I put up a post on my own blog: http://mellow-yellow-adventures.blogspot.com/2008/11/gm-should-go-bankrupt.html
The short answer is no. GM would be better served by going into bankruptcy. However, this is political and the Democrats have to push for a bailout. Unfortunately, the consequences of the Republicans being able to stop it may be worse than the bailout.
T
Finance Connexion blogs contest continues through the end of this month. We will have a winner on May 20 and May 30. To enter the contest, continue to blog your ideas at http://www.scunetworks-fc.org/blog/Previous winners:
1. http://www.scunetworks-fc.org/blog/?p=16
2. http://www.scunetworks-fc.org/blog/?p=18
For a few months, I’ve had the suspicion that the market was overreacting and overdiscounting the value of various debt instruments. As I’m sure everyone here knows, you can impute expected default rates from the price of a debt instrument. Before the crunch, the estimates of default had been too low. Now, they’re too high. How do I know that? I don’t have time to do a bunch of data-gathering or crunching. Between family, job and school I hardly have time to eat, let alone do a bunch of quantitative analysis. So, I figured a good proxy would be to look at the prices and yields of some closed-end bond funds. If their NAVs have collapsed, it’s probably more because of a loss of liquidity rather than changes in credit risk. Credit risk is much less volatile than liquidity. If there’s cash flow, I’ll be happy to provide some liquidity.
You can guess what I found — the landscape looked apocalyptic. These funds have to mark to market their holdings, so their NAVs were a fraction of their value just a year previous. Plus, they were trading at a discount to NAV. It smelled like a buying opportunity to me.
I focused in on two funds — RMA and RHY. etfConnect.com has some nice screening tools and these two popped out at me. Remember, this is a quick and dirty analysis — I don’t have time to go all the way down the rabbit hole. Yield and expenses were the only things left I would consider. Expenses are high (~3%). But since the NAV has been decimated, there was a good chance that would be cheap when considered with yield. Jackpot! 8 and 9 cent monthly dividends on securities that were trading around $3 a share. Figure that expenses eat one month’s dividends. So, you get 88 to 99 cents in annual dividends on a $3 investment. Yummy, yummy, yummy.
So I bought (towards the end of March). In the back of my head, I knew capital gains were probably going to happen, too. There was the chance that the prices could go lower, but I’m not the smartest guy around and if I found this so quickly, others would too.
I’ve gotten two dividends so far and gotten about fifty to seventy cent per share gains. Am I going to hold? Of course I am. Since I paid so little, it’s giving me a >25% adjusted dividend yield. There’s risk, but the price is so cheap primarily because this market segment lost liquidity. If the NAVs recover, then expenses will increase, so I need to keep an eye on effective yield, not gross yield. Credit risk for these kinds of yields is more than reasonable. Right now, I wish I had bought more.
Apple is reporting its quarter results today…do u think it will take the stock up 20% like google did last week? what would apple announce which the market is not expecting? The analysts are predicting a growth in earnings, anywhere from 4% to 34%. iPhone sales predictions are anywhere from 1.5 M to 2 M units. Analysts predict 2+M iMacs sold, etc. etc.
However, Apple stock has already surged 40% in the last few weeks from 116 to 160. Now, how do you think markets will react to Apple’s earnings tomorrow morning?
Saw a peg ratio of .79……… Is it really that oversold? Who is right, have clicks slowed or did the algorithms kick in and make it more efficient? Are you betting on Sergey and the other math genius’ in the googleplex, or are they just too busy making noise instead of money? I am long the stock, but not sure there won’t be a better chance to buy……… Go solar!
Laura
Intel, J.P. Morgan, Merrill and IBM all report earnings this week. Stocks dropped Friday after General Electric reported a much weaker than expected first quarter. How do you see earnings coming from these big names?
On other news, Financial shares fell Monday after Wachovia announced its first-quarter loss, and slashed its dividend by 41%. Other large banks are slated to report their earnings in coming days.
I’m sorry, but give me a break. GE now blaming their HUGE miss on Bear Stearn. Isn’t that like the retailers saying they missed because there were 3 days of rain that caused people to stop buying? How could Jeff not know prior to the last 2 weeks that this was going to happen? I think this was just an easy way to push off their mistakes, afterall, he does have to try and live up to Jack Welch. Easier to blame a fallen company than admit you have had the same issues. Its pretty funny to watch CNBC trying to figure out how much they can really say…… I better turn on Bloomberg or FBN to see what the real opinion is…..
Stocks decline after a disappointing first quarter results, combined with weak forecasts for the rest of the year. Consumer sentiment falls again, showing Americans’ confidence in the economy is continuing to dip. And we thought the worst was over… Thoughts?
Hello all,
During the month of April, Finance Connexion is running a blogging contest. Write about investments - ideas, opinions, strategies, recommendations, technical indicators, anything related to finance and investments.
We will pick a winner every week. My goal is to promote sharing of ideas among Santa Clara MBA students interested in investments. As you know, blogs are a network product, so it will become more and more valuable as more of us start writing…
SCU Finance Connexion Blogs (http://www.scunetworks-fc.org/blog/)
Any questions or feedback, email me.
Good luck,
Vivek
FC President
Anyone have thoughts on how the market will perform this year? I keep hearing first quarter will be tough, but tech stocks will have a good year.