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Tradecraft by Jonathan Hoenig (Author Archive)
The Fed's Bad Bet on GM's Electric Car
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?
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.
What’s Your Ride?
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 members’ cars are American.
Treasury Secretary Tim Geithner owns an Acura TSX. Economic director Larry Summers drives a Mazda Protégé. 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. Toyota (TM), Honda (HMC) and Nissan (NSANY) are much higher probability trades than trying to scalp a quarter uptick out of GM (GM) or Ford (F).
What the Cabinet Drives
Nissan (NSANY), Honda (HMC) and Toyota (TM) - 3 months
Flying Blind
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.
Jonathan Hoenig is managing member at Capitalistpig Hedge Fund LLC.
Order ReprintsThere is a link to the EIA stats here.
http://www.nofreewind.com/
Also, who/what is going to power these electric cars? Coal/NatGas and Nuclear that is who. Look at this story about Texas wind power, basically the winds die in the summer, we are going to ship those winds where??
http://nofreewind.blogspot.com/2009/05/texas-wind-doesnt-work.html
Also, did you know that vehicle miles driven increase in the summer, just when the winds DIE EVERYWHERE!!! This is a complete 100% hairbrain scheme, or wind farm swindle. You will now have two cars, instead of one, and your electric bill will double. The price of being green is very very high. And of course, let's DESTROY our environment in the process with thousands of windmills on our most beautiful ridges.
I'll even bet some of your parents thought the same when you were in potty training. They stood by while you made your worst attempt at toilet training. They said you would never succeed in not messing your diapers, but through slow diligent trial and a lot of dirty diaper error, you finally succeeded. Everything successful has meager beginnings.
Here in Atlanta, even the longest commute is less than 40 miles. The GM-Volt's range would be sufficient both to and from work with a 8 hour charge while on t...(Read more of this comment)
Out of curiosity - where does someone pay $0.30/kWh.
-0.54
0.11
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