Jim Hardesty, president, market strategist and chief economist at Hardesty Capital Management, and David Lutz, managing director at Stifel Nicolaus Capital Markets, discussed whether government bailout was a good idea or an unnecessary move for companies.
“Government intervention a couple of months ago was the kiss of death for any company or any industry and it seems like investors have [now] reversed that psychology,” Lutz told CNBC.
Lutz said the government acts as a last-resort investor to fix broken systems.
“It’s going to take years to bleed off all these real estate issues [governments] have on their books and it’s going to take a long time to find out if they were shrewd investors or not, in my opinion,” he said.
In the meantime, Hardesty said government investments worked, as they helped the banks that were in serious trouble.
“If it had failed, we would be in a much more severe situation today because the international settlement mechanisms would have broken down—and they didn’t,” he said.
However, out of all the government fund recipients, Hardesty said he expects more troubles ahead for General Motors.
“This is the first bankruptcy we’ve been through for GM and I think there will be [another auto company] bankruptcy,” he said.
“There’s just too much worldwide capacity and GM is going to have an extremely difficult time going forward. In the next couple of years they may survive, but come the mid-part of 2012 to 2014, it’s going to be tough.”
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7 Major Auto Stocks: Real-Time Quotes
No immediate information was available for Hardesty or Lutz.
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