For the week ending May 15, 2009, these are the most important or newsworthy reels in this blog, summarized in 1,000 words (give or take a few thousand):
1. On Friday, May 15, GM notified 1,124 of its total 6,200 dealers that they were not renewing their franchise agreements after their current ones expire next year. The previous day, on May 14, Chrysler announced it was ending its franchise agreements with 789 of its 3,181 dealers by mid-June. The two struggling US automakers have been racing against the clock to restructure their companies, or file for bankruptcy by June 1, as prescribed by a much-displeased White House. In terms of employees, the combined cuts could result in 100,000 jobs being lost by next year, when dealers reduce their sales and staff. Some dealers are vowing to contest the decisions by GM and Chrysler. Meanwhile, Ford has not announced any significant reductions in either manufacturing or sales… yet.
2. On a related matter, crude oil futures rose to nearly $60 earlier this week, with energy analysts originally anticipating consumer demand to rise this summer (this happens every damn year)… then promptly fell back to $56 at market close this weekend, after combined reports that demand would drop overall this year and disappointing news that the recession in Europe would suck longer than usual. So much for the expected recovery of the oil industry and the energy sector. The good news for oil is that this is the first time since November of 2008 that prices have hit close to $60 a barrel. The good news for consumers is that, by technical analysis of oil futures, we may not see $4 per gallon in gas prices for quite some time. After all, it took less than six months for prices to drop from a scathing high of $140 to nearly a fourth of its value (around $35 a barrel as of March, 2009). It’s only to be expected that oil prices continue to rise. Whether it’s good for the economy depends on where you stand, if you are heavily invested in the wicked oil stocks, or if the ridiculous gas prices from last year burned holes in your pockets. If transportation and utility companies finally learn their lesson and develop fuel-efficient methods that decrease their dependence on oil in the next three to four years, there is the distinct possibility that oil futures will never live to see such highs ever again.
3. Last week, the Federal Reserve released the results of its Banking Stress Tests, with the general result that even with a deepening recession, the American banking system is secure. The hitch is that some of the 19 largest banks that were audited would need to raise a combined $75 billion in capital, in order to survive the onslaught of a longer one. For all concerned, that could be great news. For banks in particular, this is a mixed signal from the Fed, hinting at cleaning up their finances… and that all they need to do is get yet more money from the government. The last thing that we need is to dole out more freebies to these cretins, who truly show no desire to act responsibly. Of course, the banks have reacted in classic fashion by declaring the following Monday (5/11/09) that they would pay back their loans quicker than you can say “Bailout.” One problem, though: For some of these banks (e.g., Goldman Sachs, Chase, etc.), the government was given warrants in exchange for cash. Now talk about twisting the knife while you apply the antiseptic. More juicy analysis on this later.
4. The European Union fined San Jose, CA-based chipmaker Intel Corp. (INTC) a record 1.06 Euros ($1.45 billion), citing illegal sales tactics to corner the market and push out smaller rival Advanced Micro Devices Inc (AMD). There have been claims of the Silicon Valley giant giving incentives to manufacturers and retailers to push computers using only its Intel processing units, while all but outright delaying or ignoring that of their rival’s. The penalty exceeds even that imposed by the same regulating committee on Microsoft, for antitrust violations. Intel has said it would comply but will also appeal the decision. Back at the ranch, the US Justice Department’s new antitrust czar, Christine Varney, threw the gauntlet at big companies, saying that while such entities should compete as they must, “some dominant firms may need reminding that… when their conduct becomes predatory or unjustifiably exclusionary, the division will take action.” This is a sharp departure from the business-friendly Bush regime, with an optimistic prediction that the playing field will be leveled back to a fair one. Very important, if we’re to reintroduce the concept of an Efficient Market and hope to make an honest buck, ever again. Evil monopolizers, be very, very afraid.
5. As of Friday, May 15, Senators on The Hill were still busy working for passage of a credit card bill to complement Congress’ version, to prohibit many detestable credit card practices. As of Thursday, 21 amendments were debated, and the latest one thrown off the table was an amendment that would have capped interest rates at 15 percent. As with any legislation in Senate, the bill is fast being muddled with stuff that could best be described as diversionary. The White House has continued to push for the matter to be resolved, and have a bill ready for President Obama to sign by Memorial Day. As with the banks, big auto, and antitrust industries, looks like credit card companies have now the dubious honor on being in the government’s Hit Parade. While it may be too late for some people’s credit card issues to be resolved fairly (including this writer’s), millions more across America could truly benefit, once this bill passes. If so, it would be one less ailment in the bleak economic landscape that has already defined America right now.
Here’s to All of You – Have a Great Week, and May You All Find True Wealth.
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Copyright Anabasius 2009
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