rh13

GM Shares Just Won't Quit

There are many subtle errors in the reporting of the GM matter that have led to the impression that the shares might be worth something some day and there are apparently enough people who don't read carefully and have a dollar a share or so to spend on shares to give them some value at present. We read of the "emergence" of General Motors and of the "survival" of GM. A headline within eyesight as I write this refers to GM as "ready for a rebound." These words are serious misconceptions. The "new" General Motors has no relationship to the old General Motors, in terms of ownership or investment results. The "new" General Motors is just a collection of the assets of the old General Motors. It is owned by different people, not the stockholders of the old GM. The "new GM" owners are not offering stock for sale at present. The old GM has a new name; most of its assets have been sold, creditors are waiting for payments, and stockholders will receive something only if the creditors are paid in full. That appears unlikely, and more unlikely with each passing day. Buying the stock, when it appears fairly sure that it will be worthless soon, seems very strange to me. The old GM does not even own the brands any more, which were the only things that might have had enough value to make the stock worth anything at all.

Buffett Saddles Up His HOG: Stay Away

Good article. Many writers do not understand the differences in the types of investments that billionaires make in different companies. Buffett's investments in Goldman Sachs and GE were very different from his investment in Harley-Davidson, and the implications for people thinking of following his lead are very different. Actually, even his investments in GE and Goldman Sachs do not carry particularly favorable implications for people thinking of buying common stock. Buffett got a guaranteed return of 10% on those, plus a windfall if the common goes up in a few years. It's a win-win for him; he either makes 10% on his money, or he makes more. You have to have a lot of money to get deals like that. His investment in Harley is different: he just makes 15% on his money. That suggests he is less interested in the Harley common stock. If you are thinking of buying the common, that should give you pause. Buffett could presumably have taken an option on the common, and he did not take one.

Is the Chevy Volt Only a Fair Weather Car?

Although I disapprove of the animosity in some of the rhetoric, I have to agree that Mr. Lifton had little to substantiate his comments. He gave no reasons for thinking that the Volt won't work in the cold and his statement that Chevrolet has not solved all the engineering problems is also without factual support and would not be of much importance if it did have factual support, since Chevrolet might be able to solve those problems in due time. They do have engineers working on those problems., after all. A heater to keep the battery warm and a thermostat to control it is simple.

Government Shouldn't Dictate Bank Behavior

I don't think any big bank would be wise to tell the Treasury secretary and the Federal Reserve chairman to "buzz off" under any circumstances.

Why I Need a Government Bailout

Every salesman sells a story. Good story.

The Big Three Crisis: Stocks Plunge as Politicians Moralize

German cars are great? I'm glad you think that. Will you buy my Volkswagen Passat? I need to get rid of it. Too many multithousand dollar service visits. That engine sludge thing is mean.

Where Citigroup Went Wrong

Is this an oversimplification? Not necessarily. Leadership is important, and it could well be that with Dimon in charge the picture of Citi today would be quite different. It would not have taken a great many things done differently to change the results substantially. Some banks, like Wells Fargo, appear to be relatively sound even in the current circumstances because they were more careful about real estate loans.
You can't take it as a fact that the financial supermarket idea is untenable. That is an oversimplification. Although large, complex organizations do have many possibilities for error, they also have great resources to prevent error if they use them effectively.

Cramer's Picks - Is GM Lehman's Twin? (11/14/08)

Does anybody take Cramer seriously? He's an entertainer.

Nationalize the Automakers? On Tom Friedman's Op-Ed

I hate to say this because I do have a soft spot for the American Three. But if we are to subsidize the auto industry, the investment would be better made in the upstarts and interlopers. The American Three are behind in delivering quality cars at low cost. Toyota, Honda, Nissan, Mazda, and Subaru all manufacture cars in the U.S. and make a profit. Why subsidize the unsuccessful at the expense of the successful? That will increase the cost of automobiles.
There is also the basic question of fairness. The American Three pay salaries and benefits that are outside the limits of the market. Why should the government, that is, the rest of us, subsidize companies that overpay the favored few?
Finally, there is just no way the government can put up enough money to pay all the people in comparable jobs wages comparable to what the American Three make. Our economy does not produce that much money.
I think there is a fair chance one or two of the American Three will survive in some form without government subsidies. They have done a remarkable job of producing vehicles over the last hundred years and recently they are showing signs of adapting to current conditions.

Nationalize the Automakers? On Tom Friedman's Op-Ed

paulk8756 invites us to look at how well the government has managed other things including social security, the post office, and energy policy. On those matters, the government has performed extremely well. Energy costs in the U.S. are low and have been since John D. Rockefeller was young. Social Security provides an annuity and insurance service at a cost so low it makes the whole medical industry look sick. The Postal Service allows anybody in the U.S. to send a message to anybody else for 42 cents or less, which is far less than it costs in other developed countries. There are other things the government does quite well, too. They include military functions, tax collection, and federal roads.

DHL, GM: Does Failure Have Consequences?

Actually, I think GM is too big to save. It is about the most bloated, insular, self-centered to the point of self-defined, company on earth. Throwing money at it will do what? It will help preserve GM in its present form. Do we need that? I certainly do not.
The phrase, "Too big to fail," was properly applied to financial institutions. Even there, the concept is arguable, but the idea was that, since people depend so heavily on a functioning financial system, the sudden, outright failure of a company big enough to be a critical part of the financial system might deprive people of services that allow the economy to hum.
That reasoning may be right or it may be wrong. (We'd have to guess it's wrong, since the decision was made by and for the financial industry.) Anyway, it does not apply to automobile manufacturers of any description. In Cuba, people are making do with cars manufactured in the 1950's. In New York and London, people get around by train. Even if I do need a car, I can get by with a Honda made in Tennessee, a Subaru made in Indiana, a Mazda made in Michigan, or perhaps a Tesla made in California.
Despite its failures, GM has done pretty well considering that its cost of employing people in union jobs is about twice what other auto makers experience. "Saving" GM without changing that doesn't fix anything, it just delays the day of reckoning.

Ford: Have You Driven a Convertible Preferred Lately?

Ford stopped paying a dividend some time ago.

Market for Electric Vehicle Batteries Is Heating Up

I thought Lithium batteries were frightfully expensive. I bought one for a phone. It cost $30. It would not turn a car engine one revolution. It would not run a headlight for 15 minutes. Of course there are efficiencies of scale, but they take development time, and that is costly, too. What gives?

Living Within Our Means: Automotive Edition

The sad part of it is that the government bailout does not help anything. You still have a great many job losses and the combined companies will still be weak. You have also taken $10 billion from people who would have used it to buy cars or other things that would have helped the economy. Furthermore, these are industry-defining companies, especially GM. While GM has made many public relation announcements about changing, we have not seen it yet. We have to expect, given the record, that the $10 billion would go to preserve the current state. Given the rate at which GM uses cash, $10 billion probably would not last long.

Ford: Kerkorian's Loss Could Be Your Win

A good article. We don't know what Kerkorian is thinking, or even why he is thinking it.
One possibility is this: Consolidations and sales are being considered in the automobile industry. Maybe Kerkorian wanted to send a signal that he would not interfere with a sale or merger. If that were to happen, it would probably be good for his investment, particularly in the short term.
He hasn't sold a lot of his stock in Ford. He said he is considering selling all of it, but he did not say he would, or when.
Also, maybe he just got stretched thin and had to sell something. I don't know what else he might have in mind.
I haven't changed my mind about Ford. I think it is risky, but likely to pay off very well from its current levels. The current radical sales slump is probably due to the financial market freeze, and that will likely be corrected soon, especially for cars. Cars follow fairly predictable value patterns, notwithstanding the recent experience with SUV's. People aren't going to quit driving. They usually don't even cut down driving very much.