-- Posted Sunday, 8 October 2006 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Monday, October 9, 2006
For investors who’d rather be smart than lucky
So much for my prediction here yesterday that bulls would celebrate the release of payroll figures on Friday no matter how many new jobs were alleged to have been added to the U.S. economy. As it happened, the number fell well shy of estimates – 51,000 new non-farm jobs versus an expected 125,000. Ordinarily we might have expected such a big shortfall to send stocks soaring, since weak employment figures tend to make the usual bunch of idiots salivate over the prospect of more Fed easing. Perhaps this scenario has become too pat to work? In any event, stocks struggled all day to say above water, finally closing moderately lower on the day.
The Rick’s Picks chart room was abuzz with rumors all the while, including some deep-throat stuff concerning a couple of our favorite gold stocks. Subscribers can access the discussion thread which identifies these stocks simply by clicking on the “Chat” button at the bottom of the main page. The source of much of this hearsay is a chat-room denizen who seems to have more connections to the world of financial and geopolitical intrigue than Knights Templar insiders in The DaVinci Code.
A GM Bankruptcy?
One decidedly non-insider piece of news that may have weighed on stocks Friday was Kirk Kerkorian’s announcement that he won’t be buying any more GM shares. In the chat room this catalyzed speculation that he might be fixing to bail out entirely, pending GM’s supposedly imminent declaration of bankruptcy. If so, it sounds like the kind of news that would drive stocks wildly higher, since even the most spectacular corporate disasters these days seemed to be perceived on Wall Street as merely cleansing of the air.
A GM bankruptcy is something I have long expected -- with our without Kerkorian to catalyze it -- since no amount of layoffs and plant closures can hope to make GM competitive with Chinese auto assembly lines. From a purely financial standpoint, the firm’s most serious problems are rooted in its pension and healthcare liabilities, and it will probably require an airline-size bankruptcy to jettison them. If and when the company declares Chapter 11, there’s no guarantee that GM’s engineers and designers will be able to stay in the game with their Japanese counterparts. Remember, GM for years has practically had to give away Tahoes and Suburbans to move them off the lots.
The company is probably worth more alive than dead, since every dollar of GM debt supports many, many dollars worth of leveraged paper downstream. But if Kerkorian has come up with a way to make GM pay off in some way other than as a huge tax loss, his logic remains obscure, at least to me. Meanwhile, every 1-point move in GM stock is worth a little more than $50 million to Kerkorian, so yesterday’s $2.08 hit will have cost him upwards of $100 million. He’s a winner as long as GM, last quoted at 33.12, stays above $30.10, but we wonder what he knows that we do not, that might keep the shares buoyant.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2006, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Sunday, 8 October 2006 | Digg This Article | Source: GoldSeek.com
