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Bankruptcy and Recovery

July 10, 2009 – 10:16 am

GM is back; well sort of. They exited bankruptcy today as a much slimmer and shrinking car company. They are going to have to prove in the market place that they can survive as a smaller company, but more importantly as a car company that will make cars that the consumers want, not as a car company that the government wants. The billions of dollars the Obama administration has poured into GM has come with a lot of strings attached, not to mention government appointed or blessed leadership. Can these guys run a car company and compete with Toyota? I have my doubts. We will know in about 5 years. Do you remember how long it took for companies like Pan Am Airlines to finally give up? The new GM can keep going in the red for a long time before the plug is pulled. My hope is that they will make it.

Turning to the economy, this morning the trade deficit improved by almost 10%. Exports increased and imports slowed. It appears that the Chinese stimulus package, that is working so much better than ours, showed that heavy equipment made here in the U.S. was ordered and exported to China at a moderately faster clip. That should be good for John Deere and Caterpillar the two main builders of heavy equipment.

It is up to earnings in the coming weeks to give us some direction for the market.

Good Trading
Steve Peasley

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