Newsletter – January / February 2009 – Two Big Three’s

Two Big Three’s

Amidst all the auto bail out bumph of late 2008, we heard the phrase “Gradual Bankruptcy.” Some US politician was commenting on the inevitable failure of one or more of the Big Three US auto manufacturers; he was hoping it could be done in an orderly way so as not to overly disturb the delicate US economy.

The Senator had missed the boat; the US auto industry has been gradually failing for a long time. Wasn’t it only a few years ago we learned that GM’s car business was losing money? Wasn’t GMAC, the auto financing arm, the only profitable part of GM? It was supporting the whole company. Hasn’t GM been losing market share for years and years? Aren’t Big Three’s unionized auto workers making 25% higher wages than non-union North American auto workers in Japanese and German companies? Didn’t Lee Iacoca save Chrysler a few years ago… and now it needs to be saved again?

All companies need to be reinvented from time to time. The computer business is a great example of the positive results of continually re-inventing products, and manufacturing fascilities. American car companies are a tragic example of what happens when self re-invention does not happen voluntarily.

But the car business is not the only businesss that needs to be re-invented. The Big Three of the investing business are in trouble too. In 2008 the world’s biggest stock broker [Merrill Lynch], insurance company [AIC] and bank [Citibank] needed to be bailed out too.

How about you? Do you or your friends need to be bailed out? How are your investments holding up? Are you experiencing gradual financial failure? Don’t get caught like the auto industry or the investment industry.