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Pelosi is going to fix Detroit

Today's Financial News - Posted November 6, 2008

It is obvious the nation’s automakers are in big trouble. But what is the government going to do about it? Nancy Pelosi is talking with Big Three executives today. This could be great news for General Motors (NYSE:GM), Ford (NYSE:F) and Toyota (NYSE:TM) shareholders.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): How far must the government go to bail out the nation’s auto industry? If it bails out General Motors (NSYE:GM) and Chrysler, does it have to help Ford (NYSE:F) even though it has a much stronger balance sheet?

Or how about Toyota (NYSE:TM)? It employs thousands of Americans and has been hurt equally as hard as American consumers test the anti-lock brakes on their spending accounts. Just this morning, the company announced its second-quarter sales fell by 69% and its annual profit forecast has been slashed in half.

The only people that know what the future holds are our elected officials in Washington. How’s that for a cheery sentiment?

Pelosi to the rescue

As you read this, Nancy Pelosi is meeting with the nation’s automaker executives and UAW officials. With the taxpayer’s checkbook bulging from her back pocket, you can bet Detroit is putting on a show. They must be drooling like a fat kid in a candy shop.

I am positive these so-called corporate leaders are tossing around figures like the estimated three million jobs that could be lost in the first year if any of the Big Three fail. Or the $60 billion it would eliminate from the economy. But the figure they are really hitting on to get the government’s attention is the nearly $50 billion in tax revenues that could suddenly disappear.

We all know, the Obama administration has huge spending plans. That means it will need every tax dollar it can get its hands on. The “new” Washington cannot afford to lose Detroit. Even worse, it cannot afford to bailout Detroit.

That is exactly why Pelosi is in Detroit today. She wants a rescue package now, while Bush is still at the helm. That way, in two months, her Democrats can say, “Don’t blame us, Bush signed that one.”

Congress wants a clean slate on January 20. We are about to see one of the strongest “lame duck” sessions in the nation’s history.

As investors, we need to take advantage of this political non-sense.

How you can win

Here’s the deal. Both Ford and General Motors will announce their third-quarter earnings tomorrow. The companies say it is a rare and “coincidental” same-day announcement. But there is nothing coincidental in this highly watched industry.

Let’s think about this. Pelosi is in Detroit today. Both companies are expected to announce horrid earnings tomorrow. Hmmmm… What do you think could come Monday?

I bet there is good news on the way.

With the economy on the rocks, investors need to take full advantage of the situation.

Shares of Ford, General Motors, and even Toyota are selling for fractions of what they once did. Any bit of positive news out of Washington, involving a bailout or help with a merger, will cause a significant share price pop.

I have already recommended buying shares of Ford. Now, it is time to start looking at the other players in the industry, from the automakers themselves to finance companies like GMAC (NYSE:GJM) to suppliers like BorgWarner (NYSE:BWA).

This is a unique and desperate time for Detroit. It is about to be a very profitable time for savvy investors.


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Posted by Andrew Snyder · Filed Under US Stocks and Markets 

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