It is strange that I keep pulling for these bailouts even though they go against my Free Market Instincts.
The legislation, approved 237-170 by the House, would provide money within days to cash-starved General Motors Corp. and Chrysler LLC. Ford Motor Co., which has said it has enough to stay afloat, would also be eligible for federal aid.
Republicans were preparing a strong fight against the aid plan in the Senate, not only taking on the Democrats but standing in open revolt against their party's lame-duck president on the measure.
I think it is just easier to go long these bailed out companies instead of betting against them. The stocks are held down by an artificial mechanism and are trading with the risk of failure baked into them. So we end up a Ford at a share price that is cheaper then a gallon of gas.
So you just need to go long and wait until there is a good chance that the bailout will be passed and then sell the rumor. It worked really well for me on the long side with Ford (I wouldn't touch a company that may still go bankrupt even with the bailout like GM.)
I just "rang the register" because the stock started to go into "wait and see" mode at about $3.25. I think that even if the bailout passes the stock won't see $8 again because it is still several quarters (or maybe even years) away from any potential turn around.
The car industry will still stay in the dumper until we are in the final innings of this recession. Also would you rather be long the #1 car maker in America like Toyota or a stock that is in debt up to its eyes and is still selling a product that people just don't want?
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