The US had a holiday on Monday, (Presidents Day), so Tuesday was their first trading day for the week.  Over the weekend there was a report that the European banks are in a worse shape than the US banks and may need fourteen Trillion Pounds or $25 trillion to keep afloat.  This is a horrendus number if true.  The fear is the Western Europe has a large exposure to Eastern Europe where unemployment, housing prices and company loans all look bad.  Will this lead to the total collapse of the Euro currency?

The day also saw President Obama sign into law his stimulus package.  Gold rose to 3 month highs, oil dropped as did the market.  Now the DJIA and S&P500 are testing the November lows.  February options expire on Friday, so a bit of extra volatility can be expected, but a 3.4% drop in a day is big, though we have seen up to 8% in the past six months – though that sort of movement in a day is extraordinary.

To add to the day’s uncertainties we have the auto makers presenting their plans to restructure, and prove they are worthy to receive billions more of taxpayers money.  There are, however, more comments appearing in the media that say the auto makers should be allowed to file for bankruptcy.  However even bankruptcy will not solve the problems as auto makers will need financing while they sort out what can be achieved. This is unlikely to come from outside the government and so it will be the government (read: taxpayer) that will have to come up with the money.  President Obama has said he wants to save the auto industry. The consequenses of a total collapse would see (hundreds of) thousands added to the unemployed and hundreds of down stream manufacturers also hitting the wall.  Which ever way you look at it there is no easy answer.  To add to the auto industry problems, consumers are not buying new cars.  If you have just been laid off, or fear you may be, or your house is worth less than you paid for it, then the last thing on your mind is buying a new car, even if you could get the finance.