Bleak future of GM
Well, after a week of high, the future of GM has not been changed. Even though it’s a pity that I did not wait for a few more days to earn a total of $2k profit. But I did not feel too much about it because of the past few days before GM while I’m holding their stock, it’s been a nightmare. A vicious cycle that keeps me to my lappie checking for every news that reported about it. It’s a good lesson learnt. I’m working too hard for my money.
Sorry for the digress. Let me explain why GM may not survive in this recession. Because investing base on emotion is a sure fail plan. And it can be a very strong factor that the stocks raise from $1.09 to $1.92 in a matter of days. There’s a lot of speculation or hope that the company will survive and pick up from there.
GM has solved the union problem. Good.
Their pension debt got restructured. Good.
Got more money loan to sustain for another month plus. Good
Offer for Opel. Good.
But the biggest problem lies in the bondholders. Asking them to forfeit $10Bn for only a maximum of 10% of the restructured company, does it make sense?
Do not blame them for the downfall. The focus should be on the company itself. They are investing in the company at a much lower returns. So they have the right to be the first to get the money in case the company goes bankrupt.
Right now the union owned 35%, US govt owned around 50%. So left maybe 10% for bondholders and 1% for shareholder. It means the shareholders will be super uber massively diluted. Maybe only worth 10 cents a share at the end of restructuring.
Given this type of situation, if people are telling me they’re going for long term, then they’re in for a rude shock. It’s all emotion at play. Buying stock because it’s cheap. Long term requires company with good fundamental. And it means more risk too.
Like what my pop always said, a bird on hand is worth two in the bushes.
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