Tuesday, December 30, 2008

Asian Flu

In the past few days we have received confirmation that our thesis regarding Asia is playing out rapidly. The data come from Japan and Korea - both heavily industrialized exporters and relatively open societies. While we have been very bearish on Asian economies here at Financial Jenga, the rapid pace of the implosion even surprises us.

Japan will soon report 4th quarter GDP and the estimates are moving fast - an in a really frightening manner. Bloomberg reports that Barclays now is estimating that Japan's economy contracted at over 12% annualized in Q4. This would be the worst result since the Arab oil embargo of 1974. Korea reported a similarly disastrous result for November industrial production. The YoY decline of 14.1% was the worst on record - with data going back to 1970. Understand that the textbook definition of depression is a 10% fall in GDP - and both Japan and Korea are already on pace to do so in a year or less.

We do not yet have any numbers this bad from China but we should not expect to see them for some time. China's economy possessed tremendous momentum entering the current crisis and that will have to bleed off before the damage becomes apparent on a macro scale. Also, China's government is still rather secretive and probably will attempt to hide the extent of the declines. However, we are getting industrial production numbers showing that December was the fifth straight month of decline.

Once again, Bloomberg reports that industrial output is slowing and the pace of layoff is increasing. The problem is that order also continue to fall so this is not an inventory correction as the head of the People's Bank of China would suggest. This is a collapse of end demand driven by credit. The demand is nearly all external so China has no control over that. Since China's end consumer demand is small and even most of that is tied to export industries in some way, there really isn't any way out for them. The most fascinating quote from that article follows:

China’s economic growth may have slipped to 5.5 percent last quarter, the weakest pace in at least 15 years, according to Shanghai-based Industrial Bank Co.

Once again, numbers that would have seemed shocking a short time ago are now the expected. China will be fortunate indeed if their GDP continues to grow at all in the near future.

Sunday, November 2, 2008

Submerging Market Update

note: This post was begun some time ago and the date-time stamp reflects the initial draft. The bulk of the data has been added since then.

China: The Collapse Begins
Chinese exports are collapsing and industrial activity with it.
Recent reports suggest that they are experiencing mass factory shutdowns with owners and manager absconding. According to the BBC, migrant workers from rural areas are returning to their homes in the countryside en masse. Those watching the media would think that an shocking collapse came out of nowhere in the last few weeks. Readers of Financial Jenga have known that this was not just possible but virtually inevitable for many months.

China could spend some of their dollars but they need to keep at least $1 trillion so the Yuan doesn't completely crash and burn. The interesting problem is the currency mismatch and "sterilization" issues. China's money supply growth is going to fall quickly as there will be fewer incoming dollars against which to issue new Yuan. Yes they will also be exporting fewer dollars to pay for raw materials but that doesn't matter to the unemployed citizens.

The mismatch issue is more critical. Everybody likes to talk about China's currency reserves. The problem is they've already been used up. Yes, they still have the dollars at the central bank but they've already issued Yuan against them as part of their "sterilization" operations. I.e. they cannot use the reserves to "stimulate" the domestic economy. They can SPEND them abroad, which will enable China to consume but will add production elsewhere, doing nothing for the production side of the Chinese economy. The mismatch problem is that they need more Yuan but what they have are Dollars. Much of the existing base of Yuan supply only exists because of the Dollar reserves. If they spend down the reserves, they either have to reduce their domestic money supply or simply print more money to make up the difference.

People like to point to China's dollar reserves but they've already had as much stimulative impact on China's economy as they ever will. Note that the Yuan is NOT a convertible currency. There is no large pool of Yuan outside of China that could be exchanged for dollars and spent in the domestic economy. Nor can they be lent out with the understanding that the loan be spent on Chinese goods (vendor financing). They have already done that indirectly by purchasing Treasury and Agency debt. Those looking for such an impact don't understand the structure of China's financial system.

Latin Cognates
Despite a vicious snapback, the trend is quite clearly down. Likely driven in part by the Fed's dollar swaps, these markets found support last week but it looks like a dead cat bounce. During that week a rally in their sovereign bonds of 200 basis points +/- 10 bp, left Mexico and Brazil debt trading 8.55% and 7.58% respectively. What this tell us is that the threat of immediate default has been averted by Fed imprudence but no one is willing to lend at anything less than a huge multiple of the 100 bp spreads we saw only a year and a half ago.

Latin economies are heavily dependent on natural resource extration. Thus they have had and continue to have a symbiotic relationship with the resource-eating black hole known as China. With consumption slowing worldwide and the initial feedback effects on the exporting countries, we are starting to see resource demand falling but the excess capacity created is collapsing commodity prices. The storm of demand destruction is roaring up the supply chain and spawning tornados that tear through individual sectors. The latest example comes from Brazil, where giant mining conglomerate Vale do Rio Doce is desperately cutting spending. The
big news is the cancellation of 12 giant ore carriers - which would have been built in new Chinese shipyards. At the same time, they are cutting ore production as demand falls.

An intersting question is how much demand for their own ore Vale just destroyed by cancelling the ship order. This is a vicious circle as the feedback loop in the symbiotic relationship turns negative. Rising expectations and optimism feed off themselves - until they don't anymore. Then ugliness always ensues. In this case the fall will be long and ugly - like that of Icarus, who flew too close to the sun. We have dubbed it the Universal Debt bubble as virtually every country and every industry was caught up in it. Countries like Brazil and China were some of the biggest beneficiaries of the UDB, yet those who advocated the Decoupling Theory essentially argued that the biggest beneficiaries of a trend would be hurt little if at all when it ended. The silliness of THAT position is now manifest for all to see.

Containment Breach
We've heard many times how the crisis would be "contained" to a specific industry or geographic region. The authorities making these countless claims were either lying, incompetent or both. We see now that it is and was global and across the board - thus UDB is very accurate. While we expect exporters and raw materials producers to suffer worse than most, the damage goes on elsewhere. German factory orders fell 8%. US durable goods spending fell 14.1% in the
3Q GDP report. Japanese auto sales have hit levels not seen since the 1970s, while US sales are Back to the Future of the 1980s. This is global and ugly friends. Please protect yourselves.

Saturday, November 1, 2008

Some Key Questions

The most important question facing us today, both in the US and around the world is just how much of our supposed wealth is real and how much was part of the illusion generated by bubble-mania and the UDB. Most of the actions of various governments and CBs seem aimed at preventing us from answering this question accurately. In The Limits of Optimism we outlined the various elements of the capital structure and it should be immediately apparent why the stock market is the chosen instrument for conjuring chimeras. By coercing a larger and larger percentage of accumulated capital into stocks, Wall Street ensured a large pool of buyers to continue pushing prices higher in complete defiance of fundamentals. By allowing so much of our wealth accumulation to be attached to something so insubstantial, we have collectively ensured the destruction of much of that wealth. Something that falls as soon as anyone wants to sell isn't much of an investment.

Now we see some of the real world impacts of aggressively tying ourselves to the stock market. Once again, the secondary feedback effects may be greater than the primary impact. According to the

At the end of 2007, companies in the S&P 500 had a combined pension-plan surplus of about $60 billion, The market selloff in the nine months to late September turned that into a combined deficit of about $75 billion...

Of course that was before October even started and we all know that things didn't go so well during that month either. Double digit declines were the rule for the month - pretty much across the board. The pension obligation and attempt to meet it by speculating in the stock market are yet another example of companies tying their fortunes directly to stock market whims rather than fundamental performance. It worked well for a while - allowing them to report higher profits than justified by actual results as speculative profits allowed them to pay less into the pension funds than a sensible and stable plan would have required. The reverse is now occurring and it's going to be nasty. This is yet ANOTHER headwind for corporate profits as they are forced to pay cash in to make up for speculative losses.

The lesson that should be learned here is "don't gamble with retirement money" but I fear few will choose to learn it until all other avenues have been exhausted. People can usually be counted on to do the right thing after all else fails.

Confirmed Reservations

Occasionally, I will encounter a supercilious restaurant host who will haughtily ask if we have reservations. When the right mood strikes the answer will sometimes be "yes, but we're planning on eating here anyway." In much the same vein, our prior reservations about the export economies and China in particular have been confirmed with a vengeance recently. Reuters reports that China's PMI hit 44.6 in October - indicating clear and serious contraction in factory output. This now makes three of the last four months down. In addition, recent BBC reports suggest that half of the toy factories in China have shut down since the start of the year.

Keep in mind that we expect a crash and burn in China's economy even if exports stagnate, much less roll over. Government action can partially ameliorate this but only to a small extent. We laid out the full case four months ago in China Syndrome. All of the elements preliminary requirements have now been met for this scenario to play out. The US is desperately trying to prevent a meltdown across the submerging markets with swap lines to exchange valuable dollars for garbage currencies like the Mexican Peso and the Brazilian Real. The temporary availability of dollars in those imploding economies has relieved the pressure from capital flight for the moment and perhaps even caused a small short squeeze for those who were looking for reality to catch up to those nations' financial system. But the banking systems overseas cannot sustain their credit expansion in the face of falling external demand and especially the collapse of primary commodity prices on which their economies rely heavily.

Sunday, October 26, 2008

A Little Credit

That really is all that is available in the debt markets today and the consequences are obvious. At the same time, we'd like to claim a little credit for calling the direction and - to some extent the magnitude of this crisis. We felt that these (then pending) consequences were obvious 18-24 months ago. In fact, one of the first posts on this blog in August 2007 noted:

Today's actions by the European Central Bank and the Federal Reserve confirm that the real threat is DEFLATION - not inflation. Central Banks don't pump $150 billion dollars into the banking system because they are afraid of creating too much money.

Again this June:

That is where we are now. The Fed has failed. The Great Oz has been exposed a just a man behind the curtain. Prepare for severe credit deflation and falling asset prices in markets that traditionally use leverage to purchase or hold positions.

For years massive credit inflation raged unchecked and asset prices soared as the pool of buying power increased far faster than the assets available to absorb it. As the debt machine began to break down and collapse under its own weight, credit creation proved insufficient to continue propping up all asset prices. At this point the Universal Debt Bubble (UDB) began to falter selectively. First housing, then junk bonds, asset-backed securities, commercial real estate, equities, corporate bonds and sovereign debt all fell off the wagon in turn. By early 2008, the one asset class that had not yet been hammered was commodities - though in reality, that was also a fragmented market with the highest profile stuff still going up while nearly everything else was down.

Selected commodities proved to be the final bastion of credit-driven asset inflation - leading many analysts to mistakenly call for inflation when the exact opposite was looming. Credit creation has now fallen to such a low level that asset inflation is now dead virtually everywhere. Grains, metals and oil were the last holdouts of the UDB and they are now being hammered into the ground. The WSJ provides us with evidence and a salutary example of how demand destruction works in Metals Meltdown Burns Scrap Dealers:

Now demand and price are in a freefall. Does the Miami businessman sell his now high-priced inventory at basement prices, or wait for the market to recover?


But in the last six weeks, scrap steel prices have fallen nearly 60% to about $400 a ton. Prices for aluminum scrap has dropped 33%, copper 25% and nickel about 15%. Peter Marcus, metals analyst for World Steel Dynamics, says, "We aren't near the bottom yet."

For a while, the trend in price seemed to be in favor of commodity inflation. The reality was that the huge amount of "money" (really credit) created during the UDB has been running around looking for someplace, anyplace to hide and commodities were the last asset bubble it ran towards. But the economic function of bubbles is draw in such phantom "capital" and destroy it as if it had never been. The trend-followers and and performance chasers will never understand this as they are always late by definition. One has to take a systems analysis approach to understand how pulling a lever over here can impact things that have no obvious connection to the original stimulus.

The last bubble is over. Oil has collapsed from nearly $150 to less than half that. Grains are down 60% or more. Industrial metals are in worse shape than that. Deflation is now the order of the day. Governments will try to stop it but will fail repeatedly. They do possess the power to stop it before deflation runs its full, natural course but the price will be self-destruction and national suicide via devaluation and hyper-inflation. In this case the cure is much, much worse than the disease.

Wednesday, October 15, 2008

Saturday, October 11, 2008

A Really Badass Story

Today is a day that shall live in the annuals of HISTORY! No, a harbor was not bombed by those sneaky Japanese, or something stupid like that. My Mercedes C280 (chassis code w202) defied physics.

My car was not started in over two months, and upon last being driven, the car was deemed to need two things, gas and brakes. My Merc is a legend, for it is in the Savemybenz.com Parthenon of Badass for going ridiculously fast in an epic race. So here is the deal, my tank was basically empty. Nothing. Zilch. It had as much gas as Paris Hilton has talent. (At non sexual favors that is...if it was her talents in that arena, the car could of equaled Saudi Arabia)

MMM Carls Jr. ... MMM as much talent as the Merc had gas. Not the first time she had that much meat in her mouth... BOO YAH! (Ok I'm done...)

It started right up, and drove quite nicely for a car with 107,000 miles on it... I have no idea how it drove. It made it to the gas station just fine and dandy. So thats pretty badass. Here is the most badass part of the story....THIS SONG CAME ON WHEN THE CAR WAS STARTED:

The song's title?!?!? I'M ALIVE! BY HELLOWEEN! (off their classic Keepers of the Seven Keys: Part I album) How friggin' awesome is that?! No gas, NONE, and a badass song being pumped through the speakers! Shit. I think I just crapped myself at the awesome. The car might as well be the automotive equivalent of Jesus, minus the whole miracles and being son of God thing. I can rather vividly picture a Seinfeld retelling:

George: The car had no gas Jerry! NONE!
Jerry: How can a car, run on no gas! Whats the deal with that?
George: NO GAS JERRY! It's a Jesus car Jerry! JESUS! CAR!
Jerry: A Jesus Car.... It was a Jesus car! No Gas! Whats the deal with that?

If you don't know what the jerk store is, chances are you are their biggest seller

WARNING: If you retell this story around the water cooler to Jenkins from Accounting and that beady looking guy in IT, please make sure they are wearing diapers, because they will, and we stress WILL shit themselves at the awesome.

The Lamborghini Diablo

This car is badass:
Eat your heart out Baskin Robins...
It comes in a variety of flavors from its eleven year (eleven years! shit!) production run, and is just badass overall. The Murciélago in our hearts was never a worthy successor of this beast, but Lambo's Reventón may just fit the bill. Just a thought.
This ass puts this lower one to shame (and is probably a whole lot cleaner too):

She is known for having a big ass and a Sex Tape! The Lamborghini Diablo is known for being really, really badass!

Sunday, October 5, 2008

When you turn your car on, does it return the favor? Hell No Bitch!

Apparently my Mercedes C280 is supposed to give me a boner when I turn it on. Apparently we are under some unwritten contract that when I ignite its engine, it is supposed to ignite my loins.


Lets get one thing out of the way. This girl, Kate Walsh, is hot. I do not watch Grey's Anatomy, or have any desire to see McSteamy, McDreamy, McPedophile, or Mc Hammer, but she is quite the babe.

See?She can check out my anatomy any day! Boo Yah!

But- hot Kate Walsh aside, I just don't think its hot for me to be getting turned on in my car, by my car. Her, yes. Me, no. My hairy ass should not get aroused steering 2000lbs of sheet metal, leather and burled wood around my dinky suburban landscape. If it did get all hot and bothered by the simple act of starting my car, then I think i'd be suffering from nymphomania, and probably get into a couple of accidents. Enough of my Seinfeld-esque ranting, long story short- Cadillac, if I buy your CTS, actresses from girly hit primetime tv shows better get turned on the moment I turn the key. If I buy the CTS and it turns out that I am the one to get turned on everytime it starts, then I will be the creepy guy, with half a woodie, driving a car that I cannot possibley afford around my suburban town. Thanks Cadillac....thanks.

BTW Cadillac...this car was soooo much more boner inducing:

Fuck. Yes. Mmmm

Saturday, October 4, 2008

This is Awesome

This deserves to be shared- an advertising war:

The Bentley Ad is fake, but funny nonetheless.

Now the question is- who won? BMW struck first, but Audi kind of grabbed BMW by the balls. Suburu's counter was out of left field, but witty nonetheless.

Thursday, October 2, 2008


The commercial paper market certainly appears to be critically wounded. The seasonally-adjusted amount of CP has fallen dramatically since mid-September. Per the Federal Reserve the declines over the last three weeks:

September 17: -$52.1 billion
September 24: - $61.0 billion
October 1: -$94.9 billion

Headlines emphasizing funding cutoffs to companies in the real economy, like Caterpillar and A&T are highly misleading. Non-financial CP took a single hit of $18 billion ($217 billion to $199 billion) two weeks ago and has hardly budged since. The REAL story is the collapse of CP issued by banks and other financial companies. Domestic financial paper is down by $93 billion ($590 billion to $497 billion); foreign financial paper fell $40 billion ($225 billion to $185 billion, down 20%!); asset-backed paper is off $55 billion ($780 billion to $725 billion).

We have seen record withdrawals from money market recently, which has led to falling demand for commercial paper - which is usually purchased by these funds. In order to stem the flight from MM funds and hide the losses in asset-backed CP, the Fed recently extended their alphabet soup yet again. The "Asset-backed commercial paper money market mutual fund liquidity facility" or ABCPM3FLC for short was instituted just two weeks ago. It's gone from zero to $152 billion in just days - $22 billion average last week, to $122 billion average this week, to $152 billion by 10/2/08. All data are from the
Fed's H.4.1 release.

Panic Lending

Actions of this magnitude clearly indicate that a major crisis is unfolding behind the scenes. The freeze in interbank lending, the explosion of LIBOR loan rates, the collapse of financial commercial paper and counter-measures taken by CBs around the world indicate that the final act of the Universal Debt Bubble may be upon us. The UDB rested entirely on confidence - and badly misplaced confidence at that. It allowed credit to be extended to those who were manifestly NOT credit-worthy and the temporarily elevated economic activity created the illusion of prosperity.

All of that is going in reverse now and the politicos don't like it. Well, unfortunately this is all necessary to return to a stable economic structure after the bankers deliberately destabilized it. One of our first blog entries was Legions of the Damned - wherein we pointed out:

Over the last several weeks, there has been a collective recognition of the inherent riskiness of using illiquid, volatile and hard to value paper as collateral for lending. The lenders are requiring either much more (paper) or better (cash) collateral to secure the loans. The result is the global "Dash for Cash" that we've seen recently. Cash is King again and the scramble to come up with it resulted in huge spikes in overnight lending rates. The injection of $150 billion into the system was designed to bring the rates back down to the ECB and Fed targets of 5.25% and 4.0% respectively.

Had the CBs not acted, there would have been massive forced selling of the illiquid paper, demonstrating it to be nearly worthless. Now that would only formally recognize a situation that already exists in reality but as long as the banks can pretend that it's worth face value, they can continue to make loans and prop up consumption. This is a classic example of Gresham's Law - to oversimplify "Bad money drives out good money." When dodgy paper assets are treated nearly the same as cash, nobody is going to put up cash.

As we surmised well over a year ago, the repricing of risk is ongoing and the current crisis is simply the big brother of the one we experienced last summer. The clearest indication of risk recognition is the explosion of spreads. Once again, according to the Fed's Commercial Paper Report, yield differentials between high-quality (AA) and lower-quality (A2/P2) commercial paper have blown out enormously - from 80 basis points (0.80%) just a few weeks ago to over 400 bp today. Then there is the spread due to implied higher risk just for being a financial company. The spread on financial vs non-financial paper has widened from 30 bp to 160 bp in just weeks. A risk that Financial Jenga readers have known about for a long time is now confirmed by the market.

Inability to borrow in the US money markets helps to explain the severe dollar starvation overseas. It is this problem that the Fed is trying to fix with the their massive dollar loans (mischaracterized as "swaps") to foreign CBs. Less than a week ago, the Fed announced a
$330 billion expansion of these loans.

The results of the dollar starvation are manifest across Europe. Huge institutions like Dexia, Fortis and Bradford & Bingley have been fully or partially nationalized within the last few days. It does not help that the leverage ratios of European commercial banks are typically much higher than their American counterparts. Not only are the commercial paper markets closing to such banks but elevated LIBOR rates cut those same banks off from cheap dollar loans from other banks. The squeeze to dress up balance sheets to make them look good for the quarter-end reports undoubtedly contributed to it but the fact that pressures have not abated much yesterday and today indicates that much more than a seasonal problem is at work here.

The "dash for cash" is on. Despite the Fed lending as fast as it can, commercial credit is being drained from risky financial institutions faster than the Fed and other CBs can pump it in. Having seen Wachovia, WaMu and a half-dozen European banks fail in the last week, we see no near-term end to the pressures or the bank failures.

Monday, September 29, 2008

24 Heures du LeMons

I don't know about you, but we here at the Autoblog love the 24h of LeMons. Case in point:

Yes. That is a fucking Pontiac Fiero.. in Alitalia racing colors!! Fuck Yea!
In case you are not familiar, the 24 hours...or as those surrendering cheese eaters the french say, heures du LeMons is an endurance race for cars under $500 before safety gear. 500 bucks and you can enter....race for 24 hours, and win $1500 paid in...NICKELS! The winner of this year's race did 2000 laps in a Toyota Supra without a hood. The Alitalia Fiero pictured above ran a respectable 679 laps. This is the greatest race in the world. Hands down.

What the F?

....As the title says- Wat the F?!

The Limits of Optimism

The absurd actions of our financial authorities continue to impress with the sheer hubris and vast scale of their proposals - with today's bailout attempt being the latest and greatest of many attempts. Some of the government's contortions would be impressive even for Cirque du Soleil were they not such a blatant effort to distort the market. Our nation and the world at large seem to be living out the economic equivalent of a Kafka novel today. Yet even here we see the boundaries of government interference and the limits of (unjustified) optimism. As advocates of the free market and rule of law, we have been constantly appalled. A nominally Republican administration continually interferes with market forces and changes investment rules in the middle of the game. How did we come to such a sad pass?

Like many children, yours truly had a favorite word for much of his childhood - "Why?" Eventually, I stopped bothering Mother but never stopped asking the question. It is particularly pertinent now. How did we put ourselves in a position where using tax money to subsidize Wall Street's losses could even be considered? Well, the stock market is now considered key to the retirement of many Americans.

Er, most Americans now have a substantial part of their pension or 401(k) invested in stocks.

Well, the higher average rate of return on stocks allows us to say that retirement is fully funded with less up-front investment. This is especially important for corporate and government pension plans. For individuals it allows hope of the big score and a cushy retirement.

Did the pension managers decide that was a good idea, themselves?
Umm, not really. Remember, stocks are not bought - they are sold. Some smart salesmen on Wall Street started to push this in the late 1980s, just as the last people who lived through the Great Depression were retiring.

But what about the higher risk?
The salesmen could point to the superior long-term returns from equity, while glossing over the risk and the folks who remembered the risk in very visceral ways were gone. Even so, many pension managers objected but were overruled by their bosses who wanted to lay out less money for pensions so they could spend it elsewhere (government) or report higher earnings (corporate).

What about 401(k) plans?
The long bull market convinced many individuals that there was little risk in stocks. They certainly had produced high returns. Many people hitched their wagon the Wall Street.

Perpetual Motion Machine
With so much money from average Americans pouring in, stocks could hardly do anything else but rise. Eventually it became a self-fulfilling prophecy as money chased performance, while pushing the price up in turn. That reached its peak with the Tech Bubble, when completely worthless companies were valued in the billions. When that broke down, the Fed stepped in and created a new bubble - actually several bubbles, led by housing. The same self-reinforcing dynamic - as old as markets themselves played out again.

With so much money from the masses committed to the stock and housing markets, there is considerable support for ANY measure to bail out these markets and prop up asset prices. This is the end result of individuals and pension funds refusing to settle for the smaller but steady gains from lower-risk investments. Keep in mind that not long ago, most pension and endowment type funds invested almost exclusively in bonds. For the economic importance of this, let's examine the characteristics of each class of capital:

- Senior Debt (bonds or bank loans):
first in line for assets and cash
must be paid or the creditor can liquidate the borrower
reliant on total company cash reserves

- Junior Debt:
next in line but otherwise similar to Senior Debt

- Preferred Stock:
3rd in line for assets and cash
dividend can be suspended as stockholders CANNOT force liquidation
reliant on company cash flow

- Common Stock:
last in line for assets and cash
dividend has the least protection of any security
reliant on company profits
potential for speculative gains

Slouching towards Insolvency
Over time, asset allocations at all levels have become riskier, including pension funds. From an economic standpoint, investment results became more reliant on marginal financial activities. For example, bonds are tied to current and future corporate cash (reserves + cash flow), which tends to have a linear relationship with revenue. Preferred is reliant largely on cash flow. Common is tied to marginal profit and even to the growth rate of profit - the second and third derivatives of revenue. Investment results went from relying on the soundness of the companies, to their profitability and then to the growth rate of that profitability. Under these circumstances, it is no surprise that the emphasis shifted away from ensuring that companies remained sound and certain to survive and towards showing growth or even accelerating growth (a fourth derivative!) at almost any price.

The eventual price was to lever up companies far beyond what was prudent in the quest for "growth." It didn't matter if the growth was real or not, it just had to look real for the shareholders. Companies undermined their own capital base with stock buybacks that juiced EPS growth while consuming cash flow and in some cases requiring additional indebtedness. We pointed to this problem nearly a year ago in Tactical Nukes. The paradoxical result was a slew of companies that were "growing" rapidly but could not survive a downturn. By placing so much reliance on marginal outcomes, the system became easy to game as small movements in revenue could drive huge changes in "growth" rates. Eventually, growth became THE foundation of many investment strategies, making those folks dependent on them willing to support increasing distortions of free markets for financial gain.

Those distortions have been a large part of the discussion here at Financial Jenga since the very beginning. The collapse of the illusion of growth and the economic distortions that supported it have revealed the true state of the underlying economy for all to see and it's not a pretty sight. Such are the ironic outcomes of the Universal Debt Bubble.

Saturday, September 27, 2008

Shadow Banks, Shadow Government

Here at Financial Jenga, we don't often comment directly on politics - being much more inclined towards economics. We are also equally skeptical of both groupthink and conspiracy theories - which tend to be opposite sides of the same psychological coin. However, the sheer scale of the current crisis and many of the proposed solutions make this problem inherently political. It would also appear that many of the "fixes" being bandied about won't actually fix anything but WILL benefit certain politically-connected parties.

There is considerable evidence that the proposed $700 billion bailout of Wall Street will do little to fix the credit problems. One of the key arguements used by supporters is that banks don't have enough money to keep lending. This is simply a lie. The latest
Fed H.3 report shows that excess reserves in the banking system were $68.8 billion as of 9/24/08. This is 1400% above any other datapoint for the past year and more than 2000% higher than the average for that time. In other words, the Fed has FLOODED the banking system with borrowed money (the excess reserves) and the banks STILL won't lend.

In the real world, you cannot conduct fully-controlled experiments to validate an economic theory. But to the extent that it can be, we have already tested the thesis that giving banks more money will cause them to lend more and found it to be flawed. The most likely outcome of the bailout appears to be many banks saved at taxpayer expense but we get a credit crash and recession-depression anyway and Main Street has even less money to struggle through it since it will have been given away to Wall Street. Basically, it redistributes the losses for past transgressions from the guilty to the innocent and does little to help the future. We therefore oppose the bailout on both economic and moral grounds.

Hitting the Panic Button
According to various media reports, the supposed experts threatened Congress with all sorts of terrible repercussions if the bailout was not passed immediately and without strings. From their public statements, our representatives have been told that failure to do so would result in an immediate end of credit, a stock market crash, massive layoffs and likely a new Great Depression. As regular readers here know, many of these consequences ARE likely but they do NOT stem from the lack of a bailout for Wall Street. They are the DIRECT result of the orgy of foolish lending that preceeded the bailout request. Paulson and Bernanke are using their control of information and the ignorance of the politicians to run a bluff. We are being threatened with consequences that are likely to come in any event and the bailout won't change that.

In many ways, the financial authorities are taking active measures to make the crisis worse. The Fed has been withdrawing liquidity from the financial system for over a week. According to
the Slosh Report, system liquidity topped at $190 billion on 9/18 and fell to $110, $110, $90, $65, $63 and $59 billion on subsequent days. With the Fed deliberately cutting prior support, it's no wonder the short-term stress has become overwhelming. One result has been the largest bank failure in history (Washington Mutual) followed within days by a shotgun marriage to prevent an even larger one (Wachovia). The WaMu failure itself is quite interesting. The FDIC ALWAYS buries failed banks on a Friday, in order to give themselves time to sort the mess out over the weekend. We've gone back and checked and it's been true for many years. Yet the WaMu failure was announced on a Thursday, the day after the President unveiled the bailout proposal. The FDIC's timing on WaMu looks suspiciously like an attempt to rachet up the pressure on Congress - as does the Fed's withdrawal of liqidity support from the system.

In many ways this power-grab resembles the cynical use of religion in primitive societies. It is well documented that the priesthood in many cases studied the heavens with great care. One benefit would be the ability to predict solar eclipses - one of the most terrifying astronomical events to our ancestors. In some cases, the religious leaders used that terror to wring offerings, greater control and even political power from a frightened populace. The events in Washington today are quite similar but even worse. The crisis is already pre-determined. But the current financial leaders helped to create the disaster and now demand power to end it. In contrast the shamans and witch doctors were merely opportunists. The crisis centered in the Shadow Banks is now being used to create a Shadow Government.

Tuesday, September 23, 2008

Chrysler Shocks the Shit out of the Autoworld!

No pun intended- Chrysler literally shocked the auto world with this:See that beast in the middle? This - This is Chrysler's savior.
Now- the Autoblog is not one to gloat, but....remember this?? HA! We called it! The next K-car isn't a shitty compact sedan- but a badass sports car! Look at the Viper-esque styling! This beast is based on the Lotus Europa's underpinnings, and man does it show!!
Look at the badass color schemes! While Ford and Chevy were getting off on their hybrid vehicles,Chrysler took the incredibly badass route and waited until they had tangible options to show. Holy shit. These cars were developed in secret too. In the age of the mass media and internet- they developed multiple cars, a multi-stage process, in near total secracy. Wow. The Autoblog doesn't even have some witty smartass remark for this. We are truely impressed. Here is thy savior Chrysler! May it work out!

Monday, September 22, 2008

A Little History Lesson in Badass

Back in the day, this crazy guy named William Kissam Vanderbilt II started an international race called...ready? The Vanderbilt Cup!
Willy K- This guy got more puss then you'd ever get
The first race took place in 1904, according to Wikipedia, aka the most reliable source in the world. People such as Louis Chevrolet and Scuderia Ferrari raced, along with the poon magnet Willie k himself. This wasn't a pussy Nascar race either- no driving around circles. Willy was nuts. Willie k wanted to drive around 30 miles of dirt roads in Nassau County. Now, if anyone else wanted to do this, the town government would of shit in their cereal, but since he was a Vanderbilt, they decided to let it slide.

In one of those cars, Willie K is getting more poon then you'd ever get
"But Autoblog- that isn't badass?! A bunch of guys with pedophile mustaches driving around a shitty suburb? Please..." is what you are thinking.

It is the mission of the Autoblog to purge you of your ignorance! Enjoy your slice of badass pie! This race is badass because at the time, Nassau County was covered in nothing but shitty roads. We aren't talking ooo quaint country lanes and shit, we're talking just really shitty ox-cart roads. Picture driving a shitty Buick Le Sabre on a twisting cow path at ungodly speeds, all while being surrounded by death. Now replace the Buick with a shitty 1910 racecar with not one safety feature whatsoever. The Buick looks pretty enticing right now don't it?! The race occured yearly until 1916, where it was resumed on a not so badass racetrack in the 1930s. After a 40 year hiatus in the 60's, it returned as a CART event. But no one cares about a shitty CART event.

Here is the Autoblog's stance, and professional recommendation:
Long Island should have a full blown rally race!

Picture doing this....


Now that would be fucking awesome. A huge ass rally race in a suburb. Someone make it happen. Your thoughts avid Autoblog readers?!

Saturday, September 20, 2008

HA! High-end Auto makers are dicks!

Hah now this is fucking funny:

So, as the economy tanked this week, there was a lovely auto show called Motorexpo in front of Merrill Lynch. As people walked with their heads down in shame and money hemorrhaging out of their asses, they got to see Rolls, Aston and Bentleys that they can no longer afford! What a nice way to start the day for the average white collar schmuck who is fearing their job security! Hah congrats high-end Auto makers! You are the dicks of the week!

Hmm. We can't afford THIS anymore. Guess we'll go shoot ourselves now!

Its funny though, this thing was planned months in advance, and these automakers had no idea that the economy would take a collective shit, but they are being called insensitive anyway. Regardless of these silly things called "facts"- it is fucking hysterical. Any opinions avid readers?! Leave them in the comments section.

Friday, September 19, 2008

Frederick the Great vs. Hank Paulson

This is total panic time. They're now firing off everything that they have after the first several attempts at an options expiration week stick save failed badly. Basically, the Treasury is guaranteeing virtually everything now with backstops for money market mutual funds and a new super SIV for bad assets. But as Fredrick the Great said: "He who defends everything, defends nothing!" This was a simple acknowledgement of military reality - concentrate on protecting the most important assets. Spreading yourself too thin invites defeat in detail and the destruction of your forces. Then the enemy can loot at leisure.

The government seemingly doesn't understand this but they will. There simply isn't the money to do everything and in their arrogance the Fed and Treasury have over-reached badly. By trying to save all of the bankrupt financial companies, they are weakening the defenses of the strategic key - Treasury debt. The bond market is already demanding 50 basis points more in interest than just days ago. Another way to look at it is that 10-year government bonds have lost 3.5% of their value in that time. The Treasury is the logistics depot from which the army defending every other target is being supplied. If it falls, the war is over and our enemies win.

One shot wonder, long-term consequences
The SEC, erstwhile market watchdog is barking up the wrong tree again. They sat on their hands and did nothing while the disaster built all around them and now they are attacking the group pointing out the problem, not the ones who caused it. In banning short-selling, they also increase the probability that there will be no bounce when the next decline occurs since short-covering is the one thing that has kept our stock market from collapsing like much of the rest of the world's.

The fact that they feel the need to use this one-time guaranteed short-squeeze now ought to tell you everything you need to know when the cost is so high for so little gain in terms of time. This tells me that election politics are paramount here since there is at least a chance (maybe 50/50) to delay the crash by 6 weeks. There is little prospect that we make it 6 months. With so little difference, I'd prefer it occur before the election to guarantee an Obama presidency. Whichever party holds power over the next 4 years will be discredited for a generation (after Hoover and GD 1.0, the Republicans were unable to build sustainable majorities for two generations). Though I'm disgusted with both political parties, there is at least some chance that the Republicans will return to their Reaganite roots after a time in the wilderness. I have no hope at all where the Democrats are concerned. The fundamentals are positively horrific and much depends on sustaining the illusion of control. Short-sellers overwhelmingly profit from disparities between perception and reality - as such, they are always among the first to point out that the emperor has no clothes. Given the stakes, anyone who sees through the deception must be punished and silenced.

There isn't even enough tax money to cover the normal operations of our bloated government, much less this madness. But the bond market was willing to make up the difference as long as there was a high probability of repayment. But the checks that Paulson is writing with his mouth right now are guaranteed to bounce and some bond buyers are noticing. From a low beneath 3.30% this week, the yield on the 10-year Treasury bond has skyrocketed by 50 basis points. The fact that the bailout silliness has more than doubled that deficit doesn't help at all. Like any fool who continues to spend far beyond his means, the creditors will charge us more and more to borrow until insolvency.

The only solution is immediate cuts in government spending and the repudiation of all the backstops that have been proposed. Getting within shouting distance of a balanced budget is the only thing that can prevent an imminent spike in Treasury rates. The entire game depends on the willingness of foreign savers to fund the now gaping chasm of the Federal Deficit. If they balk, the whole structure is endangered. By taking on the toxic waste of the financial industry, all the US government has done is place itself at risk in the inevitable implosion. This is too large for any government or even all of them together to solve. Remember how Congress sent the GSEs out to save a drowning housing market and the "lifeguards" not only failed the rescue but also got pulled to the bottom right along with everybody else? That is precisely what is going to happen to the US government if they don't extricate themselves now. A blowout in borrowing costs was a precursor to the demise of Fannie and Freddie; we appear to be seeing a super slow-mo, reverse-angle replay with the Treasury right now.

One reason the US survived GD 1.0 without the political damage in the rest of the world (think Hitler, generals in Japan, Peron and petty dictators from Pilsudski to Metaxas) was the fact that the our government's finances never reached a state of existential crisis. The deficit (what there was of it) and government bonds were always sure to be paid back. That assurance is not present today and the government's actions are making ultimate repayment ever less likely. The Argentine example is particularly poignant. In the early 20th century, that country had a higher per capita income than the USA. After decades of socialist and corporatist policies under the Perons, they became the ongoing basket case and borderline Third World country they are today.

I hate to paraphrase anything from the Star Wars series but it is too apropos: This is how freedom dies - to thunderous applause.

Thursday, September 18, 2008

Porsche wants to have it's way with Volkswagen

So- I dunno if you avid readers have time lately to check out automotive news, but besides the massive economic collapse of America, there is other big news:

Porsche is in the process of acquiring Volkswagen!
Das People's Car
The People's Champion!
What is very funny is that Volkswagen is saying that Porsche is "pushy". Germans, being pushy? No Shit! Who wouldadunkit?! C'mon Volkswagen grow a set of balls and do one of two things. Defend yourself, and do not be bought out, or let Porsche marry you in the classic arranged 18th century way. Well, regardless, maybe the Beetle will have a sick water-cooled turbo flat six now.
Just Pretend, for a second, that this thing has a Porsche Engine. It is both a sickening and awesome thought.
That would be cool. Really cool. Or maybe Brooke Sheilds will become the office spokeswomen for the 911! Whats more badass than the bitch from Blue Lagoon promoting a 911?! Is this move good for Porsche? Will they still be badass with all of VW's lame-ass baggage? We here at Das Autoblog say yes- what do you, the avid readers think?

Wednesday, September 17, 2008

World's First 8 Speed Tranny... man that sounds wrong

Lexus recently introduced the world's first 8 speed transmission. Or tranny. Hah- Tranny. Yes the autoblog made the same joke twice.

Lexus' new transmission
Now, we here at the Autoblog are all for the comfort and shit, but 8 speeds? Is that necessary? Why? I don't get it- someone explain why not 6, 7 but 8 is what is sufficient?

Anyway, you avid readers probably noticed why the Autoblog is now...Das Autoblog. Why? Well, why the hell not? German words look cooler, sound cooler and are cooler. Except for Schnitzal. That word is not cool. Just say sausage. Anyway- The Autoblog would like to ask you, the avid readers what do you think of this newfangled 8 speed tranny? (hah that never gets old). Use the comments section! We want feedback! We work to serve you! Ok thats bullshit, but comment none the less!

The Fed is Broke

Three months ago we published Why Bennie Can't Lend, detailing the Fed's balance sheet and the limitations they were up against. We contended that they were out of cash and unable to sell their bond holdings without serious consequences. That is why their incremental actions have been limited to the TSLF, where they loan out the actual bonds rather than cash. Today, the Fed admitted that we were right all along by arranging for the US Treasury to raise more money for them so they can keep lending via the alphabet soup of liquidity facilities.

The Federal Reserve has announced a series of lending and liquidity initiatives during the past several quarters intended to address heightened liquidity pressures in the financial market, including enhancing its liquidity facilities this week. To manage the balance sheet impact of (ed. - ie. pay for) these efforts, the Federal Reserve has taken a number of actions, including redeeming and selling securities from the System Open Market Account portfolio.

The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at the request of the Federal Reserve. The program will consist of a series of Treasury bills, apart from Treasury's current borrowing program,
which will provide cash for use in the Federal Reserve initiatives.

Basically, this is simply another holding action by the Fed to prevent the "fire sale" (actual price discovery) of assets held across many financial institutions. Yet the implications are profound. This would have been a perfect opportunity for the Fed to print money if it had any intention of actually doing so. Yet they did not, even under the extreme pressure of Lehman failing and AIG bailing. Instead they chose to stay within the framework of fractional-reserve banking and they BORROWED instead. If they were going to conjure money out of thin air, this would have been the time to do it and they demurred.

We believe that this is a shock to the market in a number of ways. It clearly demonstrates the limitations of the Fed's power when many market participants believe that power to be virtually unlimited. It shows that the Fed is no different than any commercial bank in this regard - they have to be able to borrow and lend to expand the money supply. They have the advantage of being able to turn to the Treasury in a pinch but they are trying to support asset prices (promoting asset inflation) and they need cash to do it. The Fed either won't or can't create that cash by decree.

Ironically, just as the weaknesses of the Fed's inflationary program are being made clear, the herd is stampeding back
into the inflation trades. This appears to be based on the assumption that today's Fed action is inflationary (true on a very small scale) and demonstrates some new power on their part (not true at all). What has been demonstrated is the INABILITY of the Fed to inflate asset prices without the willing cooperation of the market. With sentiment having turned, the best they can hope for at this point is to slow the crash in prices of risky debt used to fund credit expansion. This is a desperate rear-guard action by the Fed

Saturday, September 13, 2008

Happy 100 Years GM!

Happy 100 Years GM! The Autoblog salutes you and your many accomplishments during your 100 years in the auto industry. You gave us all the greatest hits from Buick, Chevrolet, GMC and the Corvette! You brought the small block V8 into the limelight. Your stock may be in the shitter, and you may almost be unrelevant in your own domestic market, but long live pushrod V8s (which are still friggin' badass. They eat competitors for breakfast) !But most importantly GM, the Autoblog would like to thank you for this:

This car rivals the Lamborghini Countach in terms of styling.

The 1983-84 Chevrolet Celebrity Wagon! This is the pinnacle of auto achievment! The car so nice you had to own it twice! This beast was equipped with a base 2.5L I-4 engine that produces an astonishing 85 HP. The Iron Duke engine was truely the heart of this car. If you got the Eurosport appearance package, you got sick handling/appearance upgrades. Did we mention that the Celebrity was the cousin to the badass Pontiac 6000?! This car was prominent in Robocop!

This car personifies all that is good with GM

Thank you GM, thank you for all the great things you have produced. If it is possible, please resume production of the Chevrolet Celebrity. We want to see the Eurosport model return as well, so we can outrun our friends in their shitty Ford Mustangs, and out handle anybodys Honda S2000s.


The Autoblog!

Tuesday, September 9, 2008

We love BMW

The Autoblog needs to come clean about something. We love BMW. We are extremely biased. Why? Well, today's flavor of the day is this:

Look at that dual kidney grill. Mmm fuck yeah

Do you guys remember the 7 series from Tomorrow Never Dies? Well, that was a really badass 7 series. Ok, so it was ten years ago, so howabout the Transporter's 7? That was more recent. The current generation 7 is not in the same line of badassery as these two iterations. Well, turns out that the new the 7 series is a bad ass luxo cruiser. This new Bimmer packs a twin turbocharged V8 that has 400 hp and 442 lb/ft of torque. Jesus Christ, I just shit myself. Also....get ready for this one kids- iDrive is dead. Deader than JFK Jr. (Too soon? Yes! Tasteless, yes!) The throne is returned to the 7!
Bmw blows the competition away!!!!

Monday, September 8, 2008

The CTS-V Punches old people in the face!

Apparently, the all new Cadillac CTS-V dethroned the M5 in this month's Road and Track. It was an even match that took place at Monticello, NY, and both manufacters sent their drivers and teams to represent themselves. It was quite a hellicous race with results that impressed us here at the Autoblog until we realized the following: The M5 is three years old, and the CTS-V is well, all new. Wow. Thats like punching the shit out of your grandma than striking a badass pose.

The CTS-V punching the BMW in the face. Yea it won, but is it truely a victory?
Grandma abuse aside, the Cadillac is by no means a pushover. Actually, it is a friggin' monster. Look at the specs. It sports the rather epic 6.2 L LSA V8 that generates 556hp and rockets the Caddy from 0-60 in 3.9 seconds.

Its cute...for a grandma puncher

The M5 has the 5.5L V10 that produces 505hp, and was hailed by Jeremy Clarkson after pressing the M button: "the car stops being annoying, and becomes, just magnificent." The Caddy has the power advantage, and a weight advantage. WTF? R/T couldn't find a newer
competitor for their new monster? What, was the GT-R too busy shampooing it's hair to come out and play? I guess Caddy did benchmark the M5 (and why wouldn't they?) when they created and tuned the CTS-V, but c'mon. The M5 is fast on its way to becoming a BMW legend, and just got KO'ed by the young upstart Caddy V. The end of an era? Well, there is one thing that we did not mention. In the comparo test, the Caddy posted a 2:44:23, while the BMW posted 2:44:70. The difference was roughly half a second. A three year old car lost by half a second to the best Caddy threw at them. This, in itself, is quite impressive.

Still one badass car
Oh one more thing. BMW is currently producing a new M5. That sound you just heard was Cadillac collectively shitting their pants.

Thursday, September 4, 2008

Two Badass Sleeper Cars

The Autoblog is a regular contributor to the C/D forums, and I found this little thread:

German Luxury Sedans are normally not known for their subtle hints at granduer. However, with their larger size, these rides are often soft and cushy. These cars however are not soft and cushy. These cars will tear you a new one before you even realize that a car can, in fact, tear you a new one.

The E55 AMGStealth Level: Four Ninjas out of Five.
This car is friggin' sweet. Recently covered in this months Car and Driver, the 1997-2002 E55 AMG is subtle power. It is the automotive equivalent of a UFC fighter whose day job happens to be a middle management boss. At the Gap. It has the 5.5L V8 that produces 347hp, and 355 lb/ft torque, with 0-60 in the sub 6 second range. Impressive indeed for a car that is older. And oh so sneaky. Compare it to this:
This car is as subtle as an RPG up your ass. Which isn't nessecarily a bad thing...

The Audi S8
Stealth Rating: Five Hitmen out of Five

The Audi S8 is like looking at your grandma who also happens to be a contract killer for the Gambino family. It does not differ much from the regular A8, but then again nor does the E55. So why five Hitmen out of five? Well, the S8 was created to combat the already established AMG line that Merc had, and no one know what the hell it was. This monster's 4.1L V8 produced 335 hp, the famous Audi Quattro drive train, and upgraded shocks and suspension. Plus, it offered that oh so underrated appearance that wins contests such as these. Look at the subtle offering of the current S8:

By the way- this is totally my desktop.

That is our selection of Sleeper cars for now. If you, the famed Autoblog readers have any suggestions, offer them up in the comments section!

The new NSX? I think not!

This is a good looking car. However, it has shit on this. Call us old fashioned.

The NSX has been dead for almost four years, and with its absence, it has left a mid-engined void in the near supercar realm. The Audi R8 fits the slot, but it is not the same dammit. Recently though, talk is arising about a mysterious Acura that has been circling the Nurburgring:

There are some quite notable differences between this new monster and the classic NSX. The NSX was Honda/Acura's mid-engined masterpiece, while this next car has a front engine set up. The NSX had a V6 engine that towards the end of its run produced 292 hp and 224 lb/ft of torque. This new model has a substainally more powerful 550hp 5.5L V10.
What the fuck?! Jesus Christ! Those crazy Japanese!
I googled "Crazy Japanese" and got this returned to me. Good thing I had safe search on... god knows what would of turned up.

Also, in a quite ballsy move, they are shooting very upmarket. A 2005 NSX sold roughly for $80,000, while this new car is guesstimated to sell for over $150,000.
Go for the gusto Honda!

All in all, the NSX replacement isn't exactly an NSX, but it is still way too early to tell. Maybe they are doing a tourer in conjunction with a mid-engine supercar. Who knows. In three years reread this article and laugh at how dated it will be!

We here at the Autoblog will watch this situation quite closely... close like that creepy uncle at family parties.

"Yea...look at that ass! Now go get your Uncle Robby another brew, and don't be fancy about it!"

Tuesday, September 2, 2008

Woah, a cool Lincoln!

Attention Autoblog Readers! Lincoln is relevant!

Well, with Ford in the shitter (although not in Europe), this little car surprised me:
Behold! The Lincoln MKS! Apparently these guys produce more than a Towncar these days. This car is quite capable of saving Lincoln. Priced at under $38,000, this car is rather German in style. And look at the blingy grille. Man. Babes love chrome. Powered by a more powerful version of the Duratec 3.5 L V6 that has been in almost every Ford recently. Making 275hp at 6,200rpm, it isn't slow, and soon a twin turbocharged 3.5L is coming, making 340 hp. Shit. The Lincoln has balls too. This car has the ability to turn Lincoln around, the question is though, is it too late? We shall see readers, we shall see!
He is totally saying "I shall buy one TOMORROW!"

Sunday, August 31, 2008

The Mitsubishi Lancer Evo X

Well, well, well, if it isn't Mitsubishi, the company that brought us such hits like the Outlander, Galant, and Eclipse (which by the way is totally a chick car...typically a hot chick's car.) Back in the day, Mitsubishi used to be the shit, but more recently here in the US they are on a bit of hard times. With that being said, enter the Lancer.That front end is aggressive. Aggressive is badass. Thus, the Lancer's front end, is badass!
I am impressed Mitsubishi. Very impressed. This is a very good looking car. Since you are reading this blog, I am sure that you know the Lancer's rich Rally past. So the question is, the car looks badass, but how does it drive?

Wonderfully. The Lancer is a testament to AWD. The car has so many options in terms of differential and suspension settings, I am surprised that this baby doesn't wipe your ass at the push of a knob. With the impressive 0-60 time of 4.9 seconds, and about 360hp in the UK version (why do we get 291hp? Apparently those limeys can handle power better...) While it is heavier than the Evo it replaces, this car is nothing to scoff at. Top Gear picked it above the Impreza hands down, which seemed to be an unfair challenge, for the poor Suburu looks like a tricked-out Jellybean. While the Autoblog loves European cars, this offering from the Japanese stole our hearts, and for a measly $35,000, it won't steal our wallets.

Mitsubishi, you F-ed up in the American market recently, but if you continue to build cars like the Lancer (which totally is not a chick car), you won't need worry about making a better Diamante or Galant. The Evo is just fine. Just build more Evos please.

Hello Suburu Impreza. My name is the Evo X. I am about to kick your ass? You cool with that? Good...

Friday, August 29, 2008

The Mercedes C63 is Bat Shit Crazy

While the Autoblog's parent website (www.savemybenz.com) is mainly about a Mercedes C280, the Autoblog must be unbiased when commenting on the automotive world! With that out of the way, the new Mercedes C 63 is fucking crazy. Not even like good "let's do it in the church when no one is around" crazy. It is the "As we do it I'll murder the shit out of you" kind of crazy.
Like every hot, crazy girl you may meet, this one fuck your shit up. (not in the good way)

Do you know how many horsepower this monster has? 451. The advertisements state that giving a car 400hp is nuts, so they gave it 451hp. Its true. Isn't that messed up?! On top of that, the power from the 6.3 L V8 is transferred directly to the rear wheels, and you have the ability to switch ESP off. In creating this monster, Mercedes had the M3 in their sights, and boy did they hit their mark. In all the comparo tests in the auto magazines, the M3 won (it is the darling of the automotive world, the sweet girl next door that does not try to murder the shit out of you), but the Mercedes C 63 was close. The only problem they had with the car was that it is too fucking wild.

Only the Stig mastered it.

So what is the lesson here? Well...
This car can, and probably will kill you if you attempt to drive it. Buy a Corolla and play it safe. Unless you are the Stig of course.

Wednesday, August 27, 2008

GM and Chrysler are on the shitlist


What the fuck GM? Pontiac is no longer going to be RWD exclusive? Do you guys at GM see that something is positively received, and than proceed to take a shit on it? I wish you cancer of the

As for Chrysler- may your first born infant die in a plague that rivals Moses'. As Automotive News reported earlier, they may be selling off the Dodge Viper, but it is under "strategic review." Here is a strategy to consider Chrysler- Don't be such a fucktard and sell off an American Icon!
I hope this has its way with all of the Chrysler executives wives while their kids watch.
Harsh? Probably. Necessary? Why of course!