It was announced that GM will give consumers a “no question” asked money back guarantee within the first 60 days of purchase. They are rolling out the plan because they want to show the public that the consumer can have confidence in the quality of their cars.

Things must be worse than expected if GM is giving a money back guarantee. I wonder who owns that company? Oh yea, it is the Government. This shouldn’t be a big surprise since the Government is involved with GM. Beyond this being a bad idea, there is one main reason why car companies don’t offer the ability to return cars after they are purchased. Once they roll off of the lot, they lose thousands of dollars in depreciation. If a lot of those cars come back, they stand to lose more of OUR money.

The executives of GM state that they are confident in the program and don’t expect many of these cars to be returned. I think they are going to find that they are completely wrong in their thinking for several reasons. First, buying a car is an emotional decision in many cases. If you have buyer’s remorse, you can easily return the car. In addition, it is just too easy for anyone to just change their mind. Second, the consumer who potentially faces unemployment has nothing to lose. As unemployment continues to get worse in this country, people who participate in this program are less likely to hang onto their more expensive new cars. Finally, I wouldn’t want to give anyone a way out on a big ticket item in this environment.

I don’t think this has anything to do with GM wanting to give consumers a vote of confidence. I think this is a car company that is desperate and dying. If they really want to prove a point how about a 6 months money back guarantee? Let’s face it, the chances of something breaking in the first 60 days are slim.

I can’t wait to read the fine print. More to come…

Tags: Bob Brooks, Deceptive Money, depreciation, GM, Government, Prudent Money, Unemployment

Car Dealers get IRS Surprise

Leave it up to the Government to roll out a program and not adequately communicate the details. It was made clear that anyone who received the $4,500 cash for clunkers hand-out was going to get that tax-free. Of course, they didn’t mention that car dealers would be taxed on the $4,500.

Now there are two sides to this story. In a perfect world, car dealers would ask the questions and make sure that they knew the potential tax effects of the transaction. However, we are not in a perfect world and rely way too much on what is told to us. Thus, if it was important to point out in the program that the $4,500 was not taxable to the consumer, why then not go ahead and mention that the dealer would pay tax on that money?

Well, one could only wonder. I doubt that it would have removed the incentive for dealers to participate. At the same time, why take that chance? The Government wanted this program to be a huge success. They needed to move cars. After all, we are all in the automotive business. What is good for GM is good for those unions (see campaign supporters). If any of these auto dealers didn’t allot for taxes, this could end up being a real problem.

For those of you who might think that I am being too harsh, I know your argument. The Government really provided an opportunity that the car dealers would not have otherwise had. At the same time, there was no reason why the Government couldn’t have spelled out ALL of the details. As a car dealer, would you be extra incentivized if you thought you were getting a tax free bonus on that $4,500? Did the Government make something appear a certain way when it was not? You can be the judge. This did catch a lot of car dealers by surprise.

If the politicians cannot keep Medicare, Medicaid, Social Security, effectively run the cash for clunkers program, etc.; how in the world are they going to run a healthcare program? Oops, I better not write that – Big Brother is watching.

Tags: Bob Brooks, car dealers, cash for clunkers, Deceptive Money, GM, Government, IRS, Prudent Money, tax effects

Can you just imagine the Government trying to run something as complicated as a health system? If they cannot run something as simple as the cash for clunkers program, they certainly aren’t qualified to run something complicated.

It appears that the CARS program is in real trouble. So far the Government has received 412,000 applications for roughly 1.7 billion dollars and has only processed a fraction of that money. That leaves car dealers being owed a lot of money. US News and World Reports stated that some car dealers are waiting for as much as $200,000 in payments. Thus far 80% of the rebates have been rejected. There is the Federal Government at work trying to do the car industry a favor.

The Government originally hired a little over 200 people to process all of the applications. They are in the process of hiring nearly 1,000 more people to speed up the process. Of course, that is after the delay of the hiring and training process occurs.

Then you have the Honorable Politician Barney Frank who was shown on television in a Town Hall meeting belittling and insulting the very people who unfortunately put him in office. Hopefully, this country will wake up and get rid of all of these politicians that are up for re-election. Barney Frank has nothing to do with the CARS story. However, like most in Washington, he kind of has something to do with ineptitude. The good news is that we don’t have to put up with these politicians as long as we are still allowed to vote.

Tags: Barney Frank, Bob Brooks, car dealers, car industry, CARS Program, Cash for Clunkers Program, Deceptive Money, Government, politicians, Prudent Money, Town Hall, US News, Washington

Ask Bob Comment

I wanted to make a comment on the “cars” program. I went to a dealership the first weekend that the program was on. We went to a Nissan dealer looking for a great deal. I did my homework online, my car qualified and the car I wanted to purchase qualified. I found what a good market price for the car was and off I went. The dealer came back with a deal and this was his best offer. With the “cars” program money included he was $3,000.00 over what the going market price was. He claimed they didn’t have any cars in stock or at the stockyards. I did go to another brand and they said about the same thing. Deal or no deal? No deal. I will keep my old car 99 Pontiac Montana and keep fixing it up. Since I do all the work myself it doesn’t cost much.

This is something that you need to know about buying a car. If they are offering you a rebate, interest free loan, special deal, or a Government subsidy, you probably are not going to get anything off of the price of the car. This listener was very smart to do his homework before going to the dealer. It is always smart to do your homework prior to going car shopping. That way you will know the going price of the car you want to buy.

Tags: Bob Brooks, Clunkers Program, deal, dealership, Deceptive Money, Government subsidy, interest free loan, loan, market price, Missan, no deal, Prudent Money, rebate

If you want to see Government efficiency at work, look no further than the “cash for Clunkers” program put together by those brilliant politicians in Washington. This is a good example of why we DON’T want politicians making decisions for us, for our future, and especially for our healthcare.

According to the AP, they will be halting the program that began just barely a week ago at midnight on Thursday. If you were going to take advantage of that offer, I hope that you made it down to the midnight sale at your local car dealership.

This program was designed to help give auto sales a boost and get some of the old gas guzzling cars off of the road by offering incentives of $3,500 to $4,500.

Through this past Wednesday, 22,782 cars have been sold and $96 million of the $1 billion allotted for the program was spent. According to dealer surveys, dealers are concerned that they might have already gone over the limit of cars allotted for the program because of the severe backlog in getting cars approved on the Government level. Imagine that…the Government putting out a program that they were ill-prepared to administrate. Maybe those in charge should have read the details of the program first.

There might not even be funding left for the deals that have already gone through the system pending approval. Congress is acting fast. They want to approve more money for the program. Now there is a surprise – Congress wants to spend more money. They are so excited to see something that they have put together work so well. “Let’s spend billions more no trillions more…give free money to the people!!” Sorry, I got a little carried away.

Of course, now they have all of these cars to dispose of which should be a concern for the EPA. Is it pure speculation or is getting rid of 250,000 cars sort of a problem?

Close your eyes and imagine the politicians making decisions on your healthcare.

Treasury Secretary Tim Geithner – AKA the Car CZAR, the Bank CZAR, etc. 

CZAR – One having great power or authority.  Also – also tsar or tzar (zär, tsär) A male monarch or emperor

I wrote a blog Monday about my friend Scott Lau, whose Chrysler dealership has been in the family 42 years and was just forced out of business due to the Government’s “surgical” Chrysler bankruptcy.  I interviewed Scott yesterday about his story on Prudent Money. As I was preparing for the show, so many things started to dawn on me about the whole Government involvement and Chrysler.

First, let’s consider Scott’s dealership for a moment.  Here is a business that has been a family operated small business for 42 years.  It has been a solid business with a great business plan.  It has been profitable through the years and was weathering the financial crisis.  When it was all said and done, I believe that Preston Chrysler Jeep would have survived the financial crisis.  They made the necessary adjustments.

Preston Chrysler Jeep is not closing their doors because they are not a good dealership.  They are not closing their doors because they were in trouble financially.  They are closing their business of 42 years because the Car CZAR has spoken.  Chrysler gave them and 800 plus other dealerships the pink slip and said we no longer have a contract with you.  There were no calls from any Chrysler representatives to Scott’s dealership.  There was a UPS letter delivered to the back door of the parts department.   

This is a healthy small business with no debt that was forced to shut down because the only product that they sell and service was taken from them due to Government direction through “structured” bankruptcy.  Preston Chrysler Jeep is not the reason that Chrysler and the rest of the automotive industry is in trouble.  This dealership was nothing more than a small business participating in the American Dream. 

The Government is destroying capitalism in a methodical fashion.  There was a reason that Chrysler and GM didn’t go bankrupt in December (before we threw billions of dollars of taxpayer dollars down the toilet).  Think about it for just a minute.  If Chrysler or GM would have gone through bankruptcy in December, there wouldn’t have been as much Government involvement.  Instead, the Car CZAR continued to pump billions of taxpayer dollars into these failing companies in order to keep the lights on.  This gave the Car CZAR ultimate control.  The Government controls the destiny of these automotive companies.  Now who answers to who?   Just look at what they are doing to the banking system.   

You know when you borrow money from a loan shark you give your life away.  There is no difference here.  So, the Car CZAR has spoken and Scott and the rest of the employees at the dealership that have served this area faithfully were simply on the wrong side of the Washington power grid and out of luck.  So much for the American Dream. 

So, who is this Car CZAR?  Well let’s look past the man, Steve Rattner, who was appointed to head of the task force.  Instead, let’s take a look at who makes up the task force. 

Members (according to Wikipedia)

·     Co-chairs:

o    Treasury Secretary, Tim Geithner

o    National Economic Council Director, Larry Summers

·     Secretary of Transportation

·     Secretary of Commerce

·     Secretary of Labor

·     Secretary of Energy

·     Chair of the President’s Council of Economic Advisers, Christina Romer

·     Director of the Office of Management and Budget, Peter R. Orszag

·     Environmental Protection Agency Administrator

·     Director of the White House Office of Energy and Climate Change

·     Senior Advisor on Auto Issues at the Treasury Department, Ron Bloom

You really just need to stop with the first name to see where the power lies.  It seems that Tim Geithner remains the man behind the curtain.

Tags: automotive companies, Bob Brooks, Car CZAR, Chair of the President's Council of Economic Advisers, Christina Romer, Chrysler, Chrysler Bankruptcy, Deceptive Money, financial crisis, Government, loan shark, Peter R. Orszag, Preston Chrysler Jeep, Prudent Money, Ron Bloom, Scott Lau, Secretary of Commerce, Secretary of Energy, Secretary of Labor, Secretary of Transportation, task force, Treasury Secretary Tim Geithner, Washington

Last Thursday was a sad day for me.  On Thursday, a friend of mine learned that his family dealership of over 42 years was being forced to shut down due to the Chrysler bankruptcy.  Earlier that morning, I had talked with my friend Scott Lau who is co-owner and GM of the dealership.  Scott felt pretty confident that they would not be a part of the casualty list.  Owning a dealership is an entrepreneurial venture.  The dealership is a small business and they choose to sell Chrysler products.  Unfortunately, we live in a world where capitalism is a dying breed.  We live in a world where our Government can pick and choose who stay in business.  Don’t make any mistake about it.  This could have gone much differently.

Preston Chrysler Jeep isn’t forced to shut their doors because of poor business practices.  It is being forced to shut its doors because of a broken system that continues to shatter as each day passes.  Scott is being forced to sell over 100 cars both used and new as quickly as possible.  He has until June 9th to liquidate his entire inventory.  If you are in the market for a new car, you could get an incredible deal because of this situation. 

For those of you who have followed my writing through the years, you know that I am extremely particular and careful concerning who I endorse.  This is especially true in an industry where there are more questionable activities than good honest dealings.  Without question, I know that Scott and his dealership represent what is good about the industry and there could never be a better time to get a great deal on a car.  So, if you are in the market for a new or used car, I hope that you would consider going over to Preston Chrysler Jeep and talk to Scott.  Not only will you get a great deal, you will be helping out someone in an unfortunate situation. 

If you get a chance to listen, I am going to interview Scott on the program on Tuesday.  He is going to reveal what really goes on in dealerships during the sales process.  This is information that most dealers would never talk about to the public.

Dealership Information:

Scott Lau

Co-Owner/GM

Preston Chrysler Jeep

13439 Preston Rd.

Dallas, TX 75240

972-387-3900

Tags: Bob Brooks, capitalism, Chrysler, Chrysler Bankruptcy, Deceptive Money, Preston Chrysler Jeep, Prudent Money, Scott Lau

I had the opportunity to interview Dr. Richard Ebeling on my program yesterday.  It was a real treat for me.  Dr. Ebeling is a Senior Fellow at the American Institute for Economic Research.  He has a very impressive resume.  He also is well versed in Austrian economics.

If you get a chance, the show is worth listening to.

The topic of discussion was the pension plans for the GM workers.  There is a great deal of retirement money that is already pledged to the GM workforce and is a current liability for GM. When (not if) they go through bankruptcy, they will probably be relieved of some of those liabilities.  Typically that is not a problem because of the Pension Benefit Guaranty Corporation.  This Governmental agency is set up to cover the short-fall when a company goes into bankruptcy and cannot cover their pension obligation.

Well, like most Governmental agencies, they are broke.  One of their investment managers thought it would be a good idea to invest their fund into the stock market back in October 2008 (right before the crash).  As you can imagine, that did not work out too well.

So, the bottom line is that millions of people in America who don’t get a pension of any kind will be forced to pick up the tab and pay for the pensions of GM workers.  This is just another mess that the politicians are presiding over.

I asked him what happens if GM cannot ever get back on its feet?  He said that the biggest problem politicians have is admitting they made a mistake.  Thus, they will never do what is inevitable – let it go under.

I guess that means we will probably prop it up forever by throwing good money after bad.  

Chrysler announced yesterday that they will be closing down around 800 dealerships.  The sad thing is that they chose to close down probably one of the best run dealerships in Texas.  I know the owners personally and know that they run an incredible business.  It just doesn’t seem like anyone is making good decisions.

Tags: America, American Institute for Economic Research, bankruptcy, Bob Brooks, Chrysler, Deceptive Money. Dr. Richard Ebeling, GM, Pension Benefit guaranty Corporation, Prudent Money

My buddy Bryan sent over an article to me today entitled, “Obama Halves Chrysler’s Planned Marketing Budget”.  His comment was that the Government doesn’t understand the importance of marketing.  Although that is true and I have some opinions about that decision, that is not what was so disturbing.  What’s disturbing id the fact that the Government is telling Chrysler what they can and cannot do. 

Socialism – Any of various theories or systems of social organization in which the means of producing and distributing goods is owned collectively or by a centralized government that often plans and controls the economy.  This is socialism by definition.  If you look at everything the Obama Administration is doing right now, it is completely obvious. 

I think that anyone could have come to the conclusions that both GM and Chrysler should have gone bankrupt last year.  Now after billions of dollars have been thrown down the toilet, they are doing what they should have already done.  However, that wouldn’t have given the Government what they wanted.  By going this route, they accomplish two things.  First, the Government now for the most part owns and controls the automotive industry.  Second, Obama protected the unions.  Had GM and Chrysler gone through bankruptcy, the unions would have been decimated.  Those poor $40 an hour plus benefits workers might have had to lose some of their luxury package. 

Obama has saved the unions and taken one more step towards socialism.  Let me say one more remark.  I realize that there are many people who listen to Prudent Money that aren’t too happy with my continual writing about the Obama Administration.  I know that some of you support him.  This isn’t about President Obama.  This is about what he is doing to America.  America needs to open her eyes.  If you support Obama and socialism, then that is fine. If you support Obama and just don’t understand his agenda, then I want you to be informed. 

The following link is an excellent article written by analyst Vitaliy N. Katsenelson.  I would encourage you to read more.

Here are Vitaliy’s opening remarks -

On May 1, the United States took a drastic step toward becoming Russia.  Not Russia at its best, not the motherland of Dostoevsky, Tolstoy, Rachmaninoff… 

Instead, Russia at its worst, the one that in 1917 took from the bourgeois and gave to the working class; the one that signed contracts with western oil companies in the 1990s when oil prices were low and then — in 2007 when oil prices skyrocketed – blatantly and unilaterally “renegotiated” those contracts.    

Wielding the public’s empathy as a weapon, President Obama took Chrysler from its rightful owners: secured loan holders (a.k.a. TARP-tainted banks, the “evil” hedge funds, faceless pension funds).  And he gave it to struggling, very sympathetic, $40-an-hour earning (including benefits, this is not a typo), blue collar workers — Chrysler’s employees and the United Auto Workers union.  Chrysler, simply, was stolen from its rightful owners. 

Tags: Bob Brooks, Chrysler, Deceptive Money, GM, Government, Obama, Obama Administration, Prudent Money, socialism, Vitaliy n. Katsenelson

Make sure you read the Debt Blog this morning – Budgets Don’t Work…but you still need a system

Does anyone really believe that GM is going to make it?  I realize that everyone wants to be optimistic and hope for the best.  I am just trying to add a little bit of realism to this situation.  Quietly last week, GM took another 2 billion dollars from the coffers of the taxpayers to “tie them over.”  We (you and I) are continuing to fund the operating expenses of GM.  I don’t know about you…I don’t like loaning my money to bad companies.

GM announced on Friday that they are going to discontinue the Pontiac line.  I was very sad to learn the brand that brought us the Great American muscle car, the Trans Am, was going away.  Growing up I had a love affair with the Trans Am.  In college I drove a white 1979 Trans Am with a gold bird on the hood.  Her name was Trigger.  Roy Rogers had his trigger and I had my white Trans Am.  Sorry… I had to take a trip down memory lane. 

This morning GM is trying desperately to restructure their liabilities with bondholders.  They want bondholders to exchange their bonds for GM common stock.  Incidentally, if these heroic measures don’t work, bankruptcy will wipe out the common stock.  Other than being an executive at GM, the other person I wouldn’t want to be right now is a GM bondholder.

The bigger story is that regardless of GM staying in business or going bankrupt or going away all together, we will be on the hook for decades as taxpayers.  Guess who gets to pay for those pension benefits?  The Pension Benefit Guaranty Corporation (PBGC) insures up to $54,000 per year for each of the traditional, defined-benefit pensions of workers whose employers go broke or otherwise come up short.

Well, just like everything else Government-run, that fund is in trouble as well.  Seeing that the Government fund was underfunded, the former director decided to take their investments and invest into riskier investments.  Yes, that individual thought it was a great idea to invest heavily in the stock market in SEPTEMBER 2008.  That was when the stock market was 31% higher. 

The Obama administration needs to make some tough decisions and stop waiting on GM to pull the Hummer out of the ditch.  This is just throwing billions of our taxpayer money down what looks like an endless pit.

Tags: Bob Brooks, bondholder, Debt Blog, Deceptive Money, GM, Obama Administration, pension benefits, Pontiac, Prudent Money, Stock Market, Taxpayer Money, The Pension Benefit Guaranty Corporation, Trigger

Is it just me or is it a little shocking that the United States Government just did the following:

1)  They basically fired GM CEO Rick Wagoner over the weekend

2)  President Obama guarantees all warranties on GM cars

3)  The Government forcing Chrysler to merge with Fiat (by the way, Fiat stands for “Fix it again Tony”)

If you have been reading some of the news articles throughout the day yesterday, nothing that I am going to write should shock you.   The Obama Administration is now deeply entrenched in the car business.  OK, Bush and his team definitely made a mess out of a lot of things last year.  However, the car bail-out is Obama’s baby.  He is going to save this terminal patient or else.

The last I heard we are roughly $13 billion in the hole with GM.  That money is gone.  It all went to pay for the operating expenses (I guess).  Now, President Obama is not going to give them any more bail-out money.  He is going to give them a “bridge” loan to tie them over.  Whether you want to call it a bail-out or a loan, the bottom line is that we are about to throw away another 16 billion dollars of taxpayer money straight down the tubes.

After 4 months and over who knows how many billions of dollars, finally the real solution will happen – bankruptcy.  This company needs to go through bankruptcy.  If it has any chance to survive, bankruptcy will be the answer.  At the same time, it is very hard to see whether this company will even make it through bankruptcy.  Confidence is key and has been destroyed.  Would you buy a GM car right now?  I don’t care who is backing it up.  The bankruptcy of GM could not be a good thing.  I really hope that I am wrong.   

The consumer is still in a hole and will probably remain there for a long time.  I cannot imagine the car industry getting any better any time soon.  This just looks like a bleak situation to me.  What’s worse is all of the potential jobs that will go away and the effect on millions of people’s lives. 

To be fair, I wouldn’t want to be the President of the United States having to make these decisions.  It is a no win situation.  However, President Obama, could you just make them in such a way that it doesn’t make our Government look like Big Brother?  It is a sad day in America when everyday capitalism appears to be going away.  What are your thoughts?

Tags: GM bail-out, President Obama, socialism

Remember that few billion that was given to the auto industry back in December?  Well, I am sure that the industry is going to be coming back for more.  It looks like things are just getting worse.

It was reported today that Chrysler plunged 55%, Ford dropped 40%, and GM dropped 49%.  

Who was the only automaker to make money?  Hyundai gets that dubious distinction.  However, it looks like Hyundai is using good old smoke and mirrors marketing to get that increase.  They are offering to pay for the depreciation for a car if in the first 12 months the car owner cannot make a payment.

Please accept my apologies in advance for being so cynical.  Remember, these companies are desperate.  If you read the general terms of the deal, it makes you raise an eyebrow.  I couldn’t find the specific terms and conditions on the website.  There is probably a reason.

So, the deal is that if you cannot make your payments in the first year, you can return the car and pay “any additional balance amounts” (whatever that means) and the amount above what the car company will reimburse you for in depreciation.  The maximum that they will give you is $7,500.  

The best news is that someone from the company is going to determine the depreciation.  So it is subjective for you or against you.

Think about it for a minute.  If you cannot make your payments, do you really think that you are going to have the money to pay back the remaining balance owed?  If you were laid off, do you think that you are going to have the money to pay the balance?  It seems like Hyundai is giving customers an illusion more than assurance.  

For Hyundai, the depreciation amount gets larger the longer the person has the car.  However, during that time period, the person is also making payments.  The bottom line is that between Hyundai’s estimate on the depreciation and the payments that have been made, the car company is probably not losing a lot of money.  The car company can also arrange the financing on the front-end to limit any risk of loss.  

This is just another smoke and mirrors marketing program that benefits the car company.   

Tags: Auto Industry, Bob Brooks, Chrysler, Deceptive Money, Hyundai, payments, Prudent Money

Attorney Dean Malone, who typically comes on my program and talks about dealing with abusive debt collectors, has discovered another type of consumer abuse – automobile fraud.  Dean talked about all types of fraud that are occurring at some very well known dealerships right here in Dallas, Texas.

One type of fraud has to do with negative equity.  Negative equity occurs when you owe more on your car than it is worth.  For example, let’s say that you owe $20,000 on your car and it is worth $15,000.  Many people find themselves in this situation today because values of pre-owned cars have drastically decreased. 

If you buy a car and trade a car in with negative equity, you can ( I wouldn’t recommend it) roll the money that you owe into the new car loan.  So, if the car you are buying sells at $25,000 and the negative equity (money you still owe on the car) is $5,000, then the loan would be for $30,000. 

The dealer should write up the contract to reflect the sales price of $25,000 plus the $5,000 for the pay-off of the trade-in.  A dealer who is commiting auto fraud would write the contract differently.  They would present it as a sales price of $30,000 and get the money to pay the car off that way.  It is fraud. 

As a consumer, you can sue a car dealer for that type of activity.  It is illegal.  You have to be very careful in these car transactions and make sure that you are not a victim of fraud.

Tags: auto fraud, Bob Brooks, car dealers, Dean Malone, debt collectors, Deceptive Money, fraud, Prudent Money

Complacency will be the reason that companies fail.  For years, companies skated along and conducted business as usual.  They didn’t plan for the future.  Many companies were wasteful.  Companies resisted necessary change.  Many companies just assumed everything would always work out and never prepared themselves for the worst case scenario.

That has been American business over the past decade or so.  Now, hundreds of companies find themselves in dire need because of the credit crisis.   Unfortunately, so many companies are so far gone and, without a miracle, will not make it.  The auto industry is representative of this financial trainwreck. 

From what I can tell, it would be virtually impossible to revive GM.  We would in a sense be giving them billions of taxpayer dollars to just tie them over until some REAL money can be given to them.  We are giving them money to make payroll and absorb losses.  That is not an investment in American business.  That is throwing taxpayer money into an endless money pit. 

Politicians argue that this 15 billion dollars was set aside to help the auto industry transform their production of gas guzzling beasts into energy saving vehicles.  The reality is that money will be used to absorb losses.  They have a long way to go to just shore up the company before they can start thinking about going green.

The biggest assumption made in any of these bailouts is that the economy and business will turn around, credit will free up, and the American consumer will start buying cars again.   For this bailout to work, that will need to occur very fast.  Since the bailouts began in September, the credit markets have worsened and the health of the consumer as greatly deteriorated.  The likelihood of the economy , credit, and the consumer turning around anytime soon is low.  The auto industry doesn’t have time.  They need things to turn around now.

GM was told to just file bankruptcy and reorganize.  GM claims that no member of the auto industry can file bankruptcy because consumers would not buy a car that might be going out of business.  Well, do you think the American consumer feels like buying a car from GM right now?  They probably are already bankrupt in so many ways.

America needs to be allowed to be rebuilt.  The weak need to rebuild on their own or go away.  The strong will survive.  Yes, it will be painful.  However, it will build a stronger and greater America for the future.

Tags: Auto Industry, Bailout, bankruptcy, Bob Brooks, credit, Deceptive Money, GM, Prudent Money, taxpayer dollars

I am going to keep this week’s outlook.  The bottom line is that I think we are near a bottom in the decline.  I didn’t say THE bottom.  I said A bottom.  This would allow for the market to actually recover some of the loss and give investors the ability to lighten up on their stock positions as the market recovers.

This could actually be a significant rebound.  The market is declining in what is referred to as a parabolic move.  The hallmark of a parabolic move is the strength of the move when the market changes directions.  In other words, the stock market could go up very strongly.  However, I do want to stress that I don’t believe this is the end of the bear market. 

For that to occur, I think that the S&P 500 would have to decline down to around 776 and HOLD.  It can go as low as 768.  However, it is very important that the market does not close below 776.  I talked about this pattern in an earlier blog.  If it does hold, we could get that opportunity to see the market recover strongly.

The bad news is what happens if this does not hold.  Unfortunately, the probabilities for another crash-like scenario rise.  The 776 level is about 8.7% below Monday’s close.  However, the next level down in the S&P 500 is roughly another 23% loss.  If that were to occur, I would think that a monster rally would occur.

I must stress that this is a critical point that we find the markets right now. 

The General Motors story is my greatest concern. Ultimately, I think that the auto industry will get bailed out.  However, it might not be in time.  Republicans are digging in their heels and it looks like they are going to be very defiant.  Congress has this week to get this bail-out done.  I have a bad feeling it is not going to happen.  Yes, Republicans are that mad right now.  They didn’t want the bail-out in the first place.  Now, they surely don’t want this one.

They do have a point.  The auto industry is a broken business model.  Bailing out GM would only be the start of things.  It will be a continuous process of throwing our money after bad money. 

Tags: Bob Brooks, Congress, Deceptive Money, GM, market, Prudent Money, S&P 500, Stock Market