NEW YORK, NY This Chrysler saga is going to be a real donnybrook. It's (supposedly) greedy investors versus a government using taxpayer money against the will of taxpayers so it promises to be a barnburner. Who has the highest moral ground? Are they both fighting in the gutter? One thing is for sure, casualties will include the constitution, the rule of law, and of course capitalism. Even though I'm a taxpayer I'm rooting for bondholders. If secured investors can be pushed around by the government then nobody will have any rights. Well, that's not true; the Spotted Owl is sitting pretty. I know that the president believes it's justice a long time in the making so the lower someone is on the economic totem pole the more rights they have. Without a doubt poor people, illegal immigrants, and others have been abused but more often than not by someone in their own circle. Be that as it may, stripping away the rights of the investor class means less investment, and that can't help to drive an economic recovery.

By the way, it was plain wrong putting bondholders out there as if they didn't take risks or their money didn't allow workers at Chrysler to feed their families and pay their bills. An investor in an American company isn't the same as a speculator driving up the price of crude oil to a point of breaking the back of the entire economy. Yet, the president made these groups of people one and the same. By saying that hedge funds were evil the president once again created an us versus them scenario that is completely off base and unfair. Imagine telling a person trying to sell a home that not taking a lowball offer is unpatriotic. We are talking about billions of dollars of real money that saved Chrysler until uncompetitive wages sucked those dollars dry. I have to say not only was the rhetoric harsh but the tone was frightening as well. Stoking animosity against bond investors is so irresponsible and dangerous.

What's interesting is that unions got sweetheart deals while the White House browbeat investors and threatened to paint them with a brush of anti-patriotism. This is scary stuff to say the very least. It suggests that the nation would sink into the ocean if unions at Chrysler had to give up more in a real bankruptcy. Would it have been the end of the country if the company even flat went out of business? Absolutely it would not have been the end of the world, even though it would have been heartbreaking. Just think, a foreign carmaker was given a big piece of Chrysler with no money down. They get access to plants, distribution, and the backing of the American government. Bondholders never had a voice despite their $6.0 billion investment. Their cries were muffled by banks beholden to the government via TARP money, which has become many things including now, hush money.

We'll see if there is true separation of powers, but just the notion the White House can guarantee the length of time of a complicated bankruptcy leads me to believe the fix is in. Justice isn't tearing up rules of law or demonizing entities that operate in their own best interest and that of their investors. I really don't see how any bank or money manager would want to do participate in the public-private partnership even with taxpayers taking all the risks. Speaking of the taxpayer, they are once again being played. It's the old sleight of hand that masked more than $100.0 billion in payoffs by the government to banks in foreign countries (oh, yeah, banks in other countries didn't have to take any haircuts and they didn't have to have their livelihoods dragged through the mud) that did business with AIG. The pubic was so focused on millions in bonuses that they missed billions in overpayments made at the same time.

Now, taxpayers are going to be riled up over bondholders that wanted Chrysler to go out of business if you believe President Obama. I know that when I make large investments my goal is to lose the money. I'm being sarcastic, but the point has to be made over and over again. The taxpayer is on the cusp of pumping another $3.5 billion in financing (DIP) into Chrysler while it's in bankruptcy and will pump another $4.5 billion once it comes out of bankruptcy. And that is only the tip of the iceberg. There is no way that this company meets CAFI standards with industry auto sales running fewer than 12.0 million units. It might take 16.0 million units a year to generate the kind of money needed to retrofit plants to make these new cars. The taxpayer is going to be in so much deeper than they realize right now. So, if you are one of those that got tricked again into looking the wrong way it's time to wake up.

If you want to be upset at something then be upset at the fact your money is being taken to prop up a business that has been handed over to unions that made small concessions and Fiat that did nothing at all except make itsy bitsy cars that please environmentalists. (Of course, right now, many of those Fiat cars don't meet safety or environmental standards and probably won't for more than a year.) It is really sad that non-TARP banks that decided they would live up to their fiduciary responsibility and get a fair deal are being taken to task. There is no shared sacrifice if secured lenders get a penance versus union ownership in the new company. This is wealth redistribution. It's taxpayer money going directly to unions, it has nothing to do with being patriotic. Taxpayer money will also be going to an Italian car company (Fiat has nothing to lose at all) with no skin in the game.

1. Chrysler management says that Fiat's technology is worth about $8.0 billion.

2. U.S. government will be adding $8.0 billion.

3. Canadian government will add an additional $2.0 billion.

4. Fiat has chance to own 35% if it can get international distribution for Chrysler, build fuel efficient engines in America, and produces a car that gets 40 miles per gallon.

Over the weekend, there was an article in the New York Times on a rapper with the handle Rick Ross. Mr. Ross bills himself as a tough guy thug MC, but there is evidence he has spent much of his life as an upstanding citizen. A picture of him in a class of corrections officers blew his cover recently and hurt his street "cred." It's crazy that the world of hip hop mandates one has to be hardcore to get respect, especially after the deaths of so many including Biggie and Tupac. The thing is that the biggest gangsters in the world aren't street-level hustlers. In fact, it's becoming clearer each day that the guy with the most street credibility in the country is President Obama, who is ramming through an agenda and nobody better get in the way.

Before Arlen Specter made his party shift, the president was ready to ramrod his agenda through the senate on a so-called fast track. The GOP would have been voiceless.

Now, the president is suggesting that a judge better be prepared to do his bidding within 30 to 60 days. The goal is to make bond managers and the retirees and pensioners invested with them voiceless. They are not greedy speculators without any rights. Well, maybe in the end they will have no rights. Welcome to the new American economy. If there is still anyone out there that doubts if the government wants to control the banks look how they twisted the arm of TARP banks to take a terrible deal.
BTW...if Joe Biden could get to speak in public on a daily basis the GOP would be able to sit back and wait.

Stress Test Delay

If market participants have learned anything at all since the meltdown began, it's to question everything. Question every nuance of every piece of public information, whether it's on a company or a government press release. Just think, Lehman Brothers was going to get bailed out by an overseas bank...look what happened. Chrysler, as early as last week, was going to avert bankruptcy...that obviously didn't happen. This morning, it was reported that bank stress test results will be postponed until sometime next week. The results are already known to insiders and to market followers if you spy the trading activity in regional banks. The government is tightly managing its hand, can't really argue with them there as this information could be quite critical to the next step this story takes. But, along the lines of comments above, one shouldn't expect the data to be released next week...so position your accordingly.