GM & Ford debt lowered to junk

[soupcxan]

JG, you have our deepest sympathies.

 

[Marshac]

I just came here to report the same thing   

Are you watching the dow?  With ~3 hours left, today will be an interesting day to watch.... I wonder how the Asian markets will react.


Edit-

GM and Ford bonds are held by a lot of funds, and now that they have moved to 'junk' status, wont many of them will be required to divest of these below investment-grade funds?

 

[cute fuzzy bunny]

That is correct. But the bigger outfits can shift it from their investment grade funds to their high yield or junk funds. I dont know any gains/tax implications of that to the individual investor though.

 

[saluki9]

Most mutual funds will shift them to high yield funds. Those that can't will find any excuse possible to hold them until the panic is over.

This isn't exactly news, it was a matter of when not if this was going to happen.

Any real trouble will come from the pension funds who have no choice but to dump these. They may just choose to bite the bullet and insure them until some calm hits the market.

 

[Marshac]

No, it's not a surprise, but it's still news. This will affect GM and Ford's abilities to offer low APR financing to customers which will probably hamper their future performance. Anyone have any idea when UAW will take a hint and ease up a bit on the automakers? The cost of medical will be the least of their concerns when they are totally out of a job....

You gotta admire Kerkorian and how well he pulled off his GM short-squeeze the other day... his plan worked perfectly.

 

[wildcat]

Captain Kirk & the Vegas style of investing

 

[Marshac]

I just hope it doesn't catch on... there is enough instability in the market as-is. 

The do-it-yourself short-squeeze kit (... or at least how I think it works)

1. Find a heavily shorted company
2. Purchase OTM call options
3. Announce your intent to buy an insane number of shares at a price above current market rates
4. Sell your newly ITM call options as short sellers scramble to cover their short positions drive up the share price.
5. Profit

 

[sgeeeee]

I'm a little bit suspicious that these companies want this to happen. Both are looking for an easy way out from under their pension obligations. They have 3 years left with an administration that seems willing to give away as much as possible to corporations and the rich. I think they want to declare a crisis and see how much bailout they can get before the country elects a new administration.

 

[ak4195]

Dont be in a hurry,GM's problems arent even close to being resolved yet.Cant speak for GMAC but like i said earlier "birds of a feather..."Pension liability's are well known as is GM's $300+ billion in debt.Next on the docket will be its $50 billion shortfall in health care fund.so perhaps one more downgrade to come.I suspect if the airlines bailouts are any indication of free markets at work(oh havent you heard?,we(public $'s) own decent chunks in 3 or 4 crippled airlines).So one could expect a govt., bailout of GM as well .From what ive read GM's current labor contracts expire in '08 time frame.At a minimum there may be pension bailout and of course the obligatory bankruptcy proceedings.
No hurry hear,let things unfold--ak

 

[Mr._johngalt]

I'm not worried in the least. GM in Chapter 11?
I don't see it at ANY time. Even if it happened, we would sail
on relatively unscathed, ER -wise. "Junk bonds" don't scare
me either. But, I wouldn't put all my money there, nor should you.

JG

 

[Mr._johngalt]

Dont be in a hurry,GM's problems arent even close to being resolved yet.Cant speak for GMAC but like i said earlier "birds of a feather..."Pension liability's are well known as is GM's $300+ billion in debt.Next on the docket will be its $50 billion shortfall in health care fund.so perhaps one more downgrade to come.I suspect if the airlines bailouts are any indication of free markets at work(oh havent you heard?,we(public $'s) own decent chunks in 3 or 4 crippled airlines).So one could expect a govt., bailout of GM as well .From what ive read GM's current labor contracts expire in '08 time frame.At a minimum there may be pension bailout and of course the obligatory bankruptcy proceedings.
  No hurry hear,let things unfold--ak

If you believe that any administration (present or future) would let
GM go belly up without a bailout...............well, you are living in
a different world than the one I occupy.

JG

 

[haha]

............well, you are living in
a different world than the one I occupy.JG

Isn't almost everyone?

Mikey

 

[Mr._johngalt]

True!

 

[ak4195]

2U,the point is not will they or wont they,the point is cheaper prices more than likely coming down the road,juicyness will get even more juicy.but with the debt load of $300billion and a market cap of a mere $16.6billion,hemorraging losses and more unfunded pension/health concerns ahead a default isnt out of the question.As a % of a diversified portfolio,no problem,but some seem to want to mortgage moms house to put it all on black and let 'er ride.Everyportfolio takes a lump at some point,part of the journey.Good Luck-ak

 

[Mr._johngalt]

2U,the point is not  will they or wont they,the point is cheaper prices more than likely coming down the road,juicyness will get even more juicy.but with the debt load of $300billion and a market cap of a mere $16.6billion,hemorraging losses and more unfunded pension/health concerns ahead a default isnt out of the question.As a % of a diversified portfolio,no problem,but some seem to want to mortgage moms house to put it all on black and let 'er ride.Everyportfolio takes a lump at some point,part of the journey.Good Luck-ak

One thing I have learned is that after a company gets into trouble
it can take almost literally forever until drastic measures are implemented (imposed?). I have seen exceptions but not many. In the case of GM,
I expect the struggle (however it ends) to be even more protracted than what I have been exposed to previously.

JG

 

[LEX]

GM and, to a lessor extent, Ford, have made their money loaning on car sales rather than selling cars. Add to that the pension load and I fully expect that both will resort to reorganization in five years to shake off the UAW pensions and cram them into to Pension Guarantee fund. Their competition from Toyota and Honda have no similar pension overhang, since these companies don't have to carry their countries health care programs. Expect the big story in five - ten years to be wave after wave of private pension/medical insurance defaults and the US refusing to pick up the slack.

No worries. There are plenty of nice places offshore with affordable health care to run to.

 

[bruce1]

If you believe that any administration (present or future) would let
GM go belly up without a bailout...............well, you are living in
a different world than the one I occupy.

JG

Hi All
My only question would be is how badly the investor and bondholder would fare in the reorganization to follow the bailout. Still probably worth a gamble
Bruce

 

[cute fuzzy bunny]

Of course, we could just fix the healthcare and social security/retirement income problems, which would correct the health and pension costs longer term.

 

[REWahoo]

Of course, we could just fix the healthcare and social security/retirement income problems, which would correct the health and pension costs longer term.

My response to that is the same as when I read science fiction or a cookbook:

"Like that's gonna really happen...."

REW, 19 days to eR

 

[Mr._johngalt]

My response to that is the same as when I read science fiction or a cookbook: 

"Like that's gonna really happen...."

REW, 19 days to eR

Hi REW....now there you beat me to the punch. I was poised at the
keyboard. 19 days! Good for you!

JG

 

[Mr._johngalt]

Hi All
My only question would be is how badly the investor and bondholder would fare in the reorganization to follow the bailout. Still probably worth a gamble
Bruce

GM is still a "buy" with me, but I'm fully committed elsewhere.........
(Save your "committed" jokes. I can see that one coming)

JG

 

[cute fuzzy bunny]

Dang it.

 

[cute fuzzy bunny]

And I was hoping for a frivolous double-post out of the whole thing too...

 

[laurence]

you two are almost synergistic at this point! Good luck to those of you that bought in, I still think your money is safe...

 

[Michael]

Expect the big story in five - ten years to be wave after wave of private pension/medical insurance defaults and the US refusing to pick up the slack.

It appears that the US workers who relied upon company plans have spent their life working in vain. They should have just spent their youth laying on the beach, and enjoying life. The result in their "golden years" will be the same.