It seems the market appears to be a bit more calmer than they were during October. Yes we are still having wild swings in the market, and a 3o0 point swing is common. But we are not seeing new lows and the VIX hit new all-time highs.
It seems the global rate cuts coupled with the infusion of billions of dollars is helping the market. The credit markets appear to be settling, with LIBOR rates coming down in a big way the past 3 plus weeks. As the central bank and policy makers continue to focus on opening up the credit markets further and try to accommodate consumers I expect the markets to continue to trade in the current manner. I perceive their being yet more domino’s to fall in the market, which leads me to my next point.
Many experts are divided on what to do about the big 3 automakers. Some say have the federal government bail them out with a $25 billion loan, others say let them file Chapter 11. I am with the latter. I believe Ford, GM and Chrysler have the wrong business model. With GM and Ford, they have been slowly dying for the better part of a decade. They make cars nobody wants, they employ way too many people and offer contractual retirement benefits to millions. Why bail out these companies when in honesty it seems it will only delay the inevitable.
For those that compare the big 3 to AIG, just let me say that I believe AIG is a totally different animal. A collapse of AIG would have meant catastrophic defaults all over the globe. In addition, AIG was a totally solvent company, which can’t be said for GM, Ford and to some extent Chrysler.
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