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Gldndog
Registered Member
Username: Gldndog
Post Number: 465
Registered: 12-2004
| | Posted on Tuesday, November 11, 2008 - 10:51 pm: | 
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Will GM/Ford be next?
I read an article stating that GM would be a god buy at zero. They had nothing good to say about an industry(from manufacturing, sales, service/oil) that employs nearly 1/3 of Canada. |
Public_heel
Moderator
Username: Public_heel
Post Number: 8912
Registered: 12-2003
| | Posted on Monday, November 10, 2008 - 09:33 am: |
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What the hell took so long?
It's Chapter 11, but it may as well be Chapter 7. Too much competition... |
Public_heel
Moderator
Username: Public_heel
Post Number: 6816
Registered: 12-2003
| | Posted on Wednesday, February 20, 2008 - 11:00 am: |
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SHRP - To my surprise, TradeStation had a boatload of shares to short at about $0.58, and I sold $2.50 puts for $1.95.
Unless my arithmetic is mistaken, I can't lose money on this unless the stock goes over $2.53... |
Public_heel
Moderator
Username: Public_heel
Post Number: 5239
Registered: 12-2003
| | Posted on Wednesday, July 18, 2007 - 04:47 pm: |
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How can NFI, which has a tangible book value more than double its market cap, be a GTZ?
Simple... if its $5B loan portfolio is worth only 90 cents on the dollar, then the company's tangible book is underwater.
I think it's worth much less than 90 cents on the dollar.
I'm buying 50 $2.50 leap put contracts... |
Openhigher
Moderator
Username: Openhigher
Post Number: 114
Registered: 10-2003
| | Posted on Tuesday, December 13, 2005 - 02:49 pm: |
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Great set of posts GAP and Public Heel.
I am not short a single stock. I will be short on a very cautious basis going into the new year.
The bull market is not over, but IMO, we are at 10:00. For the bios we are at 8:30. The reason why the bios still are going to run is because the repatriation money has yet to come in the bios in a big way. This will happen the first six months of next year.
As for RIMM, MRK, GM, I will probably short RIMM and MRK is such a small amount I will be able to sleep without watching the stock each day.
Public Heel: Those were great for and against statements on MRK and GM.
Thanks, Robert
Even the roosters sleep in as far as I am concerned. I was up at 4:00 am  |
Gap
Registered Member
Username: Gap
Post Number: 917
Registered: 10-2003
| | Posted on Tuesday, December 13, 2005 - 01:52 pm: |
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3) They are spinning off part or all of GMAC, which will provide $10-20B in cash
And the potential for addl cash going forward by selling more chunks of GMAC. |
Public_heel
Moderator
Username: Public_heel
Post Number: 1686
Registered: 12-2003
| | Posted on Tuesday, December 13, 2005 - 12:05 pm: |
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OH - To add a potential short. I think that RIMM should get a big boost when they settle their patent dispute with NTP. I wouldn't be terribly surprised to see them back over $80.
After that, though, it's all downhill, for the following reasons:
1) The NTP settlement will cost them a lot, not just in cash, probably in ongoing royalties
2) Their competition is big, and gaining fast. it's likely that, over the next two years, their product will become commoditized, and no longer command high profit margins.
3) Their subscription model will be wiped out by competitors who either don't require it or underbid it. |
Public_heel
Moderator
Username: Public_heel
Post Number: 1685
Registered: 12-2003
| | Posted on Tuesday, December 13, 2005 - 11:51 am: |
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O/H - To follow up on your question about shorts:
I have leap puts in GM, MRK, VC, INTC, AMAT, NVLS, TXN and FNM.
I think the TXN put will be wiped out, and I'm not optimistic about the AMAT put.
The VC put is tied to what I expect will be bad times for the U.S. Auto makers.
The GM and MRK puts I've explained elsewhere.
The INTC put was part of an industry arbitrage, where I owned calls in AMD. After a big profit, I sold the AMD calls, but am looking to get them back.
The FNM puts are my biggest position. FNM has two liabilities: (1) it was run by people who were greedy and either incompetent or crooked (or both), and its finances are a mess. They haven't reported their financial position in a year, and won't for possibly another year, as a company-wide audit is underway. Also, they are exposed to a slowdown or even collapse in the U.S. real estate market, which might expose that much of their asset base is overvalued.
As for short positions, I don't have much. I have a huge position in URPIX (double-short the S&P 500), but that is only a hedge against equally large long positions.
I'm maintaining a sizable short in PFCB. Frankly, I just don't get it. They're a low-growth restaurant chain, and should not be sporting a PE of 36, which I think is a leftover from their high-growth days.
I haven't really gotten back to thinking about shorts the way I did in past years, because I don't have any good idea of when this bull market will end (although it may have already). |
Public_heel
Moderator
Username: Public_heel
Post Number: 1683
Registered: 12-2003
| | Posted on Tuesday, December 13, 2005 - 11:38 am: |
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MRK - the case for and the case against: (I put this on GTZ as part of a conversation, not because I think that MRK is a GTZ)
1) MRK is too big to fail, is part of the DJIA, and does good stuff for the world by developing new drugs
2) Their pipeline will save them, especially the new cervical cancer vaccine they're developing. Their pipeline is weak, the cervical cancer drug is just starting trials, and another big pharma is developing a competitor. Worse, MRK's biggest-selling drug is going off patent in mid-2006.
3) The Vioxx lawsuits will fizzle out. MRK will repeatedly demonstrate that factors other than Vioxx probably caused the adverse events. The Vioxx lawsuits will bankrupt them. There are only 7,000 cases now, but could be several times that. Legal expenses will be in the $100m's, settlements will be in the $B's, and punitive damages even higher. The latest case, which MRK should have won in a breeze, ended up in a hostile hung jury. |
Public_heel
Moderator
Username: Public_heel
Post Number: 1681
Registered: 12-2003
| | Posted on Tuesday, December 13, 2005 - 10:33 am: |
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GM - The case against:
1) They don't seem to know how to make cars that sell
2) They are choosing (or being forced) to spin off their only profitable division, GMAC
3) They have enormous hidden liabilities (maybe $20B) due to absurdly optimistic assumptions in valuing their pension investments
4) They have an enormous potential liability (which is not on their books), when the Delphi bankruptcy causes the Delphi pension liabilities to rebound on them
5) Their debt is deep in junk status (just lowered two notches by S&P) and their credit outlook is negative
6) Their proposed factory closings will be terribly expensive, because they have to keep paying the workers thru their contracts, even when they aren't producing anything
7) They front-loaded much of future sales with below-cost sales of their autos over the last year or so.
8) Their healthcare costs are $1500/vehicle, while Toyota's (even in the U.S.) are only $300
9) The American consumer will not go on consuming at his recent pace
10) GM is not at all prepared for high gasoline costs. They have been living off SUV's, which are now yesterday's vehicle.
(Message edited by public_heel on December 13, 2005) |
Public_heel
Moderator
Username: Public_heel
Post Number: 1680
Registered: 12-2003
| | Posted on Tuesday, December 13, 2005 - 10:25 am: |
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GM - The case for:
1) They are "too big to fail", and "DJIA companies never fail"
2) They are iconic to the American economy, and the government won't let them fail
3) They are spinning off part or all of GMAC, which will provide $10-20B in cash, and may improve their credit rating
4) Kirk Kerkorian made a huge bet on them, and he's smarter than the rest of us |
Public_heel
Moderator
Username: Public_heel
Post Number: 1679
Registered: 12-2003
| | Posted on Tuesday, December 13, 2005 - 09:04 am: |
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O/H
Are you short GM or MRK?
I own leap puts (Jan '08) for each. The reason is partly for leverage, and partly because I expect both to have many ups and down in the next two years, but to be way down at the end of the two years.
In the case of MRK, will you short that position if the latest trial is adverse to MRK? Are they not still deliberating?
No, a mistrial was declared due to a hung jury (not because of the latest flap about MRK supposedly being misleading in reporting of trial results). The mistrial was considered very negative for MRK because the case was as weak as could be (the guy who died took Vioxx for only three weeks and was in pretty bad shape already), and they should have won easily. The jury was split 5-4 against them.
Any other good short stocks on your mind?
let me answer that in a couple of hours.
Thanks for the indulgence
I'm an indulgent guy...
You're up at 5 AM?
(Message edited by public_heel on December 13, 2005) |
Openhigher
Moderator
Username: Openhigher
Post Number: 111
Registered: 10-2003
| | Posted on Tuesday, December 13, 2005 - 08:56 am: |
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Public Heel: If you don't mind a few questions.
Are you short GM or MRK? In the case of MRK, will you short that position if the latest trial is adverse to MRK? Are they not still deliberating?
Any other good short stocks on your mind?
Thanks for the indulgence
Robert |
Public_heel
Moderator
Username: Public_heel
Post Number: 1677
Registered: 12-2003
| | Posted on Monday, December 12, 2005 - 08:23 pm: |
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Hoo boy...
http://biz.yahoo.com/rb/051212/autos_gm_sandp.html?.v=4
How much does a two-notch downgrade cost you when you have $285B in debt? |
Public_heel
Moderator
Username: Public_heel
Post Number: 1473
Registered: 12-2003
| | Posted on Friday, November 18, 2005 - 08:53 am: |
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GAP - They'll never strike. Delphi only wants a 63% pay cut  |
Gap
Registered Member
Username: Gap
Post Number: 900
Registered: 10-2003
| | Posted on Friday, November 18, 2005 - 08:41 am: |
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Potential Delphi strike could hit GM hard |
Public_heel
Moderator
Username: Public_heel
Post Number: 1470
Registered: 12-2003
| | Posted on Thursday, November 17, 2005 - 05:26 pm: |
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I looked at GM's 10-Q and, as I suspected, GMAC has been the only profitable part of the company for a while. In the last quarter, they made about $700m from it, and lost $2.3B on the auto-building side.
Still, if they sell half of GMAC for $13B, they could put that cash in the bank and make more on interest than that half of GMAC would make in profit. At the same time, they'd improve their balance sheet a lot.
[in edit] Sorry, they couldn't do that. They might make $600m, and lose $1.2B, but their balance sheet would be much better, not only from the sale proceeds, but from sizably lower emplyee-related liabilities...
I think this is the only thing that can save them from b/k, even over the next year. Also, as expected, Congress is galloping to their aid. The new pension "reform" bill says that companies have to start telling the truth, but they get to phase it in over many years. Looked at differently, they're being told it's OK to lie, as long as they lie a little bit less each year...
(Message edited by public_heel on November 17, 2005) |
Gap
Registered Member
Username: Gap
Post Number: 899
Registered: 10-2003
| | Posted on Thursday, November 17, 2005 - 05:15 pm: |
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FWIW, there were articles last week quoting some analyst saying GM has a 40% chance of BK within 2 years. |
Public_heel
Moderator
Username: Public_heel
Post Number: 1466
Registered: 12-2003
| | Posted on Thursday, November 17, 2005 - 04:01 pm: |
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GM CEO says fears of bankruptcy are "overblown". Stock stages big rally....
That's the reason I have Jan '08 puts. They can keep the ball in the air for another 25 months, and I still win. |
Gap
Registered Member
Username: Gap
Post Number: 898
Registered: 10-2003
| | Posted on Thursday, November 17, 2005 - 11:12 am: |
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What I was referring to was more those plans where, though fully funded, workers are forced to hold certain stocks.
Many plans automatically invest the employer's matching funds into their own stock... saves them cash and the stock is "free".
It's unrestricted common so the employee can rebalance as their plan allows, at least once per quarter. Sometimes they can't touch the unvested portion, though. |
Public_heel
Moderator
Username: Public_heel
Post Number: 1458
Registered: 12-2003
| | Posted on Thursday, November 17, 2005 - 09:48 am: |
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GAP - I would never accuse you of glee. In my mind, the words "GAP" and "glee" just don't go together.
I see your point about the 401-k's. What I was referring to was more those plans where, though fully funded, workers are forced to hold certain stocks. I vaguely recall that Enron was like that... |
Gap
Registered Member
Username: Gap
Post Number: 897
Registered: 10-2003
| | Posted on Thursday, November 17, 2005 - 09:39 am: |
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Like Enron's? OK, there I go being unfair again.
Everyone's Enron stock was wiped out, whether they had it in their 401k, a self-directed IRA, a mutual fund, or a plain old taxable brokerage account.
So yes, those employees who held 100% ENE stock in their 401k were badly hurt, losing their income and their savings. But every penny they contributed was accounted for and fully funded. Enron didn't skip contributions... there's no such thing as an underfunded 401(k) (actually there have been a few where a company employee was stealing the money and producing fake 401k statements... but it's very rare, losses are small, and someone ends up going to jail).
I'll tell her that you said it was good riddance, though...
Quite a leap to morph my comments about the clearly broken pension system into glee about your friend losing her retirement. |
Public_heel
Moderator
Username: Public_heel
Post Number: 1452
Registered: 12-2003
| | Posted on Wednesday, November 16, 2005 - 04:07 pm: |
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K/N - I don't know. My friend made it sound worse than that. I think it's still subject to rumor, which is likely to make it look worse than it ends up being... |
Killernut
Registered Member
Username: Killernut
Post Number: 3062
Registered: 10-2003
| | Posted on Wednesday, November 16, 2005 - 03:51 pm: |
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I haven't followed the pension funding debacle closely but...
What happened to Enron's defined pension plan, did it hold all ENE?
I thought when United turned their's over to the PBGC that they were going to be cut but still paid out at 60% or so. Is it less than that? |
Public_heel
Moderator
Username: Public_heel
Post Number: 1451
Registered: 12-2003
| | Posted on Wednesday, November 16, 2005 - 03:47 pm: |
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Defined contribution plans are better.
Like Enron's? OK, there I go being unfair again. I know a United flight attendant whose pension, which she was counting on, is evaporating. I'll tell her that you said it was good riddance, though... |
Gap
Registered Member
Username: Gap
Post Number: 896
Registered: 10-2003
| | Posted on Wednesday, November 16, 2005 - 03:02 pm: |
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it could take the whole pension system with it
Good riddance. In good times managers steal from pensions to boost earnings. In bad times they let it become underfunded and screw the employees, leaving the taxpayers to foot the bill. When faced with a crisis, Congress limits itself to debating how much the funding rules should be relaxed.
Defined contribution plans are better. |
Public_heel
Moderator
Username: Public_heel
Post Number: 1447
Registered: 12-2003
| | Posted on Wednesday, November 16, 2005 - 02:25 pm: |
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CNBC just amended their story. They say the $31B deficit was not reported by GM. It is the PBGC's calculation based on raw data submitted by GM, and GM says they dispute the PBGC's conclusion... |
Public_heel
Moderator
Username: Public_heel
Post Number: 1446
Registered: 12-2003
| | Posted on Wednesday, November 16, 2005 - 02:14 pm: |
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Let's not forget, though, that GM is spinning off half of GMAC, for (they hope) $12B. Of course, GMAC is essentially just another subprime lender, and subprime lenders may not be really popular when GM gets around to selling... |
Public_heel
Moderator
Username: Public_heel
Post Number: 1445
Registered: 12-2003
| | Posted on Wednesday, November 16, 2005 - 02:09 pm: |
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A/B - I don't know. Back then, I wasn't paying attention to the details. I guess the price would go up, and a lot.
First, though, the situation will have to get a lot worse. GM might even pull a surprise Chapter 11 filing first, perhaps triggered by an understanding of what the Delphi b/k is doing to them.
I really don't see a bailout, though. For one thing, most of the Senators and Congressmen from GM areas are Democrats. For another, we no longer think of ourselves as an industrial nation. We're a nation of speculators, real estate agents, and pet psychiatrists. Who needs GM? |
Afterburner
Registered Member
Username: Afterburner
Post Number: 346
Registered: 11-2003
| | Posted on Wednesday, November 16, 2005 - 02:00 pm: |
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P/H: What would happen to GM stock if there's a government bailout, like with Chrysler in the 80's? |
Public_heel
Moderator
Username: Public_heel
Post Number: 1443
Registered: 12-2003
| | Posted on Wednesday, November 16, 2005 - 01:50 pm: |
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Whoa... CNBC just did a piece on GM's pension problem called "Lie Now, Pay Later".
If GM goes b/k tomorrow, their pension fund will be short $31B. This is according to GM's report to the gov, which can, legally, use different accounting rules than their publicized numbers.
Delphi may add $12B to the shortfall.
They say that if (when) GM fails, it could take the whole pension system with it... |
Public_heel
Moderator
Username: Public_heel
Post Number: 1355
Registered: 12-2003
| | Posted on Thursday, November 10, 2005 - 10:07 am: |
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GAP - but that would lower the rating of the remaining entity, wouldn't it? |
Gap
Registered Member
Username: Gap
Post Number: 890
Registered: 10-2003
| | Posted on Thursday, November 10, 2005 - 10:01 am: |
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My only pertinent comment on GMAC is that a good credit rating is more important to a finance company than to a manufacturer.
An spunoff GMAC will get its own credit rating, almost certainly higher than GM's junk rating. The sum of the parts will be worth more than the whole. |
Public_heel
Moderator
Username: Public_heel
Post Number: 1351
Registered: 12-2003
| | Posted on Thursday, November 10, 2005 - 08:31 am: |
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GM - CNBC reporting that BofA has lowered their price target to $16. Briefing.com has them raising it from $16 to $18. but they get that backwards a lot.
How long before my $20 puts are in the money?? |
Public_heel
Moderator
Username: Public_heel
Post Number: 1350
Registered: 12-2003
| | Posted on Thursday, November 10, 2005 - 08:28 am: |
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GAP - That loss was booked in later periods, AFAIK.
Have you any familiarity with GM's situation vis a vis GMAC? I know they want to sell a half-interest in it, and expect to pick up $10B+ for that. It has always been my understanding, though, that, from a financial point of view, GM has long been more a finance company than a car builder.
If they're selling half of GMAC, are they selling a profitable entity in order to keep alive an unprofitable one (the car building side)? Or do they know that the finance business is about to go south and actually become a weight on the rest of the company?
If you don't know, I'll make at least a feeble attempt to find out. |
Gap
Registered Member
Username: Gap
Post Number: 889
Registered: 10-2003
| | Posted on Thursday, November 10, 2005 - 08:08 am: |
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General Motors to Restate 2001 Earnings
quote:General Motors Corp. said Wednesday it plans to restate its earnings from 2001 because an accounting error led the company to overstate its earnings by up to 35 percent.
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Public_heel
Moderator
Username: Public_heel
Post Number: 1344
Registered: 12-2003
| | Posted on Wednesday, November 09, 2005 - 08:11 pm: |
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re GM - this from Fleckenstein today, discussing a WSJ article on pension accounting:
Probably the best primer on how the "math" works is an article in today's Wall Street Journal titled "Pension Inquiry Shines Spotlight on Assumptions." It leads off with GM because the SEC is now looking into the assumptions used in its pension accounting.
The article points out that there are two ways to make your results look better. One is to pick a high "assumed rate," which is the rate of return you expect your pension assets will yield. (Until 2002, GM had assumed 10%, and has recently taken it down to 9%.) The second way is the discount rate with which you discount back your future liabilities. The higher the rate you use, the lower the present value of that future liability looks, and the more stable you appear.
The discount rate GM uses is 5.75%. A 25-basis-point change in the discount rate would impact its pension liabilities by $160 million. Similarly, a 25-basis-point change in the expected rate of return would affect GM's obligations by $220 million.
An example of how that was used to the benefit of corporations -- and the detriment of workers -- was noted in yesterday's New York Times, in an article titled "Pension Accounting Rule, Sometimes Murky, Is Under Pressure": "In 2004, for instance, Lucent said it earned $1.2 billion from operations. But $1.1 billion of that actually resulted from pension calculations." As you can see, moving these numbers around can change your results quite dramatically.
No-Can-Do Candor
The New York Times article passes along another nugget to show the size of the potential discrepancy: "Last summer, the Securities and Exchange Commission said that it had studied a sample group of companies and found that they had told their shareholders they had an aggregate surplus of $91 billion in their pension funds, when a more honest accounting would have shown an aggregate deficit of $86 billion." (The emphasis is mine.)
Now I don't know exactly what the words "more honest" mean. Nor do I know how real-world those calculations might be, as the numbers could be better or worse. If I had to guess, they would be worse, but in any case, the size of the discrepancy is already quite large.
IBM was a serial abuser of those same variables. The Times article notes that from 1999 to 2003, the company's reported earnings for that period would have been reduced from $36 billion to $21 billion, "once the pension effect was removed." The article also points out that by putting more money in riskier assets, the plan sponsors can thereby justify higher assumed rates of return, thereby making the current levels of funding look better, thereby raising earnings and helping the bosses' narrow self-interests. In the end, these strategies almost certainly place all the people in the plan at greater risk. But by then, the executives will be long gone -- and living large on the money they "earned" while pulling these levers.
Pension Cop Tails GM
When the chickens come home to roost, companies wind up (if things get bad enough) at the door of the Pension Benefit Guaranty Corp. According to another article in today's Journal titled "Pension Agency Casts Shadow on GM Sale," the PBGC is concerned that the automaker's plans are underfunded to the tune of $31 billion, as opposed to being fully funded, as GM asserts.
The PBGC calculations don't even vary any of the overly optimistic assumptions I've already discussed. The agency arrives at its determination by assuming that GM's plans are terminated today, instead of some future date. One thing we can probably be sure of: The cost of these liabilities in the future will only rise.
I'm thinking that, sometime in the next couple of years, the SEC forces GM to re-evaluate their pension liabilities. At least, with a "normal" company (not a DJIA company, especially GM) they would.
If GM had to do that, they'd essentially be bankrupt. |
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