Daily Futures Commentary FINANCIALS March 30, 2009

Monday, March 30, 2009

FINANCIALS

The news that the U.S. rejected requests for additional aid by General Motors and Chrysler is leading to speculation that the two auto giants will merge or declare bankruptcy. The failure of these two companies will have tremendous ramifications because of a trickle down effect on the economy.

GM debt holders such as pensions and financial institutions could face exposure if GM is allowed to fail. I suspect that TARP money will be used indirectly by financial institutions to cover losses from GM debt. How ironic will it be if GM fails because it didn’t get the financial aid it needed, yet financial institutions holding worthless GM paper get bailed out by the government.

Suppliers of auto components to GM are also on the hook for billions of dollars in goods and services. This unfortunately could travel through many sectors of the stock market.

Additional buying is being triggered by comments over the weekend by U.S. Treasury Secretary Geithner. All Geithner had to say was some banks will need “large amounts” of assistance to remind investors that there are …
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