This was the headline on the Associated Press on the evening of February 17th, 2009. Is that a fact?
This is how the media distorts. Pay attention.
So many investment decisions — made by investors, traders, mom & pop, everyone — gets determined by the headlines.
I am no fan of GM whatsoever. I think their products are not very good, their cost structure is bloated and the executives should not get a bailout. Lots of bad decisions over the years have put and the entire American auto industry in this position — this isn’t something that unfolded in the last few months.
But the media should be shot for their careless and sloppy reporting. The distortion is maddening.
As a preface, GM is currently trading around $2.00/share. The stock price is ALREADY TELLING YOU the company should be in bankruptcy. Even if GM’s stock price were to jump 30% in a day (or even a week), it is still not hitting $3/share.
But the “early impression” I had from clients that had been in contact with me in these past 24 hours is that GM needs an *additional* $30 billion dollars. Why? Read the headline and first sentence from the Associated Press:
GM, Chrysler seek more government aid, to cut more jobs
THE ASSOCIATED PRESS
The U.S. auto industry needs even more help from the government to survive than originally thought.
General Motors on Tuesday said it could need up to $30 billion from the Treasury Department to keep operating.
Unless you read the entire story, you would never know the actual numbers.
GM had already been approved for $18 billion in November, but only used $13.4 billion. They are now asking for $9.1 billion. So they were originally approved for $18 billion and will need $22.5 billion.
By the way, buried further down is the point that the “new” $9.1 billion is not even actually cash, but loan guarantees.
What about the remainder?
The remaining $7.5 billion is an “emergency” line of credit GM does not expect to use, but wants to ask for and have lined up. This is a “worst case scenario” (it’s already pretty bad) but this will cover expenses like bankruptcy costs, if it gets to that.
It’s the media’s job to sell newspapers, attract eyeballs to their TV channel or website. Don’t forget that.
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Too Big To Fail
by Thomas Mullooly on June 27, 2011
Weekly Commentary for May 31, 2011
Last week we discussed how so many of our favorite charts have pulled back. But they have only pulled back to the middle of the trading band, nothing more. A little more on this:
When the May statements arrive in the mail, it might appear we have made no money, or, we may have even lost a little ground. Despite what some may say, this is *not* the time to be ripping apart the play book and/or changing direction.
The top technical-rated areas of the market are (still): small cap followed by mid cap! Even though these two have lost some ground, small and mid caps still kick large cap’s butt, seven ways to Sunday.
So, even though small and mid cap gave back ground in May, we still look to buy as the strongest areas on pull-backs. This is because we are in an upward (bullishly configured) market.
If you are relying on a blog post for specific investment advice, you are making a huge mistake. Please speak with an investment adviser before making ANY investment decisions.
If you do not have an investment adviser, we encourage you to contact Mullooly Asset Management at 732-223-9000, or through our website.
Under no circumstances should the content discussed on this post be considered specific investment advice.
Now if the markets had a downward (or bearishly configured) look, we would not even stick around, we’d be sitting in cash and talking about our summer reading books instead.
If you do not understand the game plan, or what is you going on, you have an obligation to get in touch with us. You can email us back, or call us, at 732-223-9000 so we can figure a time when you & I can catch up on this.
One last thing: splattered all over HBO this weekend is their movie, “Too Big To Fail” about the financial meltdown in late 2008. And there are some well-known actors in it. No need for lengthy explanations, just watch it. It will be worth your time.
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