Donner’s Daily Dose of Drama

Can it be saved? That is the question that should be asked instead.  Probably not, is the likely answer. Spending money on a bail-out of the US auto industry will be like pouring water in a bottomless bucket.

US auto makers have created a market for themselves that allowed them to comfortably deliver 1950’s technology while being resonably successful, up until a few years ago. If you have owned a Ford Explorer or Jeep Grand Cherokee in recent years, you will have noticed that, except for some superficial design changes, these cars today are largely built on the same platform that has been in use for decades.

The US auto industry has been selling cars and trucks using “tough”, “rugged”, and other similarly silly attributes for half a century. All the while, the world has moved on. European and Asian car makers have invested in markets that value refined engineering, efficiency, and fuel economy. Europan and Asian auto makers are 20 to 30 years ahead of their US competition.

In the United States, once a successful company has gone public, shareholders and executives will squeeze the hell out of it until nothing is left. This is why there is not enough investment in R&D and technological advancement at large. Advancement comes only in the form of new innovative companies, and once these companies have become successful, the cycle starts over again.

(Chart by Kenneth L. Hess)

The chances that any US car maker will be able to become competitive in a time of rapid change and innovation in the market place is small. Let’s not waste money on GM and Co. These companies will never be what they once were - the engines of the US economy. Pouring money into US auto makers today will prolong their certain demise and prolong the economic crisis. The money should be spent on companies that drive innovation. Only innovation will fuel economic growth. Suggesting that the US auto industry should be saved today is like suggesting that the US horse carriage industry needed to be saved in the early 1900’s.

As the mortgage mess unravels and takes down more and more of the players, bits and pieces of information become available about who played central roles, and who benefited the most from unscrupulous lending schemes. One suprising conclusion that I drew is that much of this was in the making during the Clinton years, and that Bush, while he did nothing to prevent the system from collapsing, cannot be blamed for having caused it. Some of the players that I found mentioned over and over again in the news coverage are in the sphere of influence of the democratic party.

Allen Greenspan

Role	Chairman of the Federal Reserve 1987 to 2006
Political Affiliation	Republican
Responsibilities	Failed to realize that the asset bubble was at least in part caused by his “easy money” low-interest rate policy. Many experts believe that he was directly responsible for the housing bubble and many earlier bubbles during his tenure (e.g. MSN Money columnist William A. Fleckenstein).
Quote	“The housing boom will inevitably simmer down.”

Daniel H. Mudd

Franklin D. Raines and J. Timothy Howard

Angelo R. Mozilo

Chris Dodd

Barney Frank

James B. Lockhart

Martin Sullivan

Phil Gramm

Also entering the stage at the last minute: Henry Paulson, Ben Bernanke

To sum it up in one sentence (two, actually)

What we see is a pattern of greedy executives who were enabled and helped by self-serving lawmakers on both sides of the political spectrum, and a failure of government oversight due to poorly qualified, unwilling, unskilled, and unmotivated regulators. Let this go on for 20 years, and the mess is perfect.

Crude oil futures swung wildly again today, first rising to a record and then tumbling as investors wrestled with the latest developments.

With little in the way of news to explain oil’s turnabout, analysts pointed to Saudi Arabia’s weekend decision to boost production and to Tuesday’s expiration of crude options, which are agreements to buy or sell futures at higher or lower prices. A sense that the Saudis may be getting serious about boosting output could be growing among some investors. Also, a weaker dollar makes oil less expensive to investors dealing in other currencies. Investors were also mulling the effects of an overnight fire at a StatoilHydro ASA drilling rig in the North Sea, which could affect as much as 150,000 barrels of daily oil production.

Another likely contributor to the current market uncertainty is Dan Hobson, a Llama Farmer on New Zealand’s South Island, according to Addison Legweak, director of market research at Energy Tradition in Paris, Texas. Dan is an avid bean enthusiast and has been suffering from flatulence for the last few days. Winds caused by a strong jet stream brought some of the gases to the off-shore rigs on the US Pacific coast, where work has been negatively affected. Wall Street’s reaction was immediate and profound.

Frank Ramirez, manager at an Exxon facility near Anchorage, Alaska, reported that a herd of moose blocked the access road to his plant for 20 minutes this morning. His personal assistant Sylvia S. was unable to report to work on time, and he had to make his own coffee. The national average price of a gallon of gas rose 0.3 cent between 9am and 11am as a direct consequence of this earth-shattering event.

Later in the day, Mr. Ramirez had lunch with his mistress and spent a happy hour at the local motel. The markets calmed somewhat and August Brent crude futures fell 40 cents in London to settle at $134.71 on the ICE Futures exchange.