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More Fallout from General Motors

The latest Barrons has a report about Rhodia, a french company that has been hurt since the bad economic news from General Motors.

“Thanks to General Motors’ (GM) recently surprising profit warning and sharply rising U.S. bond yields, increasingly jittery investors have begun to “reprice risk” and are lightening up on those stocks and bonds that have risen mainly as a play on the unusually low and unsustainable interest-rate environment. Consequently, the willy-nilly rush into risky stocks like Rhodia has already started to unwind — the shares are down 17% from highs.

“This year analysts expect it to generate about €120 million in earnings before interest, taxes, depreciation and amortization, “a scary figure, once you know its interest costs and shareholder equity,” he says. Rhodia, which has a book value of €93 million and a market value of €1 billion, will need to make €250 million in interest payments in 2005.”

A takeover may be an out, but would you pay €0ne Billion for €93 Million equity and saddle yourself with €2.5 Billion in debt. Might be best to let it go into bankruptcy and restructure by buying off the debtors with equity in a new company.

This Is Your War

Hat tip to Shawn at Mad Canuck for referral to This Is Your War. This blog is by an American soldier in Iraq, but this guy is very eloquent in his writing. I agree and I’m adding him to my Blogroll.

Is That All there Is?

I wish to amplify my remarks to my friend Fraser in response to his moving post The Other Side of the Coin He recently purchased a gold coin without asking what was engraved on the reverse side. He used the other side of the coin as a metaphor for passing to the other side, as in death. Some on one side of the Teri Shiavo debate might believe that when you die it’s a Peggy Lee song, “Is that all there is?” Fraser on the other hand, with others like him in the Teri Shiavo debate, believes there will be a rejoining with God and those who suffered in this life will be made whole in heaven. I don’t disagree with Fraser, but my comments focused on these few lines rather than the larger issue:

Quite some time back I listen to Dr. John Lienhard’s radio show, “The Engines of Our Ingenuity”, when he was explaining about how these inscriptions on our coinage is a reflection of our culture. His five minute dialogue was very informative and the message has stayed with me over the years.

I commented:

Thanks for the kind remarks Fraser. That’s not all there is! On the back is a large eagle landing in a nest. It looks like it is providing building materials for the nest that another eagle is sharing with him. I assume one eagle (flying) is male and the nest builder is female. If they are going to have babies they must be of the opposite sex, since I don’t know of any birds that are practicing bio-technology. On one side of the coin is “e pluribas unum” which I believe means from many, one. Probably some anti-multiculturest thought that one up. Certainly not PC. On the right side is: “In God we Trust”. Seems entirely appropriate! At the top are the words United States of America. On the bottom are these words “1 oz. Fine Gold $50 Dollars. The coins have a weight to them, unlike the coins of today and they have a great metallic click, when you drop one on the other. This a $50 Gold Coin. One ounce of Gold today is $425.90. The Gold hasn’t changed in hundreds of years, but the USD has. I believe it will take $1500 to $5000 USD to buy a Gold in the future. Mover Mike

Yes, this struggle for Teri Shiavo is between those who value life and those who see it as accidental. It is a struggle between views about how to live a life, for today, tomorrow, or for a life in heaven. However, as old age approaches and our bodies begin to wear out, we begin to face the prospect of our death. I am prepared to face the known ways to die. It’s the unknown side of the coin that scares me. The slipping into some un-death, kept alive because science can.


A Christian Book Story: The Jordan Tracks

You should know that on my sidebar is a logo for Mind & Media Exclusive Reviewer. I have agreed to review books of my choosing from a list supplied by Stacy Harp at Mind & Media. They are Christian books. In return for reading and writing a review on my site, Mover Mike receive a listing on the Mind & Media site. I chose to read The Jordan Tracks by Steven W. Wise. I haven’t finished the book, but let me say that it tells about a mother Christa Bates and her son Aaron, who is a Marine in Vietnam in 1968. The two share a strong Christian faith. The boy’s father Ernie “could only invoke a spirit world that he knew existed, but did not trust.” I could have been Aaron in 1968 and I could be a father or a grandfather of a Marine in Iraq. The book is available at Amazon.com You can read it along with me.

John Podhoretz Writes…

I am writing a follow-up to my post It’s Now Clear to Me because I just read the column in the NY Post,
THE SCHIAVO STAKES: WHAT THE FIGHT’S REALLY ABOUT by John Podhoretz. Podhoretz writes:

Those who have sided with her parents in seeking the reinsertion of her feeding tube have a view of life that is profoundly different from those who have sided with her husband’s quest to have her die.

Those who want her to live tend to view life as a gift — a treasure beyond value that has been bestowed upon us and that we therefore have no right to squander. The giver of the gift cannot be seen by the human eye, and the essence of the gift cannot be seen either.

We usually call that essence the “soul.” Our souls define us: They make us who we are in the deepest sense. And they transcend us as well: They are our connection to the divine, to all in the universe that is unseen and unknowable but is still there.

I know we are “meaning making machines”, however I believe that our souls choose the parents and the kind of life it wants to experience. To end ones life artificially, by suicide for example, is against the souls wish for experience. In essence, it is against God’s will. I believe one thing the soul wishes to experience is karma. If you murdered someone in one life, it would be karma to experience being murdered in another life, thus, experience the profound grief at not being able to fulfill the soul or God’s plan. Think of the 1,000,000 souls that choose parents just in this country each year, only to be aborted. Imagine the grief of souls!

Le Metropole Cafe

I subscribe to Le Metropole Cafe.

The Cafe is a place where investors from all over the world can meet to discuss the vibrant economic and financial issues of the day. The specialties of the house are the precious metals markets and commentary which appeals to contrarians.

Sometimes what I read sends me off in all sorts of directions. Today I learned that a National Association of Realtors study released March 1, 2005 says that second home purchases surged and that about one in three homes purchased in 2004 were either for investment (23%) or vacation homes (13%).

For properties purchased between mid-2003 and mid-2004, the median price of a vacation home was $190,000 compared with $148,000 for investment homes. In contrast with the last available full-year price data in 2001, vacation homes have appreciated 12.8 percent from $168,500, and investment homes have risen 25.4 percent from $118,000.(emphasis added)

That article led me to this article Put 10% of your assets in gold and pray it doesn’t work. written by Richard J. Greene of Thunder Capital Management Among the major reasons why gold should be an important part of all portfolios are:

1. Out of control government spending with budget and trade deficits;
2. Negative real interest rates;
3. Tremendous leverage coupled with misallocated capital;
4. Continual importation of deflation, killing pricing power and jobs;
5. Demand is rising while production is declining;
6. Gold has a negative beta which should offset times when stocks decline;
7. We are in a war environment which has historically been very inflationary;
8. Financial derivatives are out of control and hiding huge financial failures;
9. Energy prices are hitting all time highs as well as many other commodities;
10. The relative size of the gold market is tiny with the bulk of inflows yet to come;
11. The biggest growers and savers (Asians) are already moving into gold;
12. Huge short positions in gold and silver that may not be possible to cover; and
13. Foreign buying of US debt is waning which should exacerbate money printing.

Which led me to this article written in March of 2004: Fiat Money Systems

A brief perusal of history will show that when a nation went on a gold standard it was the beginning of a very long period of that nation thriving. When a country went to a fiat currency there was a period, as long or longer than 30 years, in which it thrived even more. However, during that period of prosperity on a fiat currency, excesses began to build. Once they have built up to extreme levels, it is a very dangerous time. When levels of debt become too excessive, an increasing amount of the rewards of production; profits, must go to servicing debt. When the servicing of debt consumes all of the profits of production, it finally consumes production itself.

1971 – President Nixon closed the gold window, ending convertibility of dollars to gold and committed the US to a Fiat Currency.









Inflation is in the Pipeline

Jim Puplava at Financial Sense Online is telling us today something that Larry Kudlow needs to read:

It is becoming apparent to the financial markets that pipeline inflation is on the rise. Price pressures are starting to show up in the rate investors are seeking as protection against higher inflation. The markets are waking up to the fact that the credit markets are becoming less benign. The riesgo país (“country risk”) is rising rather than falling, which signals trouble lies ahead for the bond markets. Yields across the board are rising once again from Poland to Pakistan, from Turkey and Russia to Argentina and Brazil. Emerging market spreads are up 6 basis points to 369. That’s up from year-end when they stood at 335. Bond investors and politicians in Latin America are watching the U.S. bond markets closely and paying attention to every nuance emanating from the Fed. Rising interest rates in the U.S. means rising rates for most of Latin America. Interest rates are up in Argentina, Brazil, Uruguay, Peru, and Mexico. Junk bond yields are also rising especially after last week’s bombshell by GM.


$410 Billion in Debt

The other day I built a table that showed the market value and total debt of the 30 Dow Industrials. Two of those companies, General Motors and Ford have a combined total debt of $472 Billion. We have gotten so used to these big numbers that I was astounded to read this afternoon that the $472 Billion is equal greater to the total debt of Canada. As Sen. Dirksen said long ago, “A billion here, a billion there, pretty soon you are talking real money.”

Mover Mike


Merrill Lynch

Merrill to Protect Directors From Claims in Case of Bankruptcy (Hat tip to Jim Sinclair)

Merrill acted to protect its directors against bankruptcy. Now ask yourself why a corporation would take such an action. The answer, I believe, is because the directors demand it. That invites the possibility that the Directors fear such a situation.

Merrill’s plan, similar to a popular form of bond insurance called credit-default swaps.

Credit-default swaps are one of the fastest-growing parts of the $8.4 trillion credit derivatives market. The derivatives provide a payment to the holder when a company defaults on the repayment of a specific bond or loan.

In addition, investors use credit-default swaps to make bets on the future of a company’s creditworthiness. Using this type of derivative to fund the payment of legal claims in a bankruptcy would be a new application, said Gerald Silk, a partner at Bernstein Litowitz Berger & Grossman, a New York law firm that specializes in filing securities lawsuits on behalf of investors.

“I haven’t seen anything like this sort of animal,” Silk said.(emphasis added)



It’s Now Clear to Me

Back in February of 2003 in the New Yorker there was an article Unspeakable Conversations, by Harriet McBryde Johnson. Ms Johnson is severely crippled, confined to a wheelchair, and a lawyer. In the article she has numerous debates in person and vis e-mail with Prof. Peter Singer of Princeton, often called the most influential philosopher of our time believes that babies should be aborted if they are impaired mentally or physically.

He wants to legalize the killing of certain babies who might come to be like me if allowed to live. He also says he believes that it should be lawful under some circumstances to kill, at any age, individuals with cognitive impairments so severe that he doesn’t consider them ”persons.”

I have refrained from posting about the Terri Schiavo case, frankly, because I couldn’t sort out the arguments or which side had truth on their side. I came across this article (hat tip to Free Republic) and suddenly things are clear…for me. Prof Singer Singer lays it all out.

The ”illogic” of allowing abortion but not infanticide, of allowing withdrawal of life support but not active killing. Applying the basic assumptions of preference utilitarianism, he spins out his bone-chilling argument for letting parents kill disabled babies and replace them with nondisabled babies who have a greater chance at happiness. It is all about allowing as many individuals as possible to fulfill as many of their preferences as possible.

IMO, it is just a short step from what is allowable today to “active killing”.



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