Ford’s (F) Strange Rally

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Ford (F) made another perverse move up today rising as much as 22% to $2.64.

At this juncture, even if the federal govenment does extend loans to the US car companies the firms will have to go through some form of bankruptcy, The only interests that may be served in that process will be those of labor and suppliers in a hope of minimizing the effects on the econonomy.

While some of the operating savings may come from pulling out some UAW benefits, the most probably target of breaking the car companies apart and putting them back together will be those financial institutions and individuals who hold the tens of billions of debt.

If debt is taking a haircut, the common shareholders are certainly going to zero. A bailout may be good for Detroit, but a rally in the stocks is simply an example of the greater fool theory at work.

Douglas A. McIntyre