The new viability plans were part of the bargain automakers struck with Congress in December, when the two U.S. car companies received $17.4 billion in U.S. Treasury Department loans.

GM requested up to $16.6 billion in additional funding, on top of the $13.4 billion it has already received from the government. The automaker said it needs $2 billion by March and $2.6 in April to avoid running out of cash.

GM also wants a $7.5 billion line of credit that could be drawn upon, if needed, and asked to defer repayment of a $4.5 billion credit line due in 2011.

In an effort to cut costs and return to profitability by 2011, GM plans to shutter another five U.S. plants, in addition to nine it closed in December. It will sell or wind down its Hummer and Saturn brands, and said that it was talking to the Swedish government and other parties about making Saab an “independent business entity.”

The company will cut its global workforce by 47,000 this year, a figure that includes the 10,000 white-collar job cuts announced last week.

Meanwhile, Chrysler, which received $4 billion in federal loans two months ago, renewed a request for $3 billion of additional aid and said it needs $2 billion to implement its restructuring plan, bringing its total bailout request to $9 billion.

Chrysler’s plan includes discontinuing its Chrysler Aspen and Dodge Durango sport-utility vehicles, as well as the once-white-hot PT Cruiser car.

Chrysler has also cut its workforce from 87,000 at the end of 2006 to less than 54,000 now. It has also eliminated 12 shifts at its plants, equal to roughly one-third of its production capacity.

Italy’s Fiat S.p.A. (OTC: FIATY) last month agreed to buy a 35% stake in the foundering Chrysler. The deal is expected to boost Chrysler’s small-car technology and give Italy-based Fiat access to the U.S. auto market. It will also give Chrysler access to Fiat’s global distribution network.

The United Auto Workers union (UAW) said Tuesday that it reached an agreement with GM, Chrysler and Ford Motor Co. on changes to its contracts with each of the car companies.

Ronald A. Gettelfinger, UAW president, said that the changes “will help these companies face the extraordinarily difficult economic climate in which they operate.”

Source: GM and Chrysler Request Another $22 Billion in Federal Aid

And in a separate story yesterday – which underscores that the auto sector’s woes are going global – Nissan Motor Corp. (ADR:NSANY) said it would cut 20,000 jobs by the end of 2010 and expects to book a net loss for the year ended March 31, which would be its first loss in 14 years.

But the outlook for Detroit’s “Big Three” is clearly worse, right now. From the time U.S. carmakers first approached Congress about obtaining bailout money for the American auto industry, GM and Chrysler have adamantly opposed bankruptcy. Indeed, as far back as their first visit to Washington – when the CEOs caused a firestorm of controversy by flying to the meeting in their corporate jets – the automakers’ top executives said the bankruptcy labels would weaken their companies’ reputations by pushing potential customers to other brands.

However, the government could force bankruptcy by applying the debtor-in-possession status to the loans, which would make debts owed to the government the top priority, Don Workman, a partner at Baker & Hostetler LLP and bankruptcy expert, told Bloomberg News.

GM and Chrysler have until next Tuesday (Feb 17) to demonstrate progress on their plans – reducing labor costs and showing how they’ll begin repaying loans – enacted in order to receive loans from the Troubled Asset Relief Program (TARP).

GM said it plans to close dealerships and continue cutting union retirement benefits. Chrysler’s CEO Robert Nardelli previously said the company would try reducing debt, Bloomberg reported.

GM is talking with parts maker and supplier Delphi Corp. (DPHIQ) – which was spun off from GM 10 years ago – about buying back assets, which will shore up GM’s supply chain, Reuters reported.

The bottom: The government wants more cost-cutting and income-generating measures from the carmakers. And if GM and Chrysler can’t do it themselves, their loans will be yanked.

Nissan Announces 20,000 Job Cuts

Across the Pacific, Nissan said it must cut jobs because of lackluster sales – including its first loss in nearly a decade and a half.

“In every planning scenario we built, our worst assumptions on the state of the global economy have been met or exceeded, with the continuing grip on credit and declining consumer confidence being the most damaging factors,” Nissan President and CEO Carlos Ghosn said in a statement. “Looking forward, our priority remains on protecting our free cash flow and taking swift, adequate and impactful actions to improve our business performance.”

The 20,000 job cuts equate to 8.5% of Japan’s No. 3 automaker, Reuters reported, and is just one of several recovery actions the company outlined in a news release. Others include:

• Launching an average of 10 new vehicles every year from 2009 to 2012.
• Reducing labor costs in line with decreased revenues. Labor costs will be cut 20% in fiscal 2009.
• Eliminate bonus payments to its board of directors for 2008 and reduce board and corporate salaries by 10% starting in March and lasting “until the situation clearly improves.”
• Negotiate and hopefully implement a work-sharing scheme for staff workers.

Source: Bankruptcy Looks Increasingly Likely for GM and Chrysler; Nissan to Slash 20,000 Jobs

But some analysts questioned whether the company can stay off the government dole and stay in business after the worst annual performance in its 105-year history.

The company said yesterday (Thursday) it burned $5.5 billion in cash in the fourth quarter and plans to exercise a $10.1 billion secured credit line. Chief Financial Officer Lewis Booth said the company is tapping the credit line only to make sure it’s available and not to fund its operations.

The company has managed to forgo the federal loans doled out to General Motors Corp. (GM) and Chrysler LLC because Chief Executive Officer Alan Mulally decided to borrow $23 billion in 2006, securitizing all of Ford’s assets, including its trademark blue oval logo, Bloomberg News reported.

Company spokesman Mark Truby said Ford’s position on seeking federal loans is unchanged.  It asked for a $9 billion line of credit from the government but said it has enough cash to make it through 2009 and doesn’t intend to use government loans unless economic conditions worsen.

“We don’t plan to or foresee using it,” Truby told MSNBC.

But some analysts said Ford will need the money eventually and is simply trying to slip under the public radar.

“They’ll need money from the government by mid-year. But when they do put their hand out, it won’t captivate the media nearly as much, and it will go by with less fanfare,” said John Wolkonowicz an analyst at IHS Global Insight in Lexington, Massachusetts.

Ford’s cash burn in the past two quarters totaled $13.2 billion. Ford’s burn rate slowed to $5.5 billion for the fourth quarter from $7.7 billion in the third quarter. The company said this year’s cash drain will be less than in 2008 as capital spending and inventories shrink.

“We are confident that our burn rate will be substantially slower in 2009,” Booth said.

Ford won’t specify the minimum amount of cash it needs to stay in business. But some analysts question how long the government’s largesse will continue.

“They should go to the U.S. government very quickly and get it while they still can,” Sean Egan, president of bond ratings firm Egan-Jones Ratings Co., said in a Bloomberg Television interview. “They are going to need the cash, perhaps not immediately, but certainly within the next two quarters.”

Ford also announced that its credit arm would cut 20% of its work force, or 1,200 jobs, and that it has reached agreement with the United Auto Workers union to end the “jobs bank” from which laid-off workers get most of their pay. The date of that is still being negotiated.

Booth said Ford still is on track to break even in 2011, but the company anticipates worldwide sales to fall more than 10% in 2009. Ford sees improvement later this year, however, as government stimulus packages take effect.

The company said it lost $2.46 per share in the fourth quarter, compared with a loss of $2.8 billion, or $1.13 per share, for the year-ago period. Revenue in the three months ended Dec. 31 fell to $29.2 billion, down 36% from $45.5 billion in the fourth quarter of 2007.

For the full-year, Ford reported a net loss of $14.6 billion, compared with a loss of $2.7 billion in 2007. The results missed Wall Street expectations.

“These losses are not sustainable,” Egan said. “Even if they draw down their lines and the money from the government, it begs the question of whether or not the overall situation is going to improve.”

Vehicle sales in the U.S. are at their lowest levels in 26 years as consumers face tight credit markets and economic uncertainty. Ford’s U.S. sales plunged 20.5 percent in 2008, and its market share fell slightly to 15% from 15.4% in 2007.

Source: Ford Says “No Bailout Funds” Despite Worst Loss Ever

A sharp drop in U.S. car production has waylaid the auto-parts industry and now skittish banks are holding credit back from companies looking for a life preserver. Alarmed by the precarious state of Detroit’s Big Three, many banks have stopped accepting receivables, or income that suppliers book in anticipation of future sales, as collateral.

A vast network of smaller suppliers, which rely heavily on receivables to get loans from smaller banks, is particularly at risk. But even larger parts makers with stronger financials are bracing for what could turn into an industry-wide meltdown.

Lear Corp., General Motors Co.’s (GM) second-largest supplier has already hired New York investment-banking firm Miller Buckfire & Co. and Goldman Sachs Group Inc. (GS) to amend credit agreements to avoid defaulting on loans, The Wall Street Journal reported.

“A couple of significant failures could bring the entire industry down,” said Daniel Ninivaggi, Lear’s executive vice president.

Visteon Corp. was one company identified by The Journal as being perilously close to liquidation. One source familiar with situation said Visteon is “about 65% to 70% of the way there.”

The company has instituted a four-day workweek for 2,000 salaried employees and plans to cut pay by as much as 10% for employees making more than $75,000 a year.

A large portion of the domestic car industry was idled in late December as companies extended holiday shutdowns, but with cash is running low, there is growing anxiety that the weakest suppliers will start to succumb to bankruptcy by February.

Industry leaders have stepped up their lobbying efforts in recent weeks, as a result, and Neil de Koker, president of the Original Equipment Suppliers Association, told the Financial Times that representatives are planning to make a formal request for access to the Troubled Asset Relief Program (TARP), just as Ford Motor Co. (F), GM, and Chrysler LLC did last month.

“Suppliers need money, otherwise all the money put into GM and Chrysler will go for naught,” said de Koker.

Mainly, industry lobbyists want government guarantees on receivables so banks will again start accepting them as collateral.

Suppliers book $13 billion to $15 billion in Big Three receivables each month, according to the Original Equipment Suppliers Association and the Motor and Equipment Manufacturers Association.

The government would have to guarantee $10 billion to $12 billion, or 80%, of those receivables for banks to loosen credit terms, according to industry estimates.

Other measures could include direct cash infusions and a three or four-month moratorium to keep banks that received help from the TARP from pulling or altering terms on credit lines to auto-parts makers.

Source: On the Brink of Bankruptcy, U.S. Auto-Parts Companies Seek Bailout

Briefings for top congressional Democrats were to start either over the weekend or today (Monday), a senior transition-team official told The Associated Press late last week. President-elect Obama is slated to meet today with House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., in a Democratic strategy session that is likely to focus on the economic recovery package.

It’s time to look forward, not back. The 111th Congress meets tomorrow (Tuesday), and a comprehensive economic stimulus package is at the top of its agenda.  Hopefully, the lawmakers can put partisan bickering aside (fat chance) and have a bill in place for President-elect Barack Obama’s signature soon after his Jan. 20th inauguration.

Experts are looking for a stimulus package of $800 billion to $1 trillion (“pork-barrel” projects included), although the Obama administration officials claim they will trim away any unnecessary fat.

Don’t expect much joy from retail-land as a trade group projected that December sales plunged by more than 1% with J.C. Penney Co. Inc. (JCP) (-11%), Kohl’s Corp. (KSS) (-10%), and Target Corp. (TGT) (-8%) among the primary victims.  As Money Morning predicted in a recent “Buy, Sell or Hold” column, discounter Wal-Mart Stores Inc. (WMT) is believed to have benefited most from the economic weakness with sales projected to have risen by 3% in December. While the holiday numbers seem dire at best, gift card sales don’t show up in the data until they are redeemed so retailers have one last opportunity for positive news in January (and beyond).

Unemployment data highlights this week’s news reports and a 12th straight month of labor contraction is a foregone conclusion.

As for stocks, the so-called “January Effect” states “as the first five days of January go, so goes the market for the year.” Let’s hope the full week sets a nice tone for 2009 (not a bad start).  The first trading session of the New Year on Friday got things off to a fine start. The Dow Jones Industrial Average soared 258.30 points, or 2.9%, pushing the 30-stock blue-chip index back up over 9,000 to its highest close in two months. The Dow ended trading on Friday at 9,034.69.

Many investors closed their books on 2008 a few weeks early, but took some opportunities to rebalance their portfolios for 2009.  The Dow experienced its worst year since 1931 and the Nasdaq and S&P 500 indexes have fallen almost 45% since their 2007 highs. Foreign markets suffered similar fates, for instance, with Japan’s Nikkei having plunged 42% last year.

On Friday, trading was thin and the economic backdrop was dour, but it still felt “good to get off to a good start on the first trading day of the year,” Fred Dickson, chief market strategist at the investment firm D.A. Davidson & Co. told The Washington Post. “Even though all the economic data is discouraging, I think there’s a psychological lift to starting off the year on solid footing.”

Investors actually shrugged off a report from the Institute for Supply Management that showed that manufacturing activity contracted to a 28-year low in December. All but one of the stocks in the Dow posted gains – JP Morgan Chase & Co. (JPM) being the only loser. General Motors Corp. (GM), Alcoa Inc. (AA), The Boeing Co. (BA) and Citigroup Inc. (C) posted the biggest increases in the Dow.

Citigroup shares rose 6.4% to close at $7.14 after the bank revealed it would not be paying bonuses to its top executives [For more details on the Citi announcement, check out this related story in today’s issue of Money Morning]. Financial stocks also got a boost from a report that the U.S. Treasury Department said it would consider insuring toxic assets at large firms from unlimited future losses, just as it did for Citigroup in November.

General Motors shares soared 14% to close at $3.65 a share on Friday after financing company GMAC LLC said that as part of its $6 billion federal bailout and decision to become a bank, it will no longer have the exclusive right to provide low-interest loans to borrowers who buy General Motors cars and trucks. The change may help GM sell more vehicles, and rely less on GMAC’s ability to provide credit. GM sales fell 41% in November after GMAC had significantly tightened credit the prior month, leaving many prospective buyers unable to borrow.

The Standard & Poor’s 500 Index advanced 3.2%, or 28.55 points, to close at 931.80, while the technology-heavy Nasdaq Composite Index climbed 3.5%, or 55.18 points, to close at 1,632.21.

The Dow has now risen for three consecutive trading sessions. But the market still has a long way to go to recover from a year that handed the Dow a 34% decline, its biggest drop since 1931, and left the S&P down 38% for its worst performance since 1937. The Nasdaq was down more than 41% for the year.

“We still think the market bottomed on Nov. 20, and 2009 will show a continuation of the 25% rally we’ve seen the past six weeks,” Phil Orlando, chief equity strategist with Federated Investors, told The Post. “The economy will start to improve by mid-2009, and stocks are starting to discount that now.”

Market Matters

Though the year-end fanfare and fireworks were lackluster at best, investors put a disastrous 2008 in the rearview mirror and looked forward to better times ahead (or more of the same). While many had hoped for a last minute Santa Claus rally, the fat man did make an appearance over the last two weeks of the year, though results were modest and contributed little to overall holiday cheer.

Amid light volume, investors seemed content to take some time off to lick their collective wounds, analyze what went right (a very short list, indeed!) and wrong (much too long a list to reproduce here), and set their sights on 2009 (or update their résumés).  As has become the norm, the news headlines were dominated by the usual suspects: The bailout deals (financial and auto), the Bernard Madoff scandal, retail, and energy prices.

While much of the financial crisis has involved residential loans, Foresight Analytics predicts that commercial mortgages will become the next ax to fall as property developers take their place in line for the next federal bailout.  The continued freeze in credit and a vast recession could set the tone for an array of hotels, shopping centers, and office complexes to move toward default.

The afore-mentioned GMAC represented the latest non-bank to become a bank as the U.S. Federal Reserve approved its charter and the U.S. Treasury Department opened its Troubled Asset Relief Program (TARP) pocketbook to the tune of $5 billion (and another $1 billion for parent GM).  Soon after, the financing company (rather bank) announced plans to offer 0% loans for certain GM models in an attempt to jumpstart the auto sector  (Now, that’s what TARP was designed to do).

A Credit Suisse Group AG (ADR: CS) analyst quickly put a damper on these “positive” developments by downgrading GM to an “Underperform,” and claimed the company could still fall into bankruptcy.  Bernard Madoff turned over a list of his personal assets to the U.S. Securities and Exchange Commission as the befuddled agency attempted to track down that missing $50 billion.  Meanwhile, those “lucky” Madoff investors who managed to take distributions may be forced to give that money back as lawsuits apply a six-year “claw back” provision on past redemptions.

While Amazon.com Inc. (AMZN) reveled in the unexpected delight of its best holiday season ever, MasterCard Inc. (MA) predicted that most retailers were not so fortunate.  Its SpendingPulse unit projected that total holiday sales declined by 2.5% to 4% from last year’s levels and the International Council of Shopping Centers (ICSC) predicted more store closings in 2009.

Turmoil in the Middle East and a dispute between Russia and Ukraine served to advance the energy markets as oil prices jumped above $46 a barrel on the first trading day of the New Year.  For the most part, traders (and speculators) continued to take their cues from the weak global economy (and sluggish demand) as oil prices have fallen more than $100 a barrel since mid-July.

Economically Speaking

The economic data of the past two weeks did little to instill confidence that the U.S. recession will be short-lived or to promote an expectation that a rebound is imminent.  The manufacturing sector remained weak as durable goods orders fell for the fourth straight month and the ISM purchasing managers’ survey revealed widespread pessimism as it hit its lowest reading in 28 years.

Consumer confidence dropped to an all-time low, as individuals remained worried about their jobs and were hesitant to spend on much beyond the bare essentials (bad news for retailers).  Third-quarter gross domestic product (GDP) was again reported as down 0.5%, and most analysts expect a far worse showing for the fourth quarter.

On the housing front, both existing and new home sales continued to decline in November and median prices tumbled on a national level.  The drop in mortgage rates, however, prompted a surge in refinancing activity and borrowers may soon have a few extra bucks in their pockets to contribute to the economy.

On that note, all hope is not lost. As the government continues to pour money into the mortgage markets, the most optimistic of analysts believe that the same housing sector that started the downturn eventually will lead the economy out of its doldrums.  Home prices are affordable; mortgage rates are extremely low; and the incentives are there for those who can take advantage, meaning there’s perhaps a slightly brighter light at the end of the tunnel.

Weekly Economic Calendar

Source: Obama Stimulus and January Effect Will be the Week’s Top Stories

The U.S. dollar fell to two-month lows against the euro and a basket of currencies on Monday, pressured by uncertainty over the fate of U.S. automakers and reduced safe-haven flows.

The dollar was starting to respond negatively to concerns about further weakness in the U.S. economy, analysts said, after a run of weak data caused an exodus from risky positions and increased flight-to-quality buying in the currency.

Investors shunned the greenback amid fears a failure of one or more of the automakers could exacerbate a year-long recession and drag down other companies.

“The uncertain outlook for the U.S. automakers continues to keep investors wary of over exposure to the dollar at this point,” said Omer Esiner, senior market analyst at Ruesch International in Washington.

“We’re starting to see a shift in the market where negative data is starting to actually impact the dollar negatively, which is contrary to what we’ve seen for the better part of the last couple of months,” he added. “We’re seeing a naturally weaker dollar as we get into the year end, so bad news is only exacerbating the need for investors to just exit their long dollar positions.”

In early New York trading, the euro was up 1.5 percent at $1.3570 , after climbing as high as $1.3584, the highest level since Oct. 15, according to Reuters data.

The ICE Futures U.S. dollar index, which tracks the value of the greenback against a basket of six currencies, hit a low of 82.517, the weakest level since Oct. 20. It last traded down 1.3 percent at 82.606.

A more upbeat tone in the global equities market also helped ease extreme risk aversion, reducing the greenback’s safe-haven appeal and boosting demand for higher-yielding currencies.

The Australian dollar rose 1.1 percent and the New Zealand dollar was up 1.5 percent .

Against the yen, the dollar fell 0.9 percent to 90.31 , after hitting a more than 13-year high of 88.10 yen on Friday. But yen gains were capped on speculation that Japanese authorities could intervene to stem further currency strength.

BAILOUT IN FOCUS

The White House said on Friday it was considering tapping a $700 billion financial industry bailout fund to prevent a collapse of ailing U.S. automakers. That came after the U.S. Senate on Thursday rejected a bailout plan to avert a possible bankruptcy by one or more of the nation’s three automakers.

But U.S. President George W. Bush said on Monday an announcement on a car industry rescue was not imminent, leaving the industry’s fate clouded.

Investors also awaited the outcome of a policy meeting by the Federal Reserve on Tuesday to see how close to zero the U.S. central bank will cut interest rates and what alternative measures it will take to boost the economy. The Fed is widely expected to cut rates by at least 50 basis points from the current 1 percent.

“What the Fed says will likely overshadow its rate move,” currency strategists at Brown Brothers Harriman, wrote in a research note. “Many investors are looking for insight into where the Fed anticipates ending the rate cuts and what other non-traditional steps will the Fed adopt.”

Wanfeng Zhou
NEW YORK, Dec 15 (Reuters)

Americans filed over 573,000 jobless claims last week — the most since 1982.

The Labor Dept. also said the number of people collecting unemployment reached a 26-year high too, 4,429,000.

Unfortunately, we’re just getting started if a study released this morning by UCLA is accurate. The Anderson School of Management predicts we will see negative GDP for the current and first two quarters of 2009… and the unemployment rate to reach 8.5%.

If you’re mildly interested in what it’s costing for the government to “combat” this pernicious downturn, the Treasury announced yesterday the federal government spent $402 billion… for the first two months of the fiscal year.

That’s $53 billion shy of 2008’s entire historically astronomical budget deficit.

We feared we were being alarmist back in October when we forecast a $1 trillion deficit for 2009. At this rate, a trillion will be light.

The trade deficit expanded in October, too, up 1.1%, to $57.2 billion.

Quants chained to their IBMs in the basement of Wall Street’s investment banks were expecting the deficit to contract, as nations typically pull back during times of economic strife. But something curious happened. Oil and gas got a lot cheaper… and Americans used a lot more. Who would have thought that would happen? The U.S. imported almost 75 million more barrels of oil in October than in September, when the average price per barrel was $107.

Year to date, the trade gap exceeds $590 billion… on pace to pummel 2007. But not in line with 2006’s record deficit of $753 billion. Not yet, anyway.

Oil thumbed its nose at the trade number by shooting up five bucks, to $47 a barrel today.

Still, global oil demand will contract in 2009, the International Energy Agency forecast today.

The group altered their yearly outlook again this week, this time suggesting that worldwide oil consumption will decrease from 2008 for the first time in 25 years. The world will consume 0.2% less next year, they say, at an average rate of 85.8 million barrels per day.

“Global oil demand may decline, but it is not going to plummet,” notes Byron King.

“According to this week’s MasterCard Spending-Pulse data, U.S. retail gasoline demand is back to about the same levels it showed earlier in 2008.  That is, high gas prices hurt demand over the summer and into the fall. (I drove less. Didn’t you?)  But the current low fuel prices have evidently allowed demand to recover. People are driving more. It’s basic Economics 101.

“I was talking with an economist for the American Petroleum Institute about two weeks ago.  He told me that overall gasoline demand in October was down 3%, year to year.  But diesel fuel usage was up by the same amount.  Overall U.S. oil demand is down about 8%, but that reflects the slowing use of oil in industry. Out on the road, people are still driving and trucks are still hauling.

“For all the sound and fury about the run-up in oil and fuel prices through July, and then the fall in prices after that, the aggregate demand for oil is only changing at the margins.

“Looking ahead by more than about two years, world oil demand is certainly going to grow.  It almost does not matter what we do in the U.S. or Europe. When you look at the numbers of young people who are already born and living and growing up in the developing world, the demand will be there.  Many of these young people already have a cell phone and a laptop computer.  When they finish school, they will want an apartment and a car.”

Gold is up another $20 today, to $825.

“Looks like the bulls are taking aim at $835-850,” notes Ed Bugos, “a psychologically important area of resistance. The $850 level is very important for a few reasons.  First, it is the neckline of the Jan-Jul top; second, it would reverse the bearish slope of the downtrend.

“Driving the market is a bunch of things, including the dollar’s waning momentum and the prospect of an oversold bounce in the commodities markets. However, as usual, all eyes are on the Fed’s upcoming meeting.  Speculators are looking for the Fed to make more unconventional moves, such as the targeting of long-term interest rates, or this idea of ‘quantitative easing,’ which is but a euphemism for ‘madly inflating.’

“I expect some [gold] profit taking on the news and I think we’ll see another correction before the market breaks out.  If Wall Street likes the Fed’s inflation-driven bailout package, the stock market may start to rally, which may even boost the dollar in the short term if sentiment turns in the other direction from whence it is heading now.

“So be cautious in the short term. The waters are likely going to stay choppy until the new year when a new trend emerges. But, on the other hand, the ticker tape is looking sharp right now, as it should, and I don’t expect the pullback to be extraordinary.”

In the U.S. equity market, the Obama buzz seems to be slowly wearing off. Thanks to “Barack the Builder” and his promise to beef up U.S. infrastructure, stocks have surged this week. We saw some of that enthusiasm in markets yesterday, but it was more tempered… materials and energy players led major indexes to roughly 1% gains.

But then, Barack also promised to nuke Iran this morning, if they don’t get their beady little eyes off Israel.

The Dow opened down about 100 points.

On the other side of the world, we note I.O.U.S.A.’s brand of monetary enlightenment continues to spread. South Korea cut its main lending right by a mighty 100 bps overnight, to 3%, its lowest level ever.

The Federal Reserve has given the green light to the state-owned China Construction Bank — China’s second largest — to set up shop in the U.S. Even the CCB’s peculiar ownership structure is a worthy sign of the times… 57% owned by the Chinese government, 20% by Bank of America, 5% the Singaporean SWF Temasek and shareholders own the rest. The CCB has over $1 trillion under management.

Despite the credit crunch, the CCB is the fourth Chinese bank to expand operations in the U.S.

The largest leveraged buyout deal in history has collapsed.

The 5 reported with curiosity back in July the brave attempt of the Ontario Teachers Pension Plan to buy up Canada’s biggest telecom, BCE. The teachers, trying to set a good example for their students, borrowed $35 billion to fund the $51 billion deal.

Unfortunately, the deal fell apart yesterday when KPMG, accountant’s for the union, sent over some picky details. Turns out the telecom giant is no longer worth all the money the teachers union would be borrowing to buy it.

Of course, the broken deal isn’t without its share of winners. Citi, Deutsche Bank, RBS and Toronto-Dominion Bank won’t have to find $35 billion to fund the deal. And Canadian lawyers will be able to pay for their second (and third) homes. The breakup fee alone for this deal exceeds $1.2 billion.

The U.S. House of Representatives passed a bill that would extend a $14 billion loan to the Big 3 U.S. automakers. Now it’s off to the Senate. We know how this story ends, don’t we? Hank Paulson’s bank bailout metastasized 450 pages and several hundred billion dollars when it got treated over in the Senate earlier this fall.

“About this bailout,” Agora Financial’s managing editor, Chris Mayer wrote this morning,  “I keep thinking of Frederic Bastiat, the old 19th-century economist, and his idea of the “seen and unseen.”

“Most people look at the government’s bailout of Chrysler in 1979 as a success simply because the company recovered, paid off the debts and survived. But what they ignore is the unseen. What if Chrysler had failed? Perhaps GM and Ford would have gotten the pick of the very best of Chrysler’s workers. Perhaps a good chunk of the sales that would have gone to Chrysler instead would have gone to GM or Ford. In both instances, GM and Ford would be stronger.

“Maybe, just maybe, GM and Ford would have avoided the sad fate of begging for money in 2008. If so, then the Chrysler bailout was very expensive, indeed. Old Bastiat would have a field day with the stuff going on today. Lots of people ignoring the unseen consequences of bailouts in general.”

“Remember the Yugo in the ’80s?” asks a reader.

“We loved to make jokes about it, and it was our favorite example of a poor-quality communist product.  Well, I wonder if 10 years from now people in Asia and Europe will be laughing at the cars that the Big 3 churn out if our government keeps them on life support.  Obviously, some people are laughing already.”

“A sign of tough times,” writes a reader adding to our list, “one of our neighbors was driving home early Saturday morning from working a night shift. As he turned in to our neighborhood, he found a truck parked next to the three model homes, with a man apparently ‘working’ on the fence.  As soon as his car approached, the man jumped up, hopped in the truck and sped off.  He left behind his power tool and five gaping holes in the fence. He stole the 8-by-4 foot wrought iron fence sections, apparently to sell at a scrap dealer. I guess he didn’t realize that scrap iron prices peaked near 40 cents per pound in July and then plummeted nearly 80%, to 8 cents per pound, today.”

“Jupiter moved into Saturn’s sign earlier this week,” writes another reader, boldly making a forecast of his own “and he will be there for about two-three years. Amazing how such ticks in the court of the planets can cause such drastic swings in the stock market. But… it should, or could, be good for natural resources, actually.

“Maraka is the sign of the sure-footed goat climbing up the rocky mountain, followed by the sign we call Aquarius today. Aquarius was the polestar sign at the top of the dome of the sky when the floods occurred many years ago that swamped the equatorial nations.  It brought vast and mighty changes in the world organization, with four or 10 major cities going under the tides — India, Japan the North Sea and, of course, old Noah and his boat around the Caspian. I think that caused droughts and water shortages most places, as well, on land. More water in the sea means less rain and less drinking water. I’m just brainstorming.

“When Jupiter is in Leo, it certainly does cause gold to advance in daily monetary value. But why worry?  Gold is money and always has been. Hope we get more to bury in the backyard, or under the mattress.”

The 5: Hmmm… we’ve been having difficulties with our e-mail broadcast system of late too. Do you suppose this has anything to do with the alignment of Venus, Jupiter and the moon?

We’re just brainstorming too.

Source: Another Jobs Record, Huge Deficits, Oil and Gold Forecasts, The Auto Bailout and More!