<GM is also having problems with unfunded pension liabilities of $19 billion and growing, since
they have 2.5 retirees for every active employee. So now you can see GM’s problem with
deteriorating sales in light of record consumer incentives, narrowing margins due to
competition, more expensive to re-finance debt and raise capital, and pension liabilities that
must be taken out of operating cash flow thereby reducing future earnings…not too good in
light of a weakening economy. The downgrade from Moody’s is saying that due to poor
business conditions and a glut of competition, GM could have problems with existing debt,
and future debt will cost them more. If this is true for GM, I can promise you that there are
MANY other companies in Corporate America that are struggling with the very same problems.
The other big piece of negative news that hit the markets today was the decline in the Consumer Sentiment Index, which fell from 92.1 to 87.2. Economists
were actually expecting sentiment to improve to 93.1, so the decline came as a shock. Consumers are still concerned about the nightmare of losing their jobs.
The U.S. has lost nearly 300,000 jobs in the last four months and announcements of layoffs continue. The unemployment rate is now 6.1%, which is the
highest in almost nine years and should go higher. I don’t have the exact data, but I recall that this is very similar to the first war in Iraq. Consumer sentiment
improved noticeably after the war, but only lasted a few months. Once the post-war euphoria wore off, it was back to reality and the markets declined.>
<Silver closed at $4.57,
up four cents for the week. I know I have said this many times before, but I cannot find a better risk/reward relationship than silver. I say there is no way it’s
going under $4.00/oz. but it wouldn’t take much to push it back up to $7.00/oz. I’ll take those odds any day. If you index the price of silver to inflation, we are
at 600-year lows! I will try to save enough time next week to do a comparative data table illustrating how very much silver is lagging in price to the other
essential commodities. It has some catching up to do, and if you look at a silver chart, you can see how VERY FAST it can run, once it gets going. My gut
feeling tells me we are getting very close to a breakout in silver. The next few weeks will be quite telling, but in the meantime, good luck to you in all of your
investment decisions! Have a great weekend!>
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