Trading Water
by Richard
Someone needs to explain this to me.
GM-Government Motors-has fallen from being one of the 30 stocks in the Dow Jones Industrial Average…to the purgatory of the pink sheets.
In one fell swoop.
That’s what they call the over-the-counter market for stocks that no longer qualify for listing on the Big Board or Nasdaq exchanges.
Which makes perfect sense, when you consider that its status in bankruptcy should have wiped out all the common stockholder equity.
Remember, even the bond holders are scrambling for pennies on the dollar, now that the equity structure has been hijacked by the U.S. and Canadian Governments…and the sacrosanct United Auto Workers Union.
So somebody please explain why this worthless stock is still trading…$1.31 at the last tick, running up an average volume of over 250,000 shares a day.
OK. It’s a rhetorical question, so I’ll volunteer some likely explanations.
1. The investors did not know what had happened to GM.
Hey–old media print newspapers are dropping like flies, and the rabbit ears on your black and white TV no longer work now that the outmoded analog broadcasts have been terminated.
No one ever tells me anything. Your basic, all purpose, standard excuse.
2. Now that there are discount brokers offering stock execution for practically nothing, it has reduced equity investing to something like a lottery.
This is something the average investor understands. You toss a few bucks to the convenience store clerk for a lottery ticket. And you never win. But who knows….lightning may strike one day.
3. Maybe the trades are all being placed by the UAW treasury.
After all, they’ve already proven that they can leverage a very junior unsecured lien position into a huge piece of equity in the restructured company.
This is a classic and timeless maneuver.
It worked once, so why not go to the well one more time?
Who’s going to stop them…Now that they’ve got the combination to the vault.
4. Finally, we may as a nation wholly and totally succumbed to bailout fatigue.
We’ve been taught by repeated example that the government will habitually throw money at failed and bloated enterprises, especially if they are headquartered in Michigan…the stilled heartland of the rust belt.
Next up: a government funded program to purchase worthless GM stock from clueless investors?
No worse in theory and practice and application then all the other income transfer “stimulus” spending in the pipeline.
Your tax dollars hard at work.
Shovel Ready.
