I have a few interesting emails the past week that, combined with what I've been writing, made me think about the direction of the country. When you take a few steps back from the day to day, it really is amazing how involved government now has their hands in almost everything. I used to snicker (pre 2007) by all those who preached America is about free market capitalism and now I think anyone who speaks like this has simply reverted to some idealistic text book world. He/she looks at what America with an asterisk (or perhaps longs for some long forgotten era)... i.e. well if you just don't count these 87,000 programs we're full on free market capitalism. As we wrote in this post, even the champions of US Industry understand there is very little free market capitalism going on anymore - it's all about handouts and favorites and being positioned beautifully under the teat of the government.
And yes, each of those countries did a bevy of government incentives which is anathema to our (ahem) free market ideology (I say that chuckling under my breath based on what we've been seeing for 2 years) Even the CEO of General Electric (GE) was out this week saying that in the U.S. it is not a free market, it never has been when he was talking about his decisions to go after the money the government is offering left and right. Personally I much prefer when the truth is spoken, even if it's ugly - versus the dogma that dominates our media and national mindset. Thanks Mr. Immelt for speaking reality.
It's never been a free market; it's never gonna be a free market. That's just the way it is. The fact that I'd like GE to work in concert with where government policy is in the U.S. doesn't mean that I'm a traitor or a bad guy, I think it's just being practical that that's gotta happen.
As Doug Kass you cannot be moralistic if you want to profit from the actions going on. So one must sit and think, if it won't change... and in fact it is accelerating, how can I - aside from participating in the handouts themselves, benefit from the wealth transfer from future generations of unborn to the so deserving today? That's our jobs as speculators whether we like what is going on, or not. Step 2 is to stop the denial - our corporate leaders long ago dropped the denial; most of what is left is sitting within the dogma of one of our political parties and their associated media outlets. Step 3 is realizing even more opportunities are cropping up by the (seemingly) month; not only is thr growth of programs increasing - frankly it is at a historic, rate. [Jun 5, 2009: 1 in 6 Dollars of Income Now Via Government; Highest Since 1929] [May 5, 2009: Federal Aid Surpasses Sales Taxes as Top Revenue Generator for States] Frankly it is no different than our current economy as a whole or the stock market. We've taken from future generations to support ourselves today - to drive economic activity and stock market returns. Complain all you want (I certainly have) but people are profiteering at a rampant pace and certainly most appear to have no qualsm in the country. You should see the glee in consumers faces on local TV as they have new cars on their grandchildren's dime!
We do indeed have socialism here, but most of it is corporate socialism unlike the socialism that is focused on the workers class in much of Europe. Ah, some of it spins off onto the consumer here as well, but only a fraction. My favorite term for what we have in the US is Reverse Robin Hood - take from the many to give to the few. Which again, which is why I snicker each time I hear the arguments against socialism in America. It's here folks - it has been here, and those who argue against it normally are receiving huge amounts of lobbyist dollars from those who benefit the most from US socialism.
Getting back to how we can benefit from the transfer of US taxpayer dollars from the many to the few. US farming has been one for a long time. (before you shed a tear for the small family farm please research the massive farm bill, and what % of US agriculture is done by corporate versus 'family farm'). Oil has been another. Obviously US banks are the most obvious investment nowadays. US home builders have been another - although the housing market has been so distraught it's not been quite as easy of a play. We own Ocwen Financial (OCN) as a play on the handouts to the mortgage industry to do the right thing and get people's mortgages adjusted. [Apr 22, 2009: Fight the Power - or at Least Hedge Against It with Ocwen Financial] [Apr 15, 2009: Treasury Saving $10 Billion for Big Banks to Modify Loans] And now we have the auto market.
Just yesterday we wrote in [Jul 30, 2009: Cash for Clunkers a Bit Hit; Government Asks What Can We Buy You Next?]
Then, after this handout to buy cars empties I envision the program being extended. That should get us through 2010.
Well good news folks! This progam was supposed to get us through Nov 1st, but Americans across the land have already spent the $1 Billion. Look, we're a people that will spend 1 hour in line just for a free $5 pizza - do you not think when the government gives us money from the heavans we won't jump? Now, lawmakers are furtively looking for ways to put more liabilities on our future generations to give to the so deserving today. And with an election coming in 2010 and the real economy is quite pitiful shape I am fully confidant they will be very successful! Remember how US programs go ... sell it under 1 cost so you can say it won't be too expensive, and then once the program is running, explode it.
- The Department of Transportation told auto makers the Obama administration is looking at all options to getting additional funding for the cash for clunkers incentive program, a person who was briefed on the matter said.
So as stock market speculators I want you to rejoice - immense funnels of money are coming from the future into our hands today. Because we (corporate and citizen) deserve it, we are the chosen ones and we worked hard for these rewards. (p.s. if everything is so rosy, why are Federal Reserve rates sitting near zero again? nevermind - rhetorical question - back to green shoots)
So let us find our Ocwen Financial of the automotive field. The easiest choice of course are automakers - and Ford's (F) results I am sure will be subsidized nicely by the direct transfer of money from the grandkids to corporate coffers.
Now if you are a 2nd derivative fan you could also go with any number of chains heavily dependent on used cars - i.e. as new cars are bought and clunkers dismantled (keep in mind some of these clunkers are younger than most of the grandkids we're stealing from) you could make a connection that the whole daisy chain from new to used will benefit. Certainly the market has made that case... [Jun 19, 2009: Carmax (KMX) Roars on Earnings]
But let's keep it simple and focus on Auto Nation which reported last night - first the immediate benefit.
- AutoNation Inc., the country's largest chain of car dealerships, said Friday that it has sold more than 3,000 vehicles in the past week through the Cash for Clunkers program. It's been a huge success, Chairman and Chief Executive Michael J. Jackson said in a brief interview. I think there has been a psychological effect and gotten consumers to start buying cars again.
- Traffic in AutoNation's 264 franchises increased 36% after the Department of Transportation launched the cash for clunkers incentives July 24, Mr. Jackson said.
Now extrapolate that to the coming months as officials look at all options to stimulate Americans to get us back to our correct culture of spending money even if we don't have it. (remember, we deserve it) And as investors just remember, these consumers are only conduits to take money from the future and into the now. They only have the money for mere days - if its a $8000 tax credit, a $4500 clunker handout - the money eventually ends up on the balance sheets and profit and loss statements of corprorate America. (Corporate) Socialism at it's best - err, I'm sorry, free market capitalism.
Let's take a quick look at earnings.
No positions but definitely figuring out the new era!