>The GM IPO and Other Musings

>Yesterday, I “tweeted” about the pending GM initial public offering. I am suspect of this offering even though it might seem unpatriotic and anti American. In my opinion, if you rationalize what these funds are being used for it is not your normal IPO. The funds are going towards the pay back of debt; the debt owed to the American taxpayer. Therefore, you are getting your money back in stock but you have to buy it back with new dollars. The result is the taxpayers’ dollars are converted to equity or stock in GM. Is this a good investment?

Now let’s turn to the investment in GM itself. The company has not been profitable for several years. Now the estimates are only 11 to 12 million units per year so what has changed? In reality the profits shown over the last two quarters were due to cost cutting and bankruptcy relief on debt. Would you consider a company coming out of bankruptcy and only showing two quarters of profitability a good investment? This stock is highly speculative and possibly dead money for some time. I hope I am wrong for the sake of the American automobile industry.

I am working on a series of educational articles on the effects of the elimination of the Bush tax cuts on both the income tax and the estate tax. If these cuts expire everyone will have to re-evaluate their portfolios and current estate plans. I hope that they extend them for a least another year or until the economy shows significant improvement. We must plan for the worst and hope for the best. I don’t want to cause alarm, because the markets are very resilient. I believe in free markets and a flat world economy, so there are abundant opportunities for investment no matter how the politicians try to mess it up.

The views expressed in this report accurately reflect the personal views of the person covering the subject securities. This is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Investors should consider this report as only a single factor in making their investment decision.

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