OT: Buying GM Stock, a steal at $2?
 

Picked up 200 shares this week, I was wondering if anyone else is betting on GM hitting bottom at around $2?

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.

Buy it if you think Obama will save the economy.

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

Another reason I'm not buying.

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.

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.

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.

wow you are brave. I hop you put a tight stop on that order.
In a bear market, the rule is not to go long until the stock has bounced off its lowest. A real bottom comes and goes quickly. We see no evidence of that.

If you're bargain hunting there are some tempting stocks, particularly in energy and agricluture (fertilzers) and maybe ceratin techs. But I wouldn't touch autos or banking unless it's to sell short and cover quickly. Those are falling knives with some potential big time disasters coming soon.

p.s.
I'm not buying and holding a single stock. All short term buys. I'm giving hard thought to going 50% in gold ETFs and the rest in T-bills in my retirement accounts as well. If GM goes under their will be a ripple effect through the entire S&P.

Don't know what to tell you...my grandfather never bought stocks..only land. My father never bought stocks...just land and rental properties.

Right now realestate is hurting...I'm buying more land/rental properties. If stocks work for you, fine...owning properties is the only thing I know and trust, and it's never failed me...even now.

If you do buy, I hope it goes to 20, best of luck!

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


TBOYER - Unfortunately, yes. They probably stole YOUR money...


Good luck though. I certainly hope they survive and your trade works out!

Wow buying real estate or GM stock...I think I'd rather take my money to the casino and bet it all on black. At least then there is the POSSIBILITY that I may get something back!

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.

Glad you didn't risk much investment...my bet is on BK filing. I've already lost more money than I'll probably recoup in my lifetime...why throw more away?

Hopefully, someone will save Saab in the meantime.

The only thing which will save the General and the Pentagram in the long run is a Chptr.11, disolution of the UAW and Job Bank and a restructuring of their Healthcare and Pension programs.

These two companies have annual union payrolls of about $14B. But they have combined contributions to Healthcare of about $60B, and Pension pymnts. of about $14B (or almost 5 times more than actual payroll itself). The Job Bank, setup in the past to resolve a union arbitration, provides that if any UAW employee is permanently laid off, they receive 85% of their former salary for life (with COLAs!!!), regardless if they ever find other work! The Union is NEVER going to make these concessions voluntarily. Under a restructuring, they won't have much choice.

All these costs are either passed to you each time you buy their products, or as has more been the case, stifles their R&D committments. This has been the reason, much more than alleged stodgy thinking in the Boardroom, that has allowed so many foreign car makers to sieze their market share over the years.

GM Craters! Stopped at 1.71, lost about hundred bucks, the only winner here is Sharebuilder.com :-) Appears that investors are worried that GM may convert a sizeable amount of debt into equity stock, not exactly sure what that means but it doesn't sound good.

Sorry for your news. It could be linked to the fact that SAAB, a GM subsidiary filed today for Bankrupcy Protection. The Market, I believe sees this as just the beginning.

So what made you buy GM stock?

very well said, lilbastard. The UAW is pushing hard to promote the idea that if GM flies, the car industry, and the United States are dead. Truth is, filing for bankruptcy doesn't end the company. Look at Delta.

If we keep giving GM bailout money, you and I are being forced to pay someone elses retirement fund...and here I was thinking we won the cold war against communism...

Reagan must be spinning in his grave! :confused:

You know whats amazing, all this talk about the Unions was known, known by all of us. The old saying, "Never bite the hand that feeds you" well, in the world of the UAW they didn't just bite, they ripped, chewed and swallowed the hand that fed them. And now they should all stave because of that BUT, they have an ace in the hole. A back door that's in place, and all it cost them was their vote! Now Obama is coming to the rescue to pay back the campaign promise for their support. A bailout that will secure the Union's bottom line and then the Automotive Big Two can tank, but not until the Union gets theirs.

And there isn't a damn thing we can do about it.

idea
 

If GM, Ford or Chrysler had the brand equity to charge the absurd prices that Porsche does for cars and service parts, they would be in a better financial position. Just a thought.

As for the UAW jobs bank, that appears to be on the way out. The two-tier wage structure should help to bring the Detroit 3 close to wage parity with the "transplant" manufacturers, as long as they can make the VEBA work. See this:

http://www.bloomberg.com/apps/news?pid=20601087&sid=ajeONmi6OjAw&refer=home

GM forgot how to make money. They have been burning through cash for who knows how long. I would not buy GM stock.. you'll be throwing your money away. They do not have a long or short term plan to "make money".

Actually, the manufacturing is not their problem, its the management of the inventories, the styling options and the logistics. They offer too many cars & trucks, with too many options/colors. How many SUVs does GM offer?

Only recently are they starting to act like a company that's in trouble. Anyone's company that would lose money in a quarter would take immediate action... like Toyota is doing right now. GM has been losing money for who knows how many quarters?

Stay away from GM stock.

GM's problems are varied and numerous. Certainly, the unions are up there but the obituary has been being written for many years. Too bad, as I like the fact that they build some cars here, provide jobs for many directly and indirectly.

Certainly, current board and CEO are as bad as one gets.

Still, they do have some nice product now and I think Chapter 11 reorg COULD work with new CEO, new union contract etc.

Of course, it would be nice if BO didn't totally kill the rest of the economy. Folks are not buying any kind of car right about now so recovery for a sick company is especially difficult.

In my dreams!

:barf:

Converting debt into equity is a fairly common resolution when a troubled company attempts to restructure. The process removes the debt from a company's balance sheet and converts it to net equity, diluting the existing shareholders. In the long run, the original debt holders get fair value as the company becomes profitable in the future. The problem here is there's so much debt, the holders essentially get stake in a company that's going down anyway (% ownership of nothing still equals nothing) and would likely recoup zero.

Obama will likely write the check to GM and it's suppliers to keep the house of cards from collapsing and appease the unions which showed strong support during his candidacy.

Debt holders get preference over shareholders in a liquidation. Hence, most debt guys won't do this. Moreover, even if GM can come out of Chapt 11, I think the equity would be so diliuted, it would be a penny deal for them.

If I purchase whatever widget it is that you produce, am I not paying your wage with which you fund your retirement savings? As well as your kids soccer balls, cat food, and even boxster parts? It's just that GM employees have a thing called a pension that you can point to and say Aha! There it is!

that's the point...the reason GM needs a bailout is because no one was purchasing the "widget". In capitalism, we vote on a companies success with our dollars. Overwhelmingly, Americans, and the world have voted GM out of the car making business. And in a capitalist system, when you file chapter 11, your pension is done. No rights, no wrong, no moral judgements - it's just the set of rules that define a fair market.

When the fed steps in and (against the majority of Americas wishes) MAKES us responsible for GM's success, when they have failed miserably, that is called communism.

One correction. Depending on how GM sets up its pension, chapter 11 may have no long term impact on one's ability to collect a pension. Employers are free to fund pensions in many ways. One way is for them to purchase annuties that are prefunded. Hence, a current pensioner's funds flow may be fine and may come from say, Prudential or Allstate.

Also, some pension funds are moved to the union, who is repsonsible for investments, payouts and the like.

Not sure how the UAW's sets up their pension arrangments.

http://finance.yahoo.com/tech-ticker/article/yftt_103116/What-Happens-if-GM-Goes-Bankrupt-Not-Much?tickers=gm,f

I feel sorry for you if your pension is with GM. I feel sorry for you if you lost your job because GM failed. But if we leverage the US into paying for a company that has a track record of being inept, we'll be setting ourselves up for a new level of inflation and dollar devaluation that will hurt our children, and their children.

So do we suffer now, and remain Capitalists? Or make our children pay later, and become socialists?

I don't think anyone here is advocating saving GM or its pensioners. Nor are we suggesting socialism is where we want to go.

The original question was, should I buy GM stock"?

I think we all pretty much said that would be a mistake.

:)

sorry to get all political...this will fix it...

http://www.youtube.com/watch?v=bPa-E4Yejuw&feature=related


enjoy

The reason Americans aren't buying their "widget's"? Simple, GM has had their arms twisted by the UAW and have been paying their "ransom" for years. That money could have been reinvested back into the company for better R&D and materials to make a better product. Instead they have had to used cheap materials and old technology. Take the throttle body fuel injection for example, GM just stopped using that late 70's early 80's crap while the rest of the world has moved on and accelerated into direct injection. Also, has anyone pushed in on a fender lately? I swear a beer can is thicker!

Why don't I buy American cars? I'm NOT going to pad the pockets of UAW or the workers that really have the golden parachute pensions and benefit packages. As an American I have the freedom to make this choice, thank God.

As I understand it, GM is profitable outside the US. Also, I see lots of GM cars and suv's around. Their bread and butter stuff may be bland, but most people aren't enthusiasts.

If someone invests their career with the assumption of a pension and that pension is taken away too late for them react, I wouldn't consider that right morally. Practically, the gov ends up assuming the pension, although at lesser value, so you and I end up paying anyway. I'm not a lawyer, but thats my understanding.

Hey, I'm on-board with the Peter Schiff thing, but GM is small potatoes compared with the wreckless Wall Street and home=ATM crowd.

My broker said GM will not go bankrupt in anyway because the stake is too high for Americans. The stock will continue to deplete and can probably reach 1 cent a share. I wonder why USA doesn't nationalized the GM and fired those dumb CEOs?

A mild defense of the CEO of Ford. The guy has not been responsible for Ford's demise, as he has only been around a short while and he has done some good things. These companies took decades to get where they are.

Waggoner deserves the boot, but then so does about half of Congress.

:D

1) GM makes money outside the US? Wonderful - when they file for chapter 11 and reorganize, maybe they'll be smart enough to focus on those markets.

2) Morally, I agree. It's sad, it's tragic, it's not fair - and sadly, in my experience - life isn't fair. It's morally wrong that a black child can't get into college because the inner city school he went to never taught him to read, because it was underfunded. It's morally wrong that firestation#26 in atlanta's staff has been cut 1/2 - and people are watching their homes burn to the ground due to short staffs...terrible, tragic...not fair. It's morally wrong that a vet can come home from Iraq after loosing both of his legs, and he can't get the proper VA benefits to treat him, or get him a decent pair of prosthetics. Tragic, sad, unfair, morally wrong.

My dad worked for Polaroid for 38 years. The government made a deal that paid him 6cents on the dollars for his retirement fund. It wasn't fair...but that's life, that's capitalism.

And I agree - the Madoff's of the world should be sent to prison for life. What happened to those who invested with him just wasn't morally fair.

Quote;
Fred Demara
"And I agree - the Madoff's of the world should be sent to prison for life. What happened to those who invested with him just wasn't morally fair."


You know, I agree it wasn't morally fair but, after watching the news program about the Madoff scam and who was affected I couldn't help but think "Why would people and organizations put so much trust in one man with their life savings?". There is only one answer, the seven deadly sins;

Lust, Gluttony, Greed (guaranteed 19% return), Sloth, Wrath, Envy and Pride.

Maybe this country needs a little moral adjustment by the seven deadly contrary virtues;

Chastity, Temperance, Diligence, Patience, Kindness and Humility.

Just my thoughts.

hmmm
 

I'm no fan of GM, but the concept that "no one was purchasing the widget" just doesn't fly. It was big news that Toyota finally overtook GM in 2008 as the world's largest automaker, as measured by sales. How can it be said that no one was buying the widget, when the company is #2 in sales?

All three of the Detroit automakers have been working on restructuring for several years, but during 2008 the twin blows of high gas prices (in the first three quarters) and the credit crisis have hammered the companies. Even almighty Toyota is suffering during this crisis -- they have announced that they estimate a $4.9 Billion loss for the 2008 fiscal year. The collapse of auto sales is hurting nearly all automakers; the companies that were in weak financial condition before the sales slump are obviously far closer to collapse than the financially stronger companies.

As for the loss of pension in a Chapter 11...that shouldn't happen. The PBGC exists to take over pension obligations when covered companies fold or restructure under Chapter 11. I sure hope that pensions are covered: I worked in salaried, non-bargaining-unit positions at one of the Detroit automakers for about 13 years, and I would sure like to collect the pension accrued on that service time when I eventually retire. Check out this link for details on the PBGC:

http://www.pbgc.gov/media/key-resources-for-the-press/content/page13542.html