New to Trading, Good grasp of economics

Discussion in 'Trading' started by Lynik, May 31, 2009.

  1. Lynik


    Good Afternoon All,

    I am really new to Trading and had some basic questions, I didn't a forum for new members or things of that nature so this seemed like the place.

    I was interested in getting into the stockmarket and now that GM is declaring Bankruptcy I wanted to buy as much as I possibly could. I know its trading at .75 cents a share. A few friends of mine bought Ford when it was in a similair situation and made some decent cash. I was wondering if after GM declares bankruptcy will the stock dip lower or is it at a low point already. Thank you in advance
  2. nice try.

    i am also new to trading, but let's give it some thought together . . .

    it could well be that the current price of that stock accurately reflects the company's financial position, i.e., that the company really is worth almost zero . . . in the sense is that the company is not profitable . . .

    plus i thought it would be de-listed, but i'm not sure

    i'm not saying you can't do the trade. i'm saying you can't assume
    the market underpriced the stock . . . maybe it did, maybe it didn't . . .
  3. Lynik


    What happens to the stock if its delisted? do you just lose the stock or do you get reimbursed what exactly happens?

    If it stays on the market shouldnt it turn into another AIG or Ford in time?
  4. MTRIG


    Forget about GM. When (IF) they come out of bankruptcy, then buy the stock.

    Take a lesson from KMart.

    Kmart stock was around $2 a share. They filed bankruptcy, issued new stock under a new symbol. What did all those people have for buying Kmart after it issued the new stock? ZERO!

    There is no reimbursement in the stock market. If there were people that lost 1/2 of their 401k in 2008 would be at Ben Bernake's front door.

    You are better taking the same amount of cash and purchase lotto tickets. The risk/reward would be better. :eek:
  5. that's a good analogy. the probability of a win with these types of stocks is somewhat similar to lottery.

    no wonder tim knight (one of the great traders of our time, in my opinion), literally calles them 'lottery stocks', and he publishes a list of them on his site slopeofhope.

    so it's not that the idea is wrong. you should just place it into perspective, it's a 'very low probability/large win' trade. it is like the lottery, in that sense
  6. 414maple


    A strong downtrend is in place and the name remains negative longer term.