GM, Ford, Chrysler are asking for bailouts.

December 2, 2008

U.S. stock swings will be more than triple the average for the next seven months, volatility futures are saying:.

May contracts on the Chicago Board Options Exchange Volatility Index, or VIX, closed yesterday at 43.80, while futures expiring before then trade at higher levels, showing investors expect the Standard & Poor’s 500 Index to rise or fall at least 2.8 percent a day through June 17, according to data compiled by Bloomberg. The last time the benchmark index for U.S. stocks moved that much during the same amount of time was 1932.

“It’s astonishing,” said Jeremy Wien, a volatility trader at Societe Generale SA in New York. “It’s beyond even what were considered worst-case scenarios just last year.”

The S&P 500 rose or fell 4 percent or more on 26 days since Sept. 15, as bank writedowns and losses from the U.S. mortgage market’s collapse approached $1 trillion worldwide. The last time the S&P 500 had as many 4 percent moves was 1933, when it happened 38 times, according to data compiled by Bloomberg. The index has increased or decreased 0.8 percent each day on average in its 80 years of history, Bloomberg data show.

Record High

The 18-year-old VIX, which never exceeded 50 before October, closed at a record 80.86 on Nov. 20 when the S&P 500 tumbled to the lowest level since 1997. The VIX fell four straight years through 2006 and slid to a 13-year low of 9.89 in January 2007, a month before surging a record 64 percent to 18.31 on Feb. 27, 2007, as U.S. equities suffered the worst rout in four years. It lost 8.1 percent to 62.98 today.

The VIX averaged 30.98 this year and 56.14 since Sept. 15, compared with 15.60 in 2003 through the jump in February 2007. January VIX futures closed at 56.24 yesterday, while March contracts were at 47.88.

GM wants 4 billion to survive this month:

GM won’t have enough money to finish this year, asked Congress for $4 billion immediately and access to $18 billion total as a worsening economy forces the automaker to use more cash.

GM is seeking $12 billion in loans and an additional credit line of $6 billion, as it tries to shrink U.S. employment by 34 percent, close plants and emphasize only four of eight current U.S. brands, according to a statement today on its Web site. The Detroit-based company also is seeking to cut debt in half and win new concessions from the United Auto Workers union.

Ford Motor Co. earlier today asked Congress for a credit line of as much as $9 billion, saying it expects to break even or be profitable before taxes in 2011.

The two companies’ requests exceed the $25 billion in aid lawmakers have been considering for all three U.S. automakers. Ford, GM and Chrysler LLC must convince a divided Congress their plans to shrink are severe enough to ensure repayment of the loans.


One Response to “GM, Ford, Chrysler are asking for bailouts.”

  1. Nice post, I do believe that we need to swallow the pill and let GM fail. Failure is not necessarily turning out the lights, but rather file chapter 7 and reorganize. United AIrlines, N.W. Airlines adn Delta all filed for chapter 7 and are still in business.

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