• GE capital withdrew a $2 billion loan facility from General Motors. The company says it can still pay its bills. Some analysts wonder how. GM is worth $15 billion, says the stock market. But it owes bondholders $300 billion.
The company is no longer a profit-seeking, capitalist enterprise. If it makes any money, the cash goes to lenders, retirees, employees, and lawyers, not stockholders.
• Oil touched $57 a barrel yesterday. Long-term, we are bullish on oil and everything else that cannot be manufactured in China or run off from a printing press. But short-term…could oil be ready for a pullback? Maybe.
We asked Kevin Kerr his opinion on the oil market:
"Well, the oil markets seem to be waiting to see what the inventory numbers hold… however, I think investors are getting a little bit of a nosebleed up here, and are looking for an excuse to invite a healthy correction of about $4–5. If this morning’s numbers are good in crude, we may see an immediate fall off in May of about $2 or $3…the time has come. The charts reflect the need for a moderate to severe pullback, and at these levels it is justified. The momentum crude has been showing has in essence "made its point" and now can secure that position by backing and filling around the $52 level. Otherwise, a run toward $60 at this point ensures a dramatic fall-off to below $50 for most of the summer. Some are saying this will happen in the next six to eight months, but I think the window is actually far less… two to three months."
"Crude is more likely fairly priced around $48–54 at this point, but lower or higher than that is all based on speculation. When all is said and done, oil will move higher by the years-end, but for now a correction is needed."
• We bought a huge, old house in Normandy. It wasn’t very expensive, but now comes the job of fixing it up. After realizing that the job would take more time and more competence than we had available, we engaged an architect who, in turn, lined up various subcontractors.
We have restored a number of houses and feel we are experts at it. Still, there are always surprises. The first surprise was that the septic system drained right into the pretty canal next to the house. "You’re either going to have to put in a lot of ducks, or replace the entire system," said the architect.
The second surprise was that a strange type of orange fungus — merulle — was eating away at the floor joists.
"If I were you, I wouldn’t invite a lot of people into the library," he warned on Saturday. He had come down from Paris, followed by the draper — who was there to show us fabric samples. The architect had driven up in a new Mercedes. The draper had come in a new Jaguar. We always worry when the tradesmen we do business with drive better cars than we do.
"Are you kidding?" Elizabeth replied when we mentioned it, "Everybody drives better cars than we do."
"How much do you think it will cost to get those floor joists replaced," we asked our architect.
"If you have to ask," he replied, "you can’t afford it."
"Right…well…I guess we just won’t invite many people into the library."
"No, you’ve got to get it out of there. It’s worse than termites. It will eat your whole house. It’s a kind of mushroom, you know. And don’t worry about the cost…in terms of the whole job, it’s a drop in the bucket."
"That’s what I was afraid of."
"Wait, did I tell you about the beam in the attic?"
"No, water damage…"
Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century.