Sad to watch GM slowing rotting away.

GM stock went up today…wtf?

It was certain months ago. All the song and dance is just warming people up making sure they have their broker’s numbers on speed dial for a short selling sprint once it becomes official.

^That HHR didn’t help either.

Unfortunately, Obama’s focus shouldn’t be on the auto industry right now. N. Korea and Iran should be his #1 priority, due to N. Korea’s testing and downright admitting to creating a nuclear weapon. The auto industry’s problems kinda seem to fall on deaf ears when we’re on the brink of war.

On one hand there were enough wise bondholders who refused to be slaughtered like share owners. On another hand, government signed up for dumping billions into company. Now that Ch 11 will occur government will have to satisfy bondholders in a short period of time in order to get out from legal mess (for which 5 billions was budgeted). If it would happen in December of last year, new company would be formed already and it would not cost us 100’s of billions.

Borat, why would it not cost us the money? Even a new GM will still be burning thru cash to pay the bills in this low volume sales.

Also back in December there was no talk of the government supplying the DIP. Back then it would probably been chapter 7 and us in the biggest depression ever.

Bondholders will get little. Look for what happens to them at Chrysler today, and they are secured debtholders while GM’s are unsecured.

Pull the plug already on the mis-managed monster.

As many have stated since this last fall, by the time the dust settles from the US generated global credit crisis, the automotive sector (domestic/global) will be radically restructured. Odds are greater than even that this is just a lull before the plunge continues in earnest. The government’s pumps are nearly spent – the ship lists precipitously to port;-)) Smart money has been thinking along these line;-) http://www.reuters.com/article/wtUSInvestingNews/idUSTRE54P2ZC20090526

The question is should you? A quote from the above link – ignore it at your…

“Typically, deep recessions are followed by powerful recoveries because when demand finally returns, companies quickly ramp up production…”

“However, recessions caused by financial crises have a history of being long, deep and difficult to fully escape.”

There is a lot more at play here than market psychology;-) If only it were that simple!

As I stated last October: GM is potentially just the tip of the iceberg… If you have assets; it might be wise to keep this in mind;-)

Regards,

DB9

carstuff, the plan for bankruptcy budgeted 5 billions in legal fees alone. That is based on 60-90 days proceedings. If proceedings will go longer you can extrapolate the cost. If bankruptcy would be done already we would not burn 15 billions of taxes and did not plan another 15 for proceedings. If government would not choose to own company it would cost us nothing at all. Why should it? It is a private company that managed to produce large quantities of inferior products that public refuse to purchase. They’ve got wrong mix of products, huge bureaucracy and unmanageable unions, which will own almost 20% of company when original owners lost everything. Seems righteous to me, don’t you agree?

jake i doubt we’re on the brink of war with n. korea…they rattle their cage every once in a while, but they’re just doing their usual extortion game where they threaten the world and then try to gain concessions out of the folks they’re threatening…

i’m not sure i’d say it’s really “listing to port” though, as i haven’t really seen any viable plans from the starboard side…and after all, the loans to the auto companies were initiated by a starboard leaning president

as far as protecting assets goes, to a large extent its too late…the dow was over 12k a year ago, remember? most folks that had stocks or had their 401ks rolled up into stocks saw a 40% hit last year…now i do think that the recent strength in the market is what’s often called a “bear market rally” where even in the middle of a long slide the market can uptick for a while…but it’s not going to continue this way, we’re not out of the woods…i agree if you have assets you should protect them, but you really should’ve thought of that by now, since we’re already quite far into this mess…

^You play bear market rallies by selling into strength and buying on weakness;-) The buy and hold/401k strategy… well… either you have a long time horizon or your SOL:-( For a primer, see Japan’s roller coaster ride from the late eighties through the lost decade of the nineties;-) Funny thing is they did not have large deficits in their capital or current accounts…It’s a players/traders market for the foreseeable future; furthermore, it’s not rocket science for even John/Jane Q public to employ basic risk mitigation techniques;-)

The so called investors above (that this article alludes to) should have asked themselves why GM was paying 100’s of basis points over… Hmmm… let’s see rated as junk since… 2005 maybe?/!;-) I guess they thought it was too big to fail or got caught… Others, well let’s just say I wouldn’t worry about them too much;-)

DB9

PS. tacking to leeward… ready to fly the spinnaker;-))