GM's Woes Cause Bankruptcy Talk - Daily Auto Insider The Daily Auto Insider Wednesday, November 16, 2005 November 2005 Concerns about General Motors' future are causing concern on Wall Street, The Associated Press reported. An increasing number of investors are betting that GM, the world's largest automaker, may be forced into bankruptcy within the next six to 12 months, the story said. GM has been struggling to overcome plunging sales and the high cost of health care benefits for workers and retirees. "The markets are telling you that more traders are starting to see a greater risk that a [GM loan] default scenario could happen sooner in time than later," the AP said, quoting John Tierney, a credit strategist at Deutsche Bank Securities in New York. "You cannot deny there is a pattern here." A GM spokesman said the automaker has "no plans to declare bankruptcy," noting that GM has about $19 billion in cash on hand. But GM is carrying nearly $31 billion in debt related to its automaking operations that ratings agencies already have downgraded to junk status, or below investment grade. GM's total debt, including debt sold by its General Motors Acceptance Corp. unit, now stands at $276 billion. GM lost nearly $4 billion in the first nine months of this year and it has been losing U.S. market share due to competition from healthier foreign rivals and weakened demand for sport-utility vehicles, GM's one-time cash cows.
My positions are not really any of your business and don't pertain to this post. I'm long PRXI, TBLC, GIGM, and some VLO options...happy now?
Point is Blast that I have been down this road before and yes, you have to turn a blind eye to all the talk. Maybe I am crazy, but I love stocks on NYSE with what 'appears' to be good financials. I do know that many times they cook the books, but what can ya do. The way I look at it is this. If I am wrong, I lose about $2-$3/share ( I am going to add to my position if these drop). If I am right, I look at where these high flying stocks have been and project somewhere between 1/3 to 1/2 of where they had been. The fact is you are not going to get stocks for cheap with great news and awesome earnings reports. You have to be the one to say "I know there is alot of fear out there right now and that is what's driving the stock down, not a BK around the corner, although its possible." And, for the record, here is my batting average so far on this: Correct on: AMR MXT ACF GT TSO GM Wrong on: TWR DPH And, get this. Even when I was wrong on TWR (tower automotive), I still ended up $20,000 profit. I had at one point 63,000 shares of it when it was at 1.21/share. Luckily I sold off all but 5000 shares when it bounced up to 2.74/share shortly after. I love buying stocks for cheap when everyone else is soooo afraid! It's great to know you are buying each and every share off of someone who is obviously taking a loss and worried. I sincerely hope that NEW, NFI, and IMH all sink below $2/share because I will be buying 5000 share blocks just like I did with ACF, MXT, and AMR in 03. If I am right I make 10x my money. If I am wrong I lose 1x.
Not knocking you...buying stocks when they're clearly scams is usually pretty clear. ESCL was a good one. I like small caps(PRXI, TBLC) with great growth prospects. I've actually made most of my money in small caps and now trade options on all size stocks now for the thrill...I love pops or busts. Patience is something I have with a large part of my portfolio...the part I freely trade is small, but if I hit a popper I'll suddenly have a windfall of money to play with more. I was agreeing with you for the record that what you're doing is not stupid...if anything I defended you for the record. If you read that wrong, well then, you read it wrong.
To CalScholar's remark that I liked New @ 5.25. Guess what? I started buying AMR @5/share in 03 and kept on buying more all the way down to 1.25/share. My cost average was about 2.11/share when it finally headed north. I had 12000 shares total. And, ACF. Started buying it about $3.50/share and increased my purchases until I was buying 5000 share blocks below $2/share. Same for MXT too. I actually had 35,100 shares of MXT on the day it gapped up from 1.25/share and finished top gainer on NYSE on March 19,2003 in which it gained .99/share. Yea, that's 35 grand profit for me in one day. Point is this. No one can predict the exact bottom of any plunge. But, the good thing is you don't have to. As long as you can ride out the scary news, you will be rewarded. It is great though to look back and see how sweet it was to be buying all those shares for the cheap and then sell them back to the same folks months later for 10x what ya paid for em!
I respect your play Rich. I did thew same thing like 3 years ago with SUNW. I got in at 3.92 for 10k..It drops 10-15% the next day. Instead of buying more at 3.42, I sit on it. I should I bought more and chased. I have this gut feeling that the sub primes will bounce a little but I don't have the balls to do it right now.
If it was one company getting hammered then you might think it might go BK, but the fact is its industry wide just like the airline stocks in 2003. do you want to roll the tape from 2003 on the airline stocks ??? hmmm. lets see. The fact that the sub-prime mortgage companies are all getting whacked hard is better. I don't suspect all 5 of what I have will go BK. In fact, I don't think any will. The only question for me is how much money to leave on the sidelines right now. I am actually hoping they tank to below $2 so I can load up more but I can't be too greedy. I will be happy with my portfolio doubling in the next 6-9 months. peace.