YCG Investments
“If you buy above average businesses at below average prices, on average, we believe you should come out ahead.” — Brian Yacktman

A $600 billion spending bill for the auto industry that no one's talking about


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We opened the WSJ this morning and read the “What’s News” section as we always do. We here at YCG found an interesting headline that no one seems to be talking about.

We have heard so much about the $700 billion bailout plan and indeed it is a lot of money, however, we found it very surprising and quite puzzling when we read in the first column more details regarding the bail-out plan and then only to read in the next column over that:

“The House approved a $600 billion spending bill that includes a loan program to help the auto industry.”

It’s findings like these that make you realize just how influential the media is about the headlines it chooses to prey upon! Yes, the auto industry is struggling, but it is a small piece of our economy. Perhaps the highly capital intensive auto industry would be better served by becoming a little more “leaner” and thus become more competitive versus their foreign competitors in future years? Knowing that the House has already passed such a bill, it makes me wonder which politicians are squirming in their seats, hoping no one will notice how much money Washington has allocated to the auto industry, while the entire world seems to be raising their fists in outcry regarding the $700 billion “investment plan” to help save the entire financial system.

We’re not saying this bail-out plan is the best plan or the exact plan that must be instituted. In fact, the details have not even been disclosed, so we’re not sure why people are so convinced to be for or against it. What we’re saying is that something needs to be done. A bailout of some form is indeed a necessity or we will see a downward spiral and ultimately a banking collapse.

It should be noted that essentially what is being proposed is the government would become an investor – they are not spending taxpayers’ dollars, they are investing our dollars. In fact, if managed correctly, the government would make money for taxpayers. Clearly, the government was not created to invest our dollars – we loathe the idea! But who else has the capital that can step in and calm the panic?


Yacktman Capital Group, LLC

Disclaimer: The specific securities identified and discussed should not be considered a recommendation to purchase or sell any particular security. Rather, this commentary is presented solely for the purpose of illustrating YCG’s investment approach. These commentaries contain our views and opinions at the time such commentaries were written and are subject to change thereafter. The securities discussed do not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. These commentaries may include “forward looking statements” which may or may not be accurate in the long-term. It should not be assumed that any of the securities transactions or holdings discussed were or will prove to be profitable. Past performance is no guarantee of future results.

Posted by: Will Kruger | September 25, 2008 | Permalink

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