Italians Pay Billions of Nothing For Chrysler, China Goes Short

In their continued attempts to get Federal support without actually making cold, concrete changes to the way they do business, Chrysler has struck up a most extraordinary deal with the Italians, owners of Fiat. Chrysler decided to "sell" itself to Fiat, giving that company a 35% ownership stake. When reading the headlines, we immediately thought, "Why how stupid of the Italians to think they could do what the Germans clearly could not do, and how smart of the firm--Cerberus--to find some exceptionally foolish people to carry their coffins."

On close inspection, the Italians were not so stupid, essentially signing on to a cashless deal.

The speed and terms of the Chrysler-Fiat talks illustrated the emergency facing Chrysler, which was willing to give away more than a third of the company, essentially free. Yet the deal offers assurance to the Treasury Department and to the auto industry that Chrysler is attractive enough to find a partner.

(N.Y.Times)

How this possibly convinces the Treasury that Chrysler can find a partner remains a mystery. It is a like a woman who walks down the street naked, offering herself to anyone at all. She is naked, and free, and of course there will be takers. But will there be commitment?

What we have here is the Italians having a little fun, with nothing to lose, aside from a little dignity.

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In equally disturbing news, the Wall Street Journal reported (Tuesday) that China adjusted the mix of U.S. Treasuries that it holds. They are migrating away from long term holdings and increasing the short term debt in their possession. Their holdings near $700 billion.

The Journal wonders why, suggesting that the Chinese confidence in the U.S. financial system is beginning to slack a wee bit. Or, could it be that U.S. rates have nowhere to go but up, always bad for bonds?

Regardless, one more little bit of news that leaves us concerned.