Paulson 11/12/2008
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What do you guys make of Henry’s update yesterday on his change of plan to buy Bank stocks rather than troubled Assets (which, of course, the media chooses to ignore the fact that they’ve done this too)?
One of my biggest peeves about the bailout was that I always felt it did nothing for the bank's capital preservation. I'm just curious why this wasn't thought of before and why the sudden change of heart now? Also, to GM or not to GM?It is kind of frustrating because I’ve been supportive of the “bailout” to my clients…now with Paulson scrapping it, I feel like an idiot.
I told a client 30 minutes ago, I was okay with changing course. When they came out originally, it was all a knee jerk reaction. If they feel now this is the best way to go…then move forward. We are is a situation where we can’t turn back. If the feds came out today and said…“we’ve done all we can do…the free markets need to correct the problems.” all hell would break loose. You wouldn’t be able to keep up with the calls. I’d say…give the automakers the loan…with strings attached. Make the unions take the hit just as much as everyone else…
The only way to save GM is to break the union, without it, no amount of money thrown at GM will help it.
I agree. I think the new course is the way to go and, personally, I have faith in Paulson and think he’s doing a fantastic job given the circumstances.
I think both GM and F will get bailed with this money. There's too much at stake not only from an unemployment standpoint but from a pension (GM bonds in particular) as well. We'll see. One day at a time. Paulson's change of course was shocking.Absolutely. GM should be allowed to go into Chap 11, either negotiate with the Unions or preferably kick them to the curb. Fire all of them and then hire them back at reasonable salaries and reasonable benefits. Until the Unions are out of the picture we are screwed. The card check rules that are being proposed will only further flush us down the financial toilet. When the union thugs coerce the employees of Wal Mart to unionize, do you think that they will be able to keep prices where they are now? Do you think they will keep all their stores open? Hardly likely. They will raise prices and lay off employees and close selected locations.The only way to save GM is to break the union, without it, no amount of money thrown at GM will help it.
Now that you guys brought up GM, what do you think about their preferred shares GMW?
Par value of 25 trading at 3.9 with a div of $1.81. If they get funds, this has to look like a winner. Right? Any thoughts?Absolutely. GM should be allowed to go into Chap 11, either negotiate with the Unions or preferably kick them to the curb. Fire all of them and then hire them back at reasonable salaries and reasonable benefits. Until the Unions are out of the picture we are screwed. The card check rules that are being proposed will only further flush us down the financial toilet. When the union thugs coerce the employees of Wal Mart to unionize, do you think that they will be able to keep prices where they are now? Do you think they will keep all their stores open? Hardly likely. They will raise prices and lay off employees and close selected locations.[/quote] How about we let the big three go to chapter 11, flush out the common shareholders (leave the debt in place - much of it is related to pension and retiree medical obligations anyway), and then GIVE the companies to the unions. My guess is, they'd behave far more responsibly if they actually owned the company. They pretty much own the company anyway, and yet have very little in the way of managerial responsibilities. My guess is, the UAW would soon decide that a union is no longer necessary and disband it. Then, when looking at ways to improve profitability, they would implement a novel idea called merit pay and kick the slugs driving down productivity to the curb. Then at some point, they would look at the pension and retiree medical obligations and decide they are impossible to support if a domestic auto manufacturer company intends to be competitive with Honda, Nissan, Toyota, etc. The pension plan would be frozen and replaced with a standard 401(K), and the retiree medical plan would be gradually allowed to be depleted. There's a part of me that thinks the UAW could actually run a company responsibly if they knew their jobs depended upon it. Wouldn't that be karma?[quote=jamesbond]The only way to save GM is to break the union, without it, no amount of money thrown at GM will help it.
[quote=the word]
Now that you guys brought up GM, what do you think about their preferred shares GMW?
Par value of 25 trading at 3.9 with a div of $1.81. If they get funds, this has to look like a winner. Right? Any thoughts? [/quote] Can you say FRE.Z and FNM.S?[quote=the word]
Now that you guys brought up GM, what do you think about their preferred shares GMW?
Par value of 25 trading at 3.9 with a div of $1.81. If they get funds, this has to look like a winner. Right? Any thoughts? [/quote] Why don't you cold call on that today/tonight. I'm sure the 46% yield will really impress some folks...I don’t deal much with individual stock and not at all with preferreds. I was just trying to get some input. Any real thoughts? Because if the Dems, and Barack “Beholden to unions” Obama, get their way, this will not fail. Thus you could make some money. Can someone tell me, with detail, why this logic is wrong. Trying to gain some knowledge.
You sound like a young client I have who has a tiny IRA with me. I call him up to sell him some life insurance yesterday, which he will buy, and he says, "I've been thinking of getting my series this, and series that and going into finance". I say, "Ok, let's buy some life insurance first and make your 2008 IRA contribution". He says, "Ok, I'm also thinking of buying some individual stocks in an E*Trade account. I've been doing a lot of research and reading things like Motley Fool". I say, "Ok, well run your ideas by me and I'll tell you what I think if you want". He says, "I'm thinking of buying GM. With Obama in office, it sounds like they're going to get bailed out and it's so low right now". I say, "Well why don't you just take that money to Vegas and play some craps. You'll have about the same odds and maybe you'll get laid. Look, if the government lets them go BK, you'll have a 100% loss. If they bail them out, and that's a HUGE IF, they will still have problems and you won't make easy, quick money". He says, "Oh ok, I guess you're right". I say, "Ok, send me your IRA check and how much ROP life insurance do you want?" Word, I should send him to you...I don’t deal much with individual stock and not at all with preferreds. I was just trying to get some input. Any real thoughts? Because if the Dems, and Barack “Beholden to unions” Obama, get their way, this will not fail. Thus you could make some money. Can someone tell me, with detail, why this logic is wrong. Trying to gain some knowledge.
I fully realize this a huge gamble. Its for money that we can afford to lose, like vegas. This is not for an investment, but speculation.