Baltbear on Finance markets are like marshmallows

GM has reported.
The news is “not good”. Any time a corp risks receiving a “going concern” notice from auditors, something needs to change, and change hard and fast.
So far the change being pursued is more “so-called” creative financing.
In capitalism, creative financing is supposed to actually create something.
If the corp has been styled “as GM goes, so goes America” the news is especially not good.
what can GM do?
;” the company expects to burn through another $14 billion this year as it cuts output to run down inventories of unsold cars.”
The actual issue is the inventory of “serviceable miles” in total usa vehicle population, and the definition of “serviceable.”
If a new car can be said to have a serviceable life of 200,000 miles, and an 89 cavalier with 150,000 miles on the clock can be said to have a serviceable life of 180,000, then that honda is placing a 30,000 miles barrier to title transfer to the new Chevy. If the average driver is rollin up 12k miles a year, and cutting back 5-6% a year as a result of a tight economy, then then that 89 cavalier represents over 30 months of the 2009 being floor planned; or, as GM is deciding it has to do, not being manufactured. That loss of manufacturing contributes (since vehicles are 10% of the American econ) to furthering the odds that hat 89 cavalier will be perceived as being serviceable for 190k miles, now adding another 12 veh months of inventory.
This is a nearly perfect vicious cycle, that the writers of any toxic debenture would be proud of.
That 89 cavalier books at around $1500.
Which means it’s risky to sell and trade up.
The msrp was $9415.
If the feds gave a cert to the owner for $9415, and turned the Cav to tuna cans, that
owner is going to be making, let’s call it,
1/2 a job at gm for 1 year.
He’s going, as a result, to be generating in the neighborhood of $2000 in total tax revenues.
At 10 cents a gallon, $18 billion a year, this can happen??

1.9 million times, generating $3.8 bb in new revenue.
If gasoline levels out @ $2.50 a gal with this added 10 cents in it, can this be “free money”?
TAASTAAFL. But: if the 2004 or later vehicle purchased gets 5% better fuel efficiency by being tighter, newer, younger, then yes, the vehicle owner is 1% ahead cash out of pocket for fuel. And the savings on health care from air quality, better crash resistance and water quality are pure profit.
Quality of life from said air, water, health, safety, becomes an intangible pure profit of the type hyped in VISA commercials.
CAn the USA afford this?
Historically, profit is always affordable.

Originally, this was the meaning of “creative financing.” As Greenspan noted, “capitalism is the art of creative destruction.”
It’s past time for some of that creative destruction, about 10 cents worth.

Posted under business

REaders are first encouraged to read the “10 cent solution” for an overview of what is being proposed. Several readers have contacted me privately questioning the impact value i offer for this concept.

The first point that needs to be made clear is that no matter what Bank of America might be doing to its books, nobody has repealed the law of supply and demand. Nobody will look at buying a vehicle if they have one that meets their perceived needs and perceived ability to own. People will buy vehicles if they percevie self-interest in so doing. The American landscape is glutted with vehicles, largely as a result of improved manufacturing since the early 60s. Average vehicle life in miles, the only standard that really matters, has nearly tripled in the past 30 years. (Ask your grandfather how often the cars of “his day” lasted over 100,000 miles without at least 1 major rebuild, and then ask people you know how many of them have owned a car made since 1989 that has gone over 200,000 miles wothout a major rebuild)

Since 10 per cent of the American economy is vehicles, restoring vehicle demand is central to a lasting economic recovery, rather than a stabilising of a declining country.

So here is some background:

Overall, there were an estimated 250,851,833 registered passenger vehicles in the United States according to a 2006 DOT study.[3] This number, along with the average age of vehicles, has increased steadily since 1960,

135,399,945 cars.

100,000,000 which is suvs, vans, light trucks.

the number of vehicles in the usa has been going up by about 3.5 million a year.

what is the reality of  the fuel economy happening with all these vehicles?
http://www.bts.gov/publications/national_transportation_statistics/html/table_04_09.html

While “cafe standards” pushed above 20, even tho lee iacoca warned in the early 80s that these stadnards needed to keep climbing, and indeed should have been required to be over 30 mpg by 2000, the reality is that the real fleet average of the usa is closer to 17 miles per gallon.
a look at the chart does show a slow steady increase in effieciency, lagging far behind the price of oil.

The clogging of the market can be seen most clearly by looking at the increasing mean age of vehicles, even as sale remained solid.

in 2006 38% of cars in the usa were more than 10 years old.
in the 80s lee iacoca told congress that Chrysler statistics showed 17 years as the average life of a Chrysler product–long before the late 80s, early 90s when computerised controls ensured that engine destroying pollutants were either not prodiced or better scavenged from the engine.

if i assume that the distribution of car retirement ties into that 17 mark, and sa that of the vehicles on the road, 1/4 of that 38% are older than 17 years, u am facd with 12,863,000 vehicles in the available vehincle pool older than 17 years–’92 or lder.
are 9 million of them going to be 89 or older? absolutely. is this going to apply to light tricks as well?
in my experience, even more so. That’s going to be pushing 9 million light trucks and suvs. REality tells me that the older suvs are going to be especiallly high consumers of field and air.
FRom these numbers it is obvious that the USA can “afford” to get rid of 18 million cars and light trucks. The net result, with no replacement, of vehicles, would still leave the usa with more vehicles than licensed drivers.
Let’s add  a construct to the 10 cent solution: the certs for destroyed vehicles are classed as regulated financial instruments of the treasury.
Let us assume that 1/2 of the “tuna-canned” vehicles produce a certificate that is taken to a bank and lays on the books as a securitising asset for a mortgage or other debt. let us assume that the financial institution can pay 2% interest for the use of the security on its books. Does this help solidify banking assets?
yes.
Does it still empower the purchase of 9 million vehicles?
yes.
Can it do it in one year?
yes.
CAn year 2 o the program advance the chop date to 1991?
Yes. becuase the funding is there. it is clearly there, as shown before from 10 cent a gallon on fuel.
it becomes “profitible” (deficit reducing) to the treasury is a very conservative 15% total tax transfer to state and federal governments results from the sales taxes, registration, personakl property taxes, payroll/fica taxes created by the economic acitivity.
it becomes “cost effective” (deficit reducing) by the effect on air/water quality from increased average vehicle efficiency.
it becomes “econonically stabilising” (everybody wins, including the deficit) by improved fleet average droppon demand for imported oil, a large increase in available supplies of steel scrap, high-tensile aluminum scrap, and small but meaningful amounts of ductile metal scrap.
the program maintains American economic srength by ensuring an end use for high-tech, green solutions for future vehicles, becuase they will actually be bought, and therefore can be builtm and therefore their creation can be prudently invested in.

Posted under business

This is a general piece for the prudent speculator. It is about a tool for measuring, at an amotional level some cold hard facts ypou are going to need.
A little history:
once upon a time when the people who said this liquidity crisis couldn’t happn hadn’t been born yet, every 3 months publicly traded corporations wrote up dozens to hundreds of pages of impenetrable beancounter language and sent it to the sec as “proof” of something.
Then, eventuallly, the sec said it would no longer accept “the dog ate my homework”, “10k? the mailmain must have lost it”.
(if an adult reader doesn’t think this kind of excuse is till being made, i offr the 10q of biotime, btim:obb which contains the statement that becuse creditors of the self-styled stem cell research company are in different parts of the country, it took an extra time period to give an honest statement of the debt. some weeks later biotime filed, and the debt had been restructured in a d/e swap showing a clearing price of $1. )
the sec said that a transparent and liquid market is the goal of regulation, and thus mandated electronic filing of text files with readable data.
in just a few years the sec got around to noting that the .txt files could be made almost unreadable by human beings, and that the goal of regulation is a transparent and liquid market. thus, filins in .html became required. (this gives a file that opens from the sec website through your browser window, and then “reads” like a piece of paper.)
as an example:
compare the effort of reading
http://sec.gov/Archives/edgar/data/876343/000091957409002146/d964196_13d-a.htm
with
http://sec.gov/Archives/edgar/data/876343/000095000502000064/p14825_s3a.txt

A while ago, the securities and exchange commission got serious about the idea that actually, since relational databases and accessing data from them has been around for 50 years, they might have value for thw actual owners of a corporation–the people that hire management that then thinks it is the ownership–and potential owners have a right to not read, but actually understand what the filings say, as internally consistent documents.
since lotus notes, excel spread seets etc had been around for about 25 years, average people could find the relationships that had meaning to them.
since in about 1998 there had been serious work done, in part by tim berners lee, to find algorithms which would describe relationship between relationships seen by others, there could be an extensible markup language….xml..
CAn you see a thought emerging in the pea in the brontosauric sec’s head yet?
can you begin to imagine that since adobe acrobat has been capable of making a .pdf that contains pictures, movies, music–a complete little “website” all in one document, secure and shippable and readable, for >>>4 years<<< that corporations wishing te trust and money of the american people could be obliged to make the critical elements inside their filings “clickable” so that people could jump through them making sure there was honesty in them?
thus, there came, after lots of “pick me” “can i buy your congressman a nice plane ride” ? etc… a defined “extensible business relational language.”
xbrl.
an sec filing in xbrl is as searchable as this blog.
and any prudent speculator deserves one.
looking at some new ticker? wanting to get a feel for what your dd can get you?
call investor relations and ask them abot xbrl. if the answer is “we’ll do it as soon as we wil be kicked off the exchanges if we don’t” no matter how that is phrased, walk.
away.
the phrasing can be tricky. recently i was told by one posssible whore to dance with that management was far too involved in creating new products to hace paid much attention to another burdensome government regulation. i’ll never get near that puppy, becuase i never short.
i was told by another that they are looking forward to providing xbrl docs to the sec, because it will reduce calls to i/r to only those that point the company to ever more transparent means of presentation.
in reality, most tickers that speculators can work from are not your friends. they see you as fruit to be smashed to give them the juice to party on.
with this knowledge in hand, you can rob them of the secrets of their failures, double speaks, waste, hype, etc, by taking an x-barreled shotgun to their filings.
if they don;t want you to have that weapon, they are not your friends.

Posted under business