It's no secret to anyone who has read this blog on a regular basis that I've been pushing for GM to declare bankruptcy for months now. The reason being that I felt that the bailout and restructuring efforts were just prolonging the inevitable, and because I believed that it was the fastest way to separate the good parts of GM from the bad. While some may see this as a dark chapter in GM's history, I personally feel that it's really just the first step towards the company's rebirth.

However now that the bankruptcy is moving forward the question offered is: will GM be used to service the interests of the various stakeholders in the company, or will they instead work together and focus on what needs to be done to make the company profitable again?

Much has been made over the sweeping changes being forced on the credit card industry by the Obama administration, with the overriding feeling that the changes will make things easier on consumers. While I don't dispute the fact that the new laws will have some positive effects, I contend that the real problem is that consumers simply don't understand how credit cards (or any of kind of consumer debt for that matter) truly work.

The problem isn't really how the credit card companies treat their customers, it's the lack of education on the part of consumers. No bank can take advantage of an educated consumer, and the consumers who "fell victim" under the old laws will continue to face issues under the new ones.

... aka the punch most of the country wishes they could throw:

click to enlarge

All that being said: while the bankers and MBAs deserve a lot of the anger that is being directed at them, let's not forget that this crisis is truly a perfect storm of bad decision making on the part of corporations, bankers, politicians and consumers. One of the things that continues to concern me is that so many people view this crisis as something that the bankers "did to the country", and are ignoring the role that other actors played in the crisis.

This is an old WSJ graphic but it's still interesting and worth discussing, as it depicts the historical savings rate going back to the early 80s:

William K. Black was one of the chief banking regulators during the S&L crisis, and in a recent interview with Bill Moyers on PBS he makes a very strong case that our financial system has become a de facto Ponzi scheme - a Ponzi scheme that was enabled by deregulation, and that is currently being propped up by the rescue efforts of the Bush and Obama administrations.

Needless to say he pulls no punches when it comes to his opinion on how the government is handling things.

Courtesy of Economist.com, here is a graphical look at unemployment rates around the globe:

The recent earnings trend for the big banks has been big earnings surprises, with the obvious suggestion that the financial sector is recovering, the economy is coming back and the government's intervention efforts are working.

Right?

For various reasons I've never been too keen on writing one of the ubiquitous "10 reasons why stock ABC is going to $50.00" articles, primarily because I like to provide unbiased information in terms of not having an interest in the companies I'm writing about. Hence the reason my articles tend to revolve around the companies I don't want to invest in, as opposed to the companies I actually trust with my money.

Still, there is something to be said for sharing the areas that I'm currently researching and at least pointing my readers towards the companies I like. So I'm going to start posting "Investment Ideas" in terms of discussing broad sectors or groups of companies I'm interested in, and briefly discussing the reasons why I'm considering investing in a particular sector, company, etc. I think it's a happy medium from writing explicit celebrations of the companies in my portfolio, and sharing some good ideas as well.

I recently discovered a blog on the Financial Times' web site written by Don Sull, a former management consultant who is now a professor at the London Business School. In a recent blog post he discusses five myths about business failure in a downturn:

(From the Financial Times): "Many companies are suffering in the current recession, and their leaders blame their struggles on the financial crisis. Many of these explanations are too simplistic. Below are five myths about business failure in a downturn to watch out for.

The usual mixture of news stories and other tidbits I think you may find interesting, today's edition is primarily composed of item from last week with only a couple of items from this one.

Let's start off today's mix with some humor, namely Stanley Bing's offer to sell some of his toxic Assets to the Treasury. In keeping with this theme I would like to sell the treasury some of my used cassette tapes from the 80s that I feel are simply undervalued in the current economy, for I am confident my Bon Jovi, Def Leopard, and White Snake tapes will all be worth billions some day. At least that's what my valuation models tell me.

So the latest development in the Old Media vs. New Media war is the Associated Press moving to restrict the use of their content on various web sites, which has of course upset those who believe in "free information sharing" in addition to the owners of the individual web sites themselves. In light of several newspapers having closed over the past year (or being in danger of same), the usual talk from the "tech world" has been around the newspaper industry having "dropped the ball" due to not having embraced technology enough or just going along with the program.

However I think that this viewpoint is too simplistic, because you can't necessarily say that the reason the newspapers are struggling is due to 'copyright wars', lack of demand or not embracing technology.

Courtesy of the economist.com here is a look at the flow of investment into private equity funds over the past 6+ years:

(From Economist.com): "The private-equity industry is chastened but still alive

Bernanke's various efforts aimed at helping the housing market have been credited with pushing down mortgage rates, causing a "refinancing boom", and even causing February's alleged increase in home sales. I have to say that I'm skeptical about this one because the so called increase in housing sales was noting more than NAR spin doctoring, and the increase in refinancing is probably driven more by people trying to get out of resetting ARM mortgages than anything else.

The thing to remember about an ARM refinancing is that the individual (even with today's low rates) may still wind up paying an amount greater than the teaser rate, or making (at best) a lateral move from the teaser rate. So even if the refinancing keeps the person in their house, it doesn't necessarily mean that it will increase their ability to spend. The numbers may look good from a 20,000 foot level, but the household reality is probably quite a bit different.

A recent Bloomberg article discussed how GM and Chrysler have been using government aid to "open-up lending" and mitigate the slide in automotive sales:

(From Bloomberg): "April 6 (Bloomberg) -- U.S. sales are “starting to open up” as $7.5 billion in aid to the lending arms of General Motors Corp. and Chrysler LLC eases a loan logjam for buyers that helped drag the industry to its worst slump since 1981.

Here is a look at what % of the fiscal stimulus packages of various nations has been devoted to "Green Projects":

(From the Economist): " How green is your stimulus package?

Here is a look at plans by various banks to potential participate in the Treasury's toxic asset purchase plan as both buyers and sellers:

(From the Financial Times): "US banks that have received government aid, including Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase, are considering buying toxic assets to be sold by rivals under the Treasury’s $1,000bn (£680bn) plan to revive the financial system.

In "please stop talking you're embarrassing yourself" news, Maurice Greenberg is once again beating the drum of "everything was great at AIG when I was there." Apparently he wants us to pretend that he didn't create the divisions, policies and strategies that destroyed the company, and put all the blame on his successor.

This is not to say that his successors didn't make any mistakes, but to point out that he seems to be of the opinion that there was nothing inherently wrong with AIG's business model, his successor merely mismanaged it. The problem here is that it was AIG's approach to the CDS business that led them to ruin, and it was an approach that existed when Mr. Greenberg was at the helm. AIG's leadership in the post-Maurice Greenberg era may have made some mistakes, but they were still following the example of their former leader.

Here is a quick look at an article from the WSJ that asks the question: what might a Depression look like in 21st century America?

(From The WSJ): "In the wake of the biggest financial shock since 1929, economists say the odds of a depression are less than 50-50 -- though still uncomfortably high. But even if a depression comes to pass, a 21st-century version would look very different from the one 80 years ago.

Here is a look at how lending (in terms of consumer credit balances) in mid-sized cities is actually increasing in comparison to the rest of the nation.

(From the WSJ): "Consumer-lending activity has increased in numerous midsize cities in the U.S., a sign they are riding out the recession better than big cities and rural towns, an analysis of credit data shows.