TARP Report Reveals Gov’t & GM Screwed Taxpayers More than Previously Thought

Bloomberg reported today that the U.S. government lost an upwardly-revised total of $11.2 billion dollars in its bailout of General Motors Co. (GM, $34.48).  The previous estimated loss was $10.5 billion.

And on that happy note, I would like to remind investors that the stock market is based on capitalism, which means free markets.  When the government gets in bed with corporations and props up their stock, that’s no longer capitalism.  That’s socialism or fascism.  (Read more about GM’s irresponsible behavior and government bailout by scrolling to my last article in Stocks in the News — week of January 13, 2014.)

When investors buy stocks like GM, delightfully exclaiming, “Oooo, looky!  Low debt levels!  Growing earnings!”, what they are failing to see is that the company got to that sweet place because their Sugar Daddy at the U.S. Treasury opened its wallet for GM.  And now the wallet is closed.  (continued…)

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Can GM maintain a good balance sheet position and market leadership without Sugar Daddy holding its hand?  That remains to be seen.  But in light of the current recall scandals, I would venture to say that GM is far from responsible and prudent in its management of the company, its products, and its customer-base.  (Read more about the recalls in my recent article GM Issues New Recalls Relating to Axles and Transmission Lines.)

GM by the Numbers

The earnings outlook for GM has changed drastically since my March 29 report.  Wall Street now expects GM’s earnings per share (EPS) to fall 2%in 2014, followed by gains of 54% and 5% in 2015 & ’16 (Dec. year-end).

The 2014 price-earnings ratio (PE) is 11.1%, within a 2010-2013 range of 4-18; and the 2013 long-term debt ratio is 12%.

The current dividend yield is hefty at 3.4%.  (continued…)

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What to do with your GM shares?

All of my advice about the GM stock chart from March 29 remains intact.  If I owned the stock, I’d use a stop-loss order to protect my capital from bad news relating to recalls and government investigations.  And I would sell when it rises to $37.25.

Goodfellow LLC Rating: Volatile, Public.  (05-01-14)

GM Chart

GM data by YCharts

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Send questions and comments to research@GoodfellowLLC.com.

Happy investing!

Crista Huff


Goodfellow LLC

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