35 MPG Trucks!

In an expected announcement yesterday, President Obama announced sweeping reform in the auto industry and their miles per gallon (MPG) average. Obama wants fleet averages to be 35 mpg. Is it at all ironic that this announcement comes on the heels of the virtual government take-over bailout of General Motors (GM) and Chrysler (SUCK)?

And really, what really is sweeping reform? It's rhetoric! Obama says nothing but rhetoric. He is the King of Saying Nothing. When Obama says, "We need comprehensive change that will allow middle-class Americans to move forward and achieve their dreams", what has he just said? Nothing! Fortunately I have my handy-dandy rhetoric detector for translating such nonsense to see if there is any real meaning. When I typed in "sweeping reform" it is translated to "changes where the government gets what it wants". So in this case, the rhetoric actually means something, but not what they want you to think it means.

How will the car companies achieve this lofty goal, considering that the American car company fleets also produce commercial trucks that are used by small businesses? Like any Democratically-controlled Congress would say," screw the small businesses!"

As in my previous post, every action has an opposite and equal reaction. What will be the reaction? To achieve this goal, car companies will be forced to produce smaller cars that Americans do not want, and the bigger cars and trucks that they do produce and sell will be made out of plastic, Styrofoam, and cellophane. How else can you get better gas mileage out of an 800lb engine?

Using top-notch rhetoric to support his claims, Obama said that his new mandate will save Americans over $1.5 billion in fuel costs alone. Over how long? It doesn't matter. Americans are too stupid to realize that there's no substance to what he's saying. It may take 900 years to achieve $1.5 billion in fuel savings. But who cares? We're moving forward.

Will there be any other reactions to his new order thinking? Let's see - fuel - we will use less. Will the OPEC nations and fuel companies accept that they are getting less revenue because of the simple fact that we are using less oil? Or will they continue to raise the price to the point where we will pay top dollar for the little amount that we use? What was that rule that we learned in Economics 101? Supply and Demand?

What is Supply and Demand, ask all the politicians? As you decrease demand without altering supply, then the price will go down. However, the suppliers can decrease the supply to the point where the price will increase. The suppliers will ALWAYS get their money for a product that is needed. Why do you think Doritos cost so much money? Because we NEED them! Therefore, even though we will be decreasing the amount of fuel needed to power our Smart Cars, Saudi Arabia and Exxon WILL decrease the supply and raise the price, thus guaranteeing that they continue to make the revenue that they deem necessary.

Obama - at least a few of us can see through your rhetoric.

Thoughts on the Government Bailout

So I finally found a moment to catch my breath. And let me tell you, he was fast.

Anyway, I have about 400 blog posts that I've written in my head, but am sure that I will only capture a few of them on paper…or more accurately, digital print media.

Lately I have been thinking about how the government is buying stock in all of these banks with the hope of propping them up. They have even considered buying stock in GM and Ford with the hopes of helping them, too. Though I don't really agree with this, I understand their logic. If the United States Government is a shareholder, especially a large shareholder, then the company has to listen to them. And with the confidence of a large shareholder to restart the dolling out of credit, this will help get the economy going again.

Now, my problem is several-fold. The first - will the government plan on permanent ownership in stock of these companies? This I am totally against. The government does not belong in our bedrooms, our checkbooks, and we should not be competing with them in the stock market.

Secondly, WHEN the government gets out of direct ownership in the stock market, will it be subject to capital gains taxes? If so, what rate will they pay? I can imagine the tax form now: If you make between $5 trillion and $10 trillion, your rate is Capital Gains tax rate is 39%. And if the government sells the stock at a loss, where does the loss go? Will they deduct that from what they need to pay for Social Security?

And speaking of Social Security. Remember when George Bush floated the idea of allowing Americans to invest a portion (a PORTION) of their social security payments in the stock market? Every Lib in town went berserk. You would have thought that he wanted Aunt Mildred to put her life savings in a dot-com company that specializes in currency arbitrage. I heard from the CFO of the finance department of the Plastic Bubble Wrap Department here at American Amalgamated Conglomerates of America, that what GW really had in mind was investing a small portion, like 1-10%, of their SSI into mutual fund-based investments where risk is diminished. Because, as you know, the stock market has averaged 10% a year since I don't know when. It's not always up, but it is usually up over any 10 year period. Uncle Jesse would not be flipping option straddles under the buttonwood tree on Wall and Broad streets.

Now, no one really flinches at the idea that the government is buying stock in companies. Perhaps now that we are experiencing it, society will be less against it. And imagine if we could invest our money now while many stocks are down 50-70%. Here at AACA, our stock is down 65% in 36 days. Yikes! If there's a quick rebound, that's lots of money!