Jim Sinclair’s Commentary
The sheer size of this continuing free lunch bailout program guarantees two things:
– Gold meeting and exceeding my price objective of $1650 by multiples
– A drop in the value of long bonds that takes the appearance of a very, very long fishing line as the US is shocked by an unwillingness of Asia to finance the incomprehensible size of the bailout free lunch for those wholly responsible for the disaster in the first place.
There simply is no moral engine that can power any alternative ending.
There are no more than 745 days left in this drama.
U.S. throws GMAC $6 billion lifeline
Treasury injects $5B into finance firm key to General Motors’ survival, while automaker gets $1B loan to make its own investment in GMAC.
By Tami Luhby, CNNMoney.com staff writer
Last Updated: December 29, 2008: 11:03 PM ET
NEW YORK (CNNMoney.com) — In yet another move to prop up the crumbling U.S. auto industry, the government announced Monday that it will pump $6 billion into GMAC Financial Services, a financing company critical to the survival of General Motors.
The rescue package has two parts. The Treasury Department is injecting $5 billion directly into GMAC in exchange for preferred equity shares that pay an 8% dividend. GMAC also is issuing warrants to Treasury in the form of preferred stock. If exercised, the warrants will pay a 9% dividend.
Also, the government will lend $1 billion to GM that the automaker will invest in its financing arm. GMAC needs the funding to convert to a bank holding company, a necessary step to receiving the bailout money.
The Federal Reserve said last week that it would approve GMAC’s conversion to a bank holding company, subject to certain conditions.