“The trick is to make sure you don’t die waiting for prosperity to come” – Lee Iacocca
Bad news for the stock market today, a near sure sign that a major drop is coming. Was it the horrible unemployment numbers (back up to 9.1% – and possibly on the rise)? No. Was it continued meltdown and flail in Europe (mainly Greece)? No. Was it the news that the housing market is headed for another downturn? No.
No, the worst sign for stocks came when the government announced that it will sell its remaining stake in Chrysler (story here).
Don’t get me wrong, I’m glad the government is divesting from Chrysler. They (we) never should have been involved in the first place. It is utter nonsense to take taxpayer funds to bailout failing and badly run corporations. Public risks with private rewards? That’s not the way freedom works. Take risks if you want to – you’ll bear the downfall and reap the benefit all to yourself.
Having said that, why would we sell the stake now? Ben Bernanke has been on a roll of late, flushing billions down the drain but causing a new market bubble (and commodity bubbles too). Maybe ole helicopter Ben sees the writing on the wall.
The GM and Chrysler bailouts are major political liabilities for the Obama administration. If we lose our shirts on the deal it will be seen (rightly) as nothing but a taxpayer-funded giveaway to political interests. Not that the banking bailouts or any other government handouts are any different – but this one seems to get more headlines. If the government is deciding to sell now it may well be that they feel like this is the market peak. Get while the getting is good.
We’ll still lose some $1.3 billion on the deal, having put in $12.5 billion and recouping only $11.2 billion. But hey, what’s $1.3 billion amongst friends – that’s only like $4 a citizen … umm, investor.
(disclaimer – I don’t make stock market calls on this blog, and the above does not represent investing advice. But boy, would it be funny if they did sell at the top, having fairly good insider knowledge of what the Fed will do next?)