Guess the Federal Bailout, Win Money - Today's Sector: Auto Suppliers Lear (LEA) +50%, American Axle (AXL) +30% and Dana (DAN) +

Submitted By Trader Mark
It appears we are back to 2008 type trading; guess what the government is going to bailout next, and place your bets. The only irony in watching these stocks soar is knowing people in the supplier industry and these companies themselves and realizing what shape they are in, while their stocks surge. As we said last week, [Jun 4, 2009: Detroit's Woes Wound an Army of Suppliers] there will be a lot of fallout in the multi thousand supplier base but as with banks, it appears the government will protect the largest. And this is exactly the type of information having a bevy of friends from Goldman Sachs within government provides - you know exactly where to place your chips. Not that this type of thing ever happens. And we wonder how Goldman had only 8 losing days on their trading desk in all of first quarter 2009. (talent of course, not information flow) If you want some bemusement feel free to check out this piece on Huffington Post on how to properly sleep with the government [Government Sachs - Goldman's Close Ties to Washington Arouse Envy, Raise Questions] The "relationship" map within that story, not to mention the literal list of all the names intermixed in government.... is staggering.

But I digress! No matter what shape the companies are in today, as with Sequenom (SQNM) yesterday all that matters is a technical intraday breakout or a huge volume spike, and away we go... daytraders pile in. Today's winners are Lear (LEA) +50%, American Axle (AXL) +30% and Dana (DAN) +20%. The speculative fervor in low price stocks continues on. This is the sideshow, the real money will be made when the government picks the winners of its next round of largess, and the information is kept "top secret" (no leaks) so those with connections won't be able to alert their trading desks.

Anyhow back to the resurgent* auto supplier business. Look at those volume spikes the past 2 days! Yowsers - one point about "American" Axle (AXL) - last I read in the local paper a few weeks ago "American" Axle is in the process of closing American plants and moving operations to Mexico.

U.S. auto supplier American Axle & Manufacturing Holdings Inc (AXL) is set to close the largest axle plant in its Detroit-area manufacturing complex and move production to Mexico, a United Auto Workers union official said on Tuesday.
"People are very upset about losing their jobs,""They're very upset that a company with the word 'American' in its name is moving jobs to Mexico." (while it is ironic, there is a very simple solution - "Mexican Axle" is just a little whiteout away - just remember, the profits stay in the country. Wait, did I say profits?)
Alford said American Axle had informed the UAW the plant would close by mid-July and production would move to Guanajuato, Mexico, by the end of July.

Just wanted to let your grandkids know where their money is going as we unleash more bailouts :) The path to the jobless US economy is long and strong. (remember, American labor is just an unnecessary cost - the less of it, the better for the green shoot recovery and profits) Oh don't worry - the salaries still stay with the CEO, CFO and the top staff and a few white collar folk in the good ole USA, so your bailouts are helping out. And you know how it works from there - your bailout supports these few at the top (because it makes sense for CEOs to make 300x on average the median wage - I mean how many people could run a company to the point it needs government bailouts? Only the most talented), and then they will spend that money in the US economy... and it will "trickle down" to the rest of the peasants soon enough. Yep. Same shenanigans, different industry (finance, auto, you name it) Delphi has been in bankruptcy for almost 4 years now yet paying retention bonuses to head honchos because "we can't lose the talent".... same argument as the banks. I just wish I had this sort of talent.

*including government bailouts

Enjoy

U.S. auto-parts companies plan to ask the Obama administration for as much as $10 billion in new aid as General Motors Corp. and Chrysler LLC bankruptcies deepen the suppliers' troubles. The Treasury earlier this year put in place a $5 billion program to guarantee GM and Chrysler payments to suppliers, but supply groups said the program falls short of what they need.
Trade groups will meet Wednesday with President Barack Obama's auto task force at the Treasury Department and warn that hundreds of parts companies could collapse without the aid.
The parts companies account for more than three-quarters of auto-sector employment in the U.S., according to a Chicago Federal Reserve study, with employment of about 600,000 -- roughly five times as many workers as are expected to be employed by GM and Chrysler's domestic operations once their government-subsidized restructurings are done.
A Treasury Department spokeswoman said administration officials "will continue to work with the companies and monitor the auto supply base going forward."
The supplier groups also plan to meet with members of Congress on Thursday to press for alternatives, including legislation, if the administration declines to provide further aid

Just another day of free market capitalism.

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