Tuesday, October 28, 2008

US Equity Futures Perk Up on the Heels of Global Rebound

Optimism about the Fed rate-cut? Renewed confidence that the government interventions are working?  Dead-cat bounce?  Whatever the underlying reason, equity investors around the world decided that stocks are a bargain, for today at least.  The Japanese Nikkei was higher by 6.4%, and Hong Kong soared 14.4%.  European stocks joined the party with sharp rallies across the board.  Germany's DAX jumped an astonishing 8.3% (related in part to a 90% surge in Volkswagen shares due to Porsche's plan to take three-quarter's of Volkswagen's stock.)  Germany aside, the FTSE 100 was 4.6% higher and the French CAC-40 rose 3.2%.  US futures are poised for a rebound.  
GM may receive a $5 billion loan to aid its planned merger with Chrysler.  Ordinarily I would spend at least a paragraph mocking the idea of two huge money-losing companies getting government aid to become one gargantuan money-losing company, but at this point, I am just relieved that they are ONLY receiving $5 billion.  If the government is giving $25 billion to Citigroup, might as well throw the US auto industry a small, but tasty, bone.  The only disheartening aspect of this news is that it indirectly aids the private equity firm Cerberus, who owns part of Chrysler and GMAC.  But at least the private equity guys are finally having to work their butts off to save an investment rather than just borrowing money to pay themselves dividends every few months.  If Cerberus can single-handedly turn the US auto industry around, then they've officially earned all the fees they've been collecting for operating in an easy-credit bull market for the past 15 years. 

2 comments:

Oscar said...

Now that we're back in a bull market, can I get my bonus back please?

deaususa said...

Constantly I come across blogs which disagree with bailouts and that it serves its CEO and management. What about the millions of consumers & retirees who bought bonds based on the wacky Credit Rating Given ? What about all the 401(K)'s and just plain workers that saved for years for their retirement ? Not to mention the employees of said company. If a company can turn around and pay back the bailout loan (with interest) the nation will be better off, instead of loosing its industries to foreign competition.
A simple fix would be if a CEO's & the bunch would have to forfeit (2 years in arrears) their Golden Parachute. That would certainly be an incentive to conduct business properly.