31October

Washington Giving Detroit a Second Chance

Great article. But Washington gives Detroit a "second" chance? More like seven times seven ;-)

Re: "United Auto Workers President Ron Gettelfinger holds the hammer and will determine whether they emerge more competitive or shattered in pieces and sold to foreign investors."
-- We all know the obvious answer to that.

Re: "In December, George W. Bush granted $17.4 billion in temporary loans on the condition those firms convert two-thirds of their debt into equity."
-- They did not make GMAC or bank holding companies meet the obligations, and they will not hold GM's feet to the fire.

Based on seekingalpha.com/artic..., you cannot make risk-free money shorting GM. And only an idiot would go long, since equity will be wiped out by debtholders.

But you can make money on GM:
1. XGM, BGM, etc. BONDS currently pay 40% yield.
2. The ex-dividend dates that fall before March 31 are guaranteed.
3. After 31 March, SOMEBODY in government will throw more money at them, regardless of right or wrong.
4. By November 2009, you would receive 120+% of your investment back in interest alone.
5. If bankruptcy did occur immediately after March [the right thing to do, but politically unimaginable], both parties in Congress have mentioned a 30% settlement on debt, meaning no more than a 30% downside risk for a 40% perpetual return on interest or a 100+% return on capital.

If you want to give Detroit a second chance, buy some GM bonds.