In the investment game>, we often remark how "your first loss is your best loss, that doubling down on the sunk cost of a losing investment is, more often than not, a supremely awful idea. The market, after all, isn t confirming our outlook. Why stand in front of a clearly noncooperative trend?
It s a lot easier to waste money when it s not your money, which is probably why out of all the recommendations made by the Presidential Task Force on the Auto Industry, one not being followed by the Obama adminsitration is the recommendation for curtailing research and development of General Motors' electric car, the Volt.
The Volt is designed to go a mere 40 miles on electricity, giving the car a fairly limited electric range considering the average American s commute to and from work is about 32 miles. Without subsidies, the cost is expected to be near $40,000, putting the expense on par with a brand new BMW Z4.
According to the task force, the car is currently projected to be much more expensive than its gasoline-fueled peers and will likely need substantial reductions in manufacturing cost in order to become commercially viable.
Translation: It won t work. Yet that likely won t stop the Obama administration from pouring more money (now taxpayer money) into trying to make it so.
For a business to succeed, it must be run for economic reasons, not political ones. It s shameful enough taxpayers are being forced to subsidize poorly run auto makers in which they neither wanted to support as investors or customers. To double down on that losing trade by pouring tax dollars into developing ineffective, expensive cars the public has no interest in buying represents a new low in the government coup to stifle free trade.
The president himself used to drive a Chrysler 300C, a gas-guzzler he replaced with a Ford hybrid as he was preparing for a run for the White House. Yet his Auto Task Force, when it comes to their own rides, shows a strong foreign preference. Only five out of 23 of
Treasury Secretary Tim Geithner owns an Acura TSX. Economic director Larry Summers drives a Mazda Prot g . The vice president's economist Jared Bernstein owns a Honda Odyssey, while Obama's economic advisor Austan Goolsbee sports a Toyota Highlander.
As long as they re buying Japanese cars, they might take a look at Japanese car companies, which are unequivocally stronger stocks and world-wide brands.
) are much higher probability trades than trying to scalp a quarter uptick out of
As was reported on WSJ.com, the Congressional Budget Office has significantly bumped the estimate of the TARP program s cost to taxpayers. In January, the bill was estimated to total $189 billion, but just two months later, that figure was boosted to $356 billion, an increase of some 88%. Factoring in data from the president s 2010 budget, the CBO now estimates the number will be closer to $375 billion, a 98% upward revision in just four months time.
If a private business misjudged an expenditure that widely, shareholders would be calling for management s heads, let alone their resignations. When it comes to the businesses now run by the federal government, taxpayers, posing as shareholders, only get that opportunity once every four years.