OT: Buying GM Stock, a steal at $2?

[Boxtaboy]

Unfortunately, with the situation they're in right now, I think the price will go even lower....perhaps in the $1 dollar range within a year.

It will go lower, much lower, before it goes back up. Plan to dollor-cost-average.

[ekam]

Buy it if you think Obama will save the economy.

[bkiersz]

I'm passing on all the auto stocks. See below article from Bloomberg.



GM, Chrysler Have 70% Chance of Filing Bankruptcy, Moody’s Says
By Caroline Salas

Feb. 18 (Bloomberg) -- General Motors Corp. and Chrysler LLC, the automakers seeking as much as $21.6 billion in additional federal aid, have a 70 percent likelihood of filing for bankruptcy, according to Moody’s Investors Service.

“We continue to see a high risk of a Chapter 11 filing by one or more of the U.S. auto makers with the government providing” debtor-in-possession financing for the bankruptcy process, Bruce Clark, an analyst at Moody’s in New York, said in a statement today. The report reiterated an estimate Moody’s made in December.

Detroit-based GM and Chrysler of Auburn Hills, Michigan, met a deadline yesterday requiring that they show progress in revamping operations with $17.4 billion in loans granted so far. They also got a boost from tentative accords with the United Auto Workers to cut labor costs.

If GM and Chrysler fail to show by March 31 how they will become profitable, the Treasury Department can recall the money or require it to be used as bankruptcy financing. The two automakers said in filings yesterday that Chapter 11 restructurings may cost taxpayers as much as $110 billion and lead to liquidation, potentially costing millions of jobs.

“Because of the potential reluctance of constituents to make adequate concessions and the considerable complexity of the reorganization, the government may in fact have to stand aside and allow one or more of the companies to make a Chapter 11 filing as a measure that could accelerate the restructuring that is necessary,” Clark said in the report.

Moody’s rates both GM and Chrysler debt Ca, its second- lowest grade.

To contact the reporter on this story: Caroline Salas in New York at csalas1@bloomberg.net

Last Updated: February 18, 2009 17:25 EST

[bkiersz]

Originally Posted by ekam

Buy it if you think Obama will save the economy.

Another reason I'm not buying.

[gerrygug]

If they go Chapter 11 you lose $400.00
If the stock rises to $30.00 you make $5,600.00
Odds are they will go Chapter 11 to break the Union so they can reemerge with a more competitive labor situation. Hope you win, but my money is on bankruptcy.

[Brucelee]

If you want cheap stocks, there are plenty that have no risk of going Chapter 11. Alcoa, Dow Chemical, Altrea, Harley Davidson to name a few.

International Paper, RR Donnelly.

I am not buying GM. I think 11 is in their future.

Ford is OK and pretty cheap.

[coreseller]

Typically Chapter 11 relegates common stockholders to go to the back of the bus when it comes to who recoups what. Dependant upon the appointed judge, typically creditors, bondholders, pension plans, employees, etc. will see monies before you would as a stockholder. I would view it as playing the lotto, except with a MUCH lower payout if you hit. GM stock IMO is a guaranteed loss.

[Ofishbein]

Originally Posted by Brucelee

I am not buying GM. I think 11 is in their future.

Ford is OK and pretty cheap.

I agree. If - and it's a big IF - I were going to buy any US auto stock it would be Ford since I think they have the best chance for survival. They might even pick up some market share from the die-hard buy-American-or-walk contingent once the shakeout is over.

Unfortunately, I think GM and Chrysler are already dead but just don't know enough to lie down yet. Unless the UAW is willing to take big concessions, I afraid that these bailouts are just postponing the inevitable.