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Magna International: Worth the Risk?
They have taken very little in the way of restructuring charges although the big three are off about 40% in total volume in the last year. I expect a big loss this quarter and large restructuring costs in the near future to bring their capacity in line wiht the new reality. There is likley to be a failure on the part of Chrysler and possibly GM as well. There are large restructuring charges and receivable write offs yet to to come. They do have 8B in shareholders equity, so they can take the hits that are coming, and remain in business, but the share price likely has some room to fall.
Option ARMs: The Banking Backdrop of 2009
Autoworkers' Pay Only Small Factor in Detroit's Problems
GM has something like 48B on its balance sheet as an accrued liability for retiree health care and other benefits. In Chap 11 that will be wiped out. There is no other way that GM can go forward as a sucessful company. That may be harsh and I agree it is completely unfair to the retirees but it is reality. These are the type of hard decisions and hard results that are required for successful restructurings.
Does anyone think that any Democratic government apointed "car czar" will have the political strength to do what has to be done?
The money coming from the government in this bailout is a complete waste of taxpayer dollars. In effect a transfer of wealth from the taxpayer to various creditors of GM who would otherwise not be paid. They money would be far wiser spent to fund a DIP loan for a proper chap 11.
Half of U.S. Consumers Delaying New Car Purchases
The sales rates we witnessed in the last few years of between 15-17M vehicles were unsustainable, and more of a function of insanely low financing rates then real "need". In essence, the auto industry brought forward demand, and now they will have to pay for that mistake.
it will take some time for that excess supply to work itself out of the market.
What Obama Needs to Know about Tim Geithner, the AIG Fiasco and Citigroup
They knew that these contracts were not "insurance" at all. AIG was not selling this "protection" as an insurance contracts at all so as to avoid the legal requirements for capital etc.
At no time did any counterparty believe they had the full faith of the US treasury backing their risk. The US taxpayer should not take this loss. They did not choose to take on this risk.
If we let AIG go bankrupt and all those who contracted with them lose out, so be it. In the future all will be more careful with whom they take on "counterparty&quo... risk. That is a lesson all need to learn.
Bait-and-Switch Obviousness Shock: GM's Payoff
Paulson should be ashamed of himself, if he does indeed sink to this level of dishonesty.
How Low Can Mining Stocks Go?
Why GM + Chrysler = Ugh
Some True Safe Havens Are Still (Surprisingly) Undervalued
There have been a few mining closures during the last few months, and many more will follow if the commodity pricing complex remains suppressed. Naturally, these decision will result in reduced supply, which will lead to increased pricing, and so on. These cyles play out over many years however, and you may need to wait a few years for your thesis to pay off.
Chewing on the FDIC List of 'Problem' Banks
thanks
A First Look Inside the Fannie / Freddie Bailout Plan
The greenback will likely descend, and commodities should strengthen, over the next few weeks as this becomes better understood.
Short Thesis Still Intact at FirstFed
On Aug 28 07:22 PM Kinabalu wrote:
> Just a comment on uninsured deposits. These deposits are usually
> demand deposits and are the most attractive deposits a bank can have.
> As a result when the FDIC takes over a failed bank they can sell
> the demand deposits to other banks for more than the face value.
> So the depositor doesn't have to take a loss as the new bank is happy
> to take over their business. There really isn't any more incentive
> for the uninsured depositor to participate in a run on the bank than
> for an insured depositor.
Short Thesis Still Intact at FirstFed
1. FED does not voluntarily provide the monthly report. It is required by one of their regulators. Note that Downey provides essentially the same information monthly as well. Perhaps someone could clarify which regulator requires that filing?
2. While the dollar value of 30-59 day late non accrual loans was fairly steady at 123M vs. 126M one month ago, the 60-89 day bucket increased to 101M to 81M. Total Non Accrual loans in the pipeline went up 17M in the month.
3. Cash was 562M at the end of July, but wholesale deposits spiked during the month by 556M. This spike in wholesale deposits was unprecdented in the history of FED and seems very susupicious. During the month, as you point out, ordinary retail depositors withdrew 257M. There is no further detail about the source(s) or this "wholesale" deposit. Note that is may have been only on deposit for a short time. We are also not given any information as to the terms provided to the depositor(s). It seems hard to beleive that anyone would put their capital at risk with an uninsured deposit at FED given its precarious balance sheet. Note that in the absence of this miracle deposit, the bank would have been out of cash, and needed to tap the FHLB, which would, of course have attracted still more regulatory attention.
4. Very important to always remember with respect to FED that almost all of its loans are in California (a few in Arizona as well), and primarily in the absolute worst hit part of California, LA, the inland empire, and San Diego. The loss severities for them will be very significant.
This bank is in very big trouble....
Auto Sales Are Cause for Optimism
further to this discussion, some of you may want to take a look at this chart to see what the cost of insuring GM debt is today. The debt market clearly expects insolvency.
Auto Sales Are Cause for Optimism
The only issue here is....are GM shares a buy at these levels?
In my view, they are not. GM simply has to many anchors to succeed going forward. Absent huge changes in US trade policy, they will have no choice, in my view, but to eventually file. The longer they wait, the lesser will be their cash available to 'reorganize' with.
As an aside, I am not sure if the readers here have seen the promotional pieces being touted on CNBC relating to their upcoming piece on GM. Much is being made of the GM success in China, to bad nobody is mentioning that they actually lost money in China last quarter, even thought they sold a lot of cars. In addition, much of their reported "growth" in China is relating to their SAIC joint venture, in which they have a 34% interest, but report 100% of the sales as if they were their own. GM has done very well overseas and particularly in China, and they will continue to do so, but while they make and sell a lot of cars overseas, they do not make a lot of money there, and they will never be able to make up their domestic losses with foreign profits, unless they go through that chap 11 filing.