5 things to know for the week ahead

This article was written by Minyanville's Kevin Depew

1. Chrysler gets a “new lease on life”

President Barack Obama on Thursday pledged to give Chrysler LLC "a new lease on life," by which he meant ushering the automaker into a bankruptcy reorganization that essentially puts Italy's Fiat SpA in charge.

It was a classic case of government coercion and arm-twisting. And here’s what really happened: The lenders with Chrysler exposure who have received Troubled Asset Relief Program (TARP) money -- lenders the government now basically controls as a result of their agreeing to accept that money -- all agreed to essentially give up their rights as secured lenders to allow the “surgical bankruptcy” to proceed.

What does that mean for the other lenders? Independent lenders, mostly institutions and hedge fends, however, did not agree to allow this to happen, and so this “bankruptcy” will most likely wind up in court and drag on for years and years.


2. Meanwhile . . . reality

Meanwhile, in the real world, despite the pie-in-the-sky promise of a “new lease on life” for Chrysler, and presumably the economy, we still have the following:

One, too much debt in an economy that is not producing enough real income to service it, while two, the government, doing its level best to ignore number one, continues to try to force still more debt into a system that is both unable (and unwilling) to accept it, even as three, the government is attacking lenders and bondholders for standing up for their rights to be paid back.


3. Stress test?

On top of all that, what should have been the one slam dunk for the government among all the weirdness, the farce that is known as “stress tests” for the banks, has been delayed. What has the world come to when federal regulators and bank examiners can’t agree on the right fictional outcome for these fictional bank “stress tests”? It’s the movie equivalent of a major studio delaying its summer blockbuster until the fall so they can reshoot the ending to appeal to early screening focus groups.

4. RIMM developers conference

Most technology companies do some sort of conference or presentation to announce new products: Apple (AAPL) has Macworld, Research In Motion (RIMM) has a developers conference that starts on Monday.

Analysts are expecting RIMM to announce some new products. Last year the company announced the Storm and Bold phones. This year the company is expected to announce the Niagara, a phone similar to the Bold but made for the Verizon network. According to tech geeks, this phone is supposed to be pretty sweet as it will use the Storm’s operating system and it should be ready for shipment in June.

Research firm AmTech expects RIMM will get a positive response from this conference. Now if they could only name the conference something catchy: RIMM World, Around the RIMM, On the RIMM, Circling the RIMM . . . you get the idea.

5. 'Sell in May and go away'

There’s a popular saying on Wall Street, “Sell in May and go away.” This year it seems to be picking up steam among market pundits. Why? Because the market has just had its best two-month run since 1938.

Minyanville’s chief Todd Harrison wrote a column this week: “Sell in May and Go Away.” Here is an excerpt from that:

“I believe the current rally will prove to be a massive stock tease. We monitored the cumulative imbalances as they built through the years, and it would be myopic to assume we’ve swallowed the bitter pill in its entirety. While there are two sides to every trade, we must remember that social mood and risk appetites shape financial markets.”

Harrison went on to list five things that worry him for the month: swine flu, technical factors, problems in Pakistan, Ken Lewis and the stress test results.

Meanwhile, Minyanville Professor Prieur du Plessis also took a look at the old “sell in May and go away” axiom in his piece, “The Best Time to Invest in Equities.”

“A study of the pattern in monthly returns reveals that the 'bad' periods of the S&P 500 Index are quite distinct, with five of the six months from May to October having lower average monthly returns than the six months of the good periods. Interestingly, May -- the first month of the bad patch -- is the only exception."