Markham Lee_

GM and Chrysler: Is Avoiding Bankruptcy Avoiding the Inevitable?

I think this conversation is going in the wrong direction.

I don't buy German cars simply because they're German I buy a particular German car based on the way it performs on the road, followed by the level of luxury.

Nothing in Chrysler's line-up is comparable as far as overall performance even though some do compare as far as straight line acceleration. The other issue is that they're using the same interiors as were in my college roommate's Dodge Neon, the resale value is abysmal and I find their cars to be gaudy at best.

Not to mention the fact that the "parts sharing" between Mercedes and Chrysler is minimal at best, and if you drive both back to back it's a vastly different driving experience.

Saturns and Malibus being based on Opels doesn't change the fact that (again) the cars don't compare to the German cars I like. I've driven plenty of GM products whilst traveling for work and I simply didn't like the car. I was always much happier when I was given a Japanese car instead.

It's not about Status symbols or wanting something just because it's German, it's about spending MY hard earned money on the car that best suits my tastes. I'm not choosing to support Germans over Americans, I'm choosing to buy the products that I enjoy the most.

It's more than a little ridiculous to claim that I would enjoy driving a Malibu as much as my BMW, simply because the former is based on an Opel I wouldn't buy either.

Buy American is not the way to help Detroit, the U.S. automakers should help themselves by producing better products.

Furthermore this discussion is rather moot since GM already sells enough cars to be profitable, they're just too inefficient to be profitable with their current level of marketshare. Hence the reason Honda is profitable with a fraction of GM's marketshare.

No offense but the high-horse approach of chiding people for choosing the products they like the most, (especially when we're talking about the product that represents people's 2nd largest expenditure) is a non starter.

GM and Chrysler: Is Avoiding Bankruptcy Avoiding the Inevitable?

Also as I said before working with the Bondholders is only one piece of the puzzle, as the company has other liabilities it needs to shed and it still needs to correct problems related to operational efficiency. Working out a deal with the bond holders only solves part of the problem.

And since I'm sure some people are curious:

I don't intend on buying a new car from anyone in this economy because the one I have works just fine, and I'm sure I can get another 2-3 years of worry few driving out of it.

But if I did buy a new car it would be German, sorry but this is America and I have the god given right to buy any car I please. I'll admit that Detroit is putting out far better vehicles than they were five years ago, but they still don't like them as much as vehicles produced by certain Bavarian companies.

If Detroit is going to survive it has to be able to survive in the free market, not via people trying to guilt their fellow citizens into buying GM just because it's American.

GM and Chrysler: Is Avoiding Bankruptcy Avoiding the Inevitable?

To clarify I meant that 62% of GM's total outstanding debt amounts to $28 billion, the total amount is $45.2 billion.

Keep in mind that this number doesn't include dealer support and other liabilities related to long-term leases on factories they don't use, money paid to municipalities related to same, pension liabilities, etc.

A Nation of Mortgage Slaves

To clarify my original point I'm only talking about people who can't afford their mortgages not people who are upside down, because there are undoubtedly home owners who have positive equity but can't make payments and there are people with negative equity who can make payments.

I've always felt that a home is (first and foremost) the place where you live not an investment, so if you can afford your home you should just stay put and not risk the financial damage that will come from walking away.

However people who can't afford their homes in the first place are highly unlikely to benefit from any sort of loan modification, and any efforts to resist foreclosure will just delay the inevitable.

The point of the article was to inject some realism into the conversation around preventing foreclosures, as there is really little point in wasting resources to try to keep someone in a house they can't afford.

Thanks you for reading.


Markham Lee

Detroit: Please Bring Back the Stripped Car

I understand your point of view Bob, however I shouldn't have to buy a product I don't find appealing just to support Detroit. This is America after all.

I drive American cars all the time when I travel for work and I'm always quite happy to get back into my German sedan, it's not about the name plate it's the way the car performs.

If America catches up they can get my money.

Detroit: Please Bring Back the Stripped Car

There is one major flaw in this argument: in the 1980s cars weren't as reliable as they are now, and the used market wasn't as strong. In other words there is no point in buying a stripper Malibu when I can get a used Accord for the same price.

That's the real problem Detroit faces as far as resale a lot of consumers would rather have a used import than a brand new American car.

I know this consumer (I've always bought Japanese or German) would rather have a 4 year old import than a brand new American car, and to be honest it isn't really about longevity - it's the simple fact that I like the styling, performance, interiors, etc, a lot better.

Speaking of which:

I would buy a Ford Mondeo if I was looking at a midsized family car, too bad it isn't sold in the U.S. and some dolt at Ford thought that the American consumer would prefer the Fusion...

...even though European customers are buying Mondeos instead of Accords.

-M

The Negative Equity Phantom Menace

If people always know what their home is worth, then how do you account for the recent surveys that indicate that most people think their home is worth more than it is?

E.g. the Zillow surveys indicating that a large % of people think that their home has either retained or gained value, despite the fact that the opposite is true?

Either way, thanks for reading


-M

The 28-33% Mortgage Payment Rule: Confronting Reality

It doesn't do anyone any good to use taxpayer funds to enable cash strapped borrowers to live in homes they couldn't afford in the first place, it would make more sense to help these people become financially stable renters.

Buy a GM Car, Get 50 Shares Free?!

Car_guy:

What say you to the fact GM was offering employee discount pricing last month in an effort to prop up sales? Isn't that the largest incentive a car company can offer?

Toyota may have been offering 0% financing to a few select customers, but let's not forget that Toyota turns a profit per car sold and GM wasn't doing that BEFORE their deep discounts.

How about the fact that you can still lease a Japanese or German car and the American car makers are discontinuing their leasing programs?

If the demand for the Malibu is so high that it is selling for a higher price than the Camry (I've seen no evidence of this), how do you explain the fact that the Camry is outselling the Malibu by nearly 2.5:1? Per a recent WSJ article GM sold 16k Malibus in July and Toyota sold 42k.

I seriously doubt recent numbers would show much of a difference.....

You may find my articles to be poorly researched, however I don't see any data that supports your view of the world and would be happy to review it if you would point me to it.

As always, thanks for reading


-M

Weighing the Government Action Options

The real option should be cash infusions from the Government in exchange for preferred shares that pay HIGH I mean Tony Soprano high dividends.

That money should go towards infrastructure projects (50%) and the rest given to taxpayers as a special refund.

The banks (as r3ph said) should also just start raising the yields to 7-8% to raise capital, because at this point they're subprime borrowers so they should have to pay subprime rates for cash.

In fact the 7-8% interest rates on CDs coupled with unlimited FDIC insurance would basically solve the problem as investors would run towards that kind of yield right now.

I know I would.

Thanks for reading everyone.

-M

A Satirical Breakdown of the Bailout Plan's Expenditures

Security forces to protect them from angry citizens? LOL

Bailouts: Misunderstanding the Moral Hazard

In my opinion if things are 1/10 as bad as Paulson would lead us to believe, then the banks are desperate and will happily participate punitive damages or no.

Besides in my view the situation should be handled like FDIC receivership: "Sorry but we're MAKING YOU do this, you will suffer greatly, get over it"

But maybe I'm just being an overly Calvinist bear again, it's happened before

-M

The Weekend American Capitalism Died

sr9web

As an armchair QB I'm not saying that the Government shouldn't have stepped in, because Fannie & Freddie collapsing would've had a cataclysmic impact on our economy. What I am saying that is that various policies/actions have been killing capitalism for decades, the takeover of the Mortgage GSEs was merely the sign, not the cause per se.

SO what would I have done different?

Managed the GSEs better and reigned them in years ago especially during the credit crunch, as opposed to recent policies that had them expanding their investment activities despite their suspect capitalization levels.

Better managed the banking system during the housing boom, especially with respect to lending standards.

The credit crisis could've easily had been prevented if people had been willing to make inconvenient decisions, as opposed to telling taxpayers how great things are and celebrating faux housing wealth.

-M

Browser Wars: What Are They Good For?

For those that say the browser wars are about money, I ask again: did the winner of the last browser war benefit financially from it? Back in the '90s the expectation was that the winner of the browser war would effectively "own" the Window to the Internet, and as a result would easily be able to monetize that advantage.

This turned out to be a pipe dream as the winner of the browser war didn't benefit financially in the end, and now finds itself investing more in the browser to keep up with an upstart.

The newest entrant in the war has other things in mind and could "conceivably" benefit, but what is more likely to happen is that multiple companies will spend tens of millions of dollars to develop products that will converge (in a sense) in terms of capabilities and in the end, see little benefit.

14 years after Netscape and no software company has really been able to show the financial advantage of having the dominant browser.

My techie side is excited in terms of seeing new technology, but my more practical investor side is rather unimpressed.


-M

Record Companies Starting to Shun iTunes

Quick thoughts:

1) If the record companies die then we won't have any music to buy.

2) I've personally supervised the production of CDs in runs of less than 1,000 for small artists, where the cost was under $1/CD often in the $0.80 range.

If you're running off millions of CDs, have your own facilities, etc, the cost is undoubtedly lower.

3) The analysis is a hypothetical to be sure, but it does illustrate why many artists and the record companies prefer to sell albums.

It would be different if iTunes sold more albums than single songs or a given artists, as the $7/sale the record company received would be close to a CD sale and would be "good enough" to keep everyone happy.

4) I don't disagree with the fact that many people prefer to buy singles and it does favor the consumer, just noting that eventually it could kill the producer of the content you're paying for.

5) The Camry example is meant to indicate order of magnitude i.e. selling 200k CDs generates more $ than 2.2 million digital downloads of single track.

Anyway, we all agree a new model is needed, we all agree that selling albums is more profitable, we agree that consumers prefer track downloads.

BUT

What kind of model allows the record companies to survive and make consumers happy at the same time? Right now both goals are at odds with each other.

And if the record companies die?

There won't be much of anything new to download

I suppose I should probably point that I've never bought a digital download in my life, I use rhapsody to listen to music at work or occasionally drop a song on my Mp3 player, but to buy a digital track?

Never.

I always buy CDs prefer I like the sound quality better, but I suppose that's a topic for another discussion.


As always thanks for reading.


-Markham