GM and The Working Group

There is this very interesting piece posed on LewRockwell.com ( here )

It first talks about the Plunge Protection Team or The Working Group:

The New York Post recently ran a piece on Washington’s tight-lipped Plunge Protection Team, or, the "Working Group," as it is formally known. Essentially, the role of this group is to prevent another 1987 "Black Monday" in the stock market. It was put into law in 1988, as Executive Order 12631, by Ronald Reagan. If you read the Executive Order you’ll note that it essentially allows the government to intervene in the stock market – should a crash or foreseeable dip appear to be on the horizon – via legislative law, administrative fiat, or the manipulation of private bodies via coercive tactics on the part of the Federal Reserve, Treasury Department, or the executive office. Section Two of the order states that its purpose and function is to recognize "the goals of enhancing the integrity, efficiency, orderliness, and competitiveness of our Nation's financial markets and maintaining investor confidence."

The Working Group was established in order to identify issues – which studies have vetted out – in regards to the events surrounding the 1987 market crash. Its purpose is to gather recommendations from anointed experts and consider what government actions, under existing laws and regulations, can be undertaken in order to carry out those recommendations. The last step is to "appropriately consult" with private sector bodies and participants in order to seek any possible private solutions. These "private solutions," however, will come from puppet organizations of the corporatist establishment.

And the author, Karen De Coster, has these comments on General Motors.

On May 24, 2006, at the behest of the Working Group (in our opinion), Merrill Lynch came out with a "buy" recommendation pertaining to General Motors’ stock. Keep in mind that this recommendation was made fully one month before Tracinda recommended that GM explore the idea of forming an alliance with Nissan and Renault. Shamefully enough, Merrill’s rationale hinged upon the premise "…that the automaker's restructuring plans, specifically the number of workers taking buyout packages, are coming along ahead of schedule." This is nothing short of harebrained reasoning serving the demented ends of the Working Group.

It is highly unusual for a restructuring plan that is so far away from accomplishing anything substantial to get such a standing ovation, even from the fraudulent Wall Street analysts. This move by Merrill Lynch is a hoodwink designed to keep the confidence level high among investors speculators, thus keeping under wraps any unwanted drama or uprising from the unsuspecting masses. In fact, if Johnny Beer Drinker could read a balance sheet, he'd bail out of GM's stock immediately. But Johnny Beer Drinker can't read a balance sheet; he may watch CNBC and Jim Cramer, and if he does, he is a blind fool following a bullish fool who is serving up bad advice to serve his own interests.

Since Merrill Lynch’s pronouncement, GM’s stock has shown market leadership like a four-star general – it was up by 40.1% during the second quarter of 2006, making it the best performing Dow stock for the three-month period ending June 30^th. Even on days where the Dow Jones Industrial Average had declined by over 100 points, the "General’s" stock held steady. One day, it was even up by over 4% when the market swooned terribly – and this in spite of the fact that gasoline prices are at $3.00 per gallon. We have little doubt that GM stock is being accumulated by Caribbean-based hedge funds owned and operated by the Federal Reserve – the very same folks who mysteriously emerged as buyers of U.S. Treasury debt (thus, keeping interest rates down) when other buyers began to shy away from that debtaholic Uncle Sam. For now, the General looks unbeatable – as long as "investors" believe the stock is the company.

When examining General Motors’ March 31, 2006 balance sheet, what comes to mind is not a proud general, but a bloated inmate of a debtor’s prison. It is boggling that any financial analyst would recommend purchasing the common stock of a company with the following financial profile:

• General Motors’ automotive operations have a combined working capital position of deficit $15.4 billion.
  
• GM has total debt and liabilities approaching half-a-trillion dollars.
  
• GM’s total liabilities to equity ratio is 29 to 1. There once was a day when financial analysts sounded the alarm bells when this ratio exceeded 4 to 1.
  
• Arguably, GM has a deficit net worth of $18.2 billion. Such a sobering conclusion can be deduced simply by disallowing intangible assets such as goodwill and deferred tax assets.

It is interesting to note that GM’s market capitalization was recently at $12.4 billion, which is smaller than that of Harley-Davidson, about equivalent to the market cap of Hershey Co., and in comparison, Toyota’s stands at $194.7 billion. With such a weak balance sheet, GM will not survive a recession. Hence, bankruptcy is a possibility – even if the aforementioned alliance with Nissan and Renault is consummated. GM’s banks understand this and have required that General Motors provide additional collateral in order to keep open a $5.6 billion operating line of credit. On the heels of this move by the banks, Standard & Poor's and Moody's cut GM's senior unsecured debt rating even deeper into junk territory. For the banks’ collateral-call and the debt downgradings to occur shortly after such a high-profile recommendation to buy GM stock, Merrill Lynch’s top executives should be embarrassed.

Ah, but the top dogs at Merrill Lynch have no shame and will sleep well. They know that most Americans don’t pay attention to the corporate bond market nor the backroom dealings of bankers. It is the Dow Jones Industrial Average that grabs the attention of Americans. By keeping the Dow up, the Plunge Protection Team – as assisted by Merrill Lynch – understands that it is making a key contribution to the insanely expensive game of "bread and circuses" Uncle Sam is playing with its citizens. Consequently, the Federal Reserve will conjure up as much fiat money as possible in order to intervene in, and prop up, the stock market so as to keep our collective confidence elevated – and, in the mind of these Keynesians, the economy will be peachy. Ultimately, and Bill Gross not withstanding, why is GM stock a selected target of the Plunge Protection Team? As GM’s CEO Charles E. Wilson famously stated in 1953: "…because for years I thought what was good for the country was good for General Motors and vice versa."

Take a look at GM's two year chart. Look how a plunging stock staged a remarkable turnaroun in May despite any change in its fundamentals.