Arnold’s Ramblings

Hi,

The GM US government plan for not facing bankruptcy is an amazing plan! The bond holders who are owed over $21 billion, will receive 10% (no outstanding debt) of the common stock after the deal is complete; the union who is owed $10 billion for the cost of the retiree health coverage (which I do not believe is even considered a legal debt) is receiving $10 billion in cash and 39% of the common stock after the deal is complete; the government will receive 50% of the common stock after the deal is complete; and the existing shareholders will receive 1% after the deal is complete. When asked why the union would receive full payment plus 39% of the equity, an administration spokesperson was heard to say, “you need workers to make the cars; you do not need bondholders.”

Also, there is talk from the administration that bank executives will be replaced (by the administration) if the executives do not make loans.

And finally, apparently, getting the private investors to invest in the “toxic” assets of the banks has become a problem because of concern that the President or Congress will attempt to control their respective companies.

All in all a good week for capitalism.

The DJIA looks to be topping this week and then falling to about 7200 before resuming its climb to 10,000.
Gold looks higher, and should be at all times highs already; and will be soon.
Oil looks higher as well. $60 to $75 a barrel should before summer’s end.
Interest rates are still in a trading range, but the 30 year Treasury rates have risen to just under 4%.
Real estate pricing appears to be rising in some markets in the short term

Arnold

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