GM and Creative Destruction

 

 “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”  -Ronald Reagan 

 We thought the above quote was appropriate considering the delay of the GM IPO filing.  The bankruptcy of GM was a national embarrassment.  The biggest US automaker was a mismanaged disaster that needed a $50 billion bailout from the taxpayers.  Now, are we really  supposed to view the GM IPO as a government success story?  Capitalism teaches us that bankrupt companies are supposed to fold and disappear.  We call this creative destruction.  Out of the ashes will rise new and smaller companies with more aggressive business plans.  Some of those will fail but some will succeed and with the proper capital raising, they will become larger, profitable companies.  Consumers will be better off because the new companies will be forced to compete and make a better, more cost efficient product.  But the government bailout of GM has interfered with this creative destruction process.  Smaller companies never had a chance of competing with a taxpayer subsidized GM.  But look on the bright side, you will soon be able to purchase a $40,000 Chevy Volt.  Anybody have an extension cord that we can borrow?

 “HFTs are akin to market jackals, scavenging off the legitimate strategies of longer-term investors while simultaneously touting their importance to market health”.  No, we at Themis Trading didn’t say that, although it is pretty good.  That quote comes from a white paper that our friends over at Jones Trading published yesterday.  Here was another good quote, “Because people can build quality machines, doesn’t mean machines will ever build a quality market.”  Nice job guys and keep up the good work.  Maybe, just maybe, we can start to bring some sanity back to this market.