Saturday, May 30, 2009

Saturday Rock Blog: Like a Rock (in water)

Monday will see the end of an American icon in the stock market. The General Motors name and business will live on but the stock will go to zero. It just goes to show that the truth is that most stocks do not go up in the long run. A few stocks go up a ton to balance out all the losers like GM. Those winners combined with the rebalancing of indexes like the dow jones and S&P create the illusion that stocks are a winning investment vehicle on average. Buy and hold is a scam sold by wall street to the American public in my opinion. Buy low, but don't forget to sell when you are high!

I have to say though, the public and the stock market sure are taking the bankruptcy of GM and Crystler disturbingly well. How is it that the broad market can rally as the biggest US corporations fold under stress? Do investors not see that wave corporate defaults moving from industry to industry? First it was home builders, then we had the financial sector essentially go bankrupt (subsidies mostly prevented actual chapter 11 filings(but I didn't forget Bear Stearns, Lehman, Wamu and IndyMac!!)), now its spread to the car industry, only Ford was saved. I can imagine next we'll see a wave of retailer bankruptcies, Circuit City already went under. I'm no expert but maybe Dillards and Sears will be among the dead. Then I suspect the airlines will file for Chapter 11 again after rising fuel costs combine with less frequent travel and horrible customer service. Eventually it will hit the technology sector as unemployment takes its toll on business and consumer spending. Is it really that hard to figure out, is the stock market so naive? Investors should be looking at GM and wondering which shoe will drop next, not assuming gleefully that this *must* be it, finally. Sometimes I just have to laugh at this market because it really seems like a big joke to me. Its supposed to be funny, right?

Here's GM since 1970:

And by the way, vehicle sales are about where they were when GM went public. Where did all that money go I wonder? Hmmmm! Vehicle sales over roughly the same period as the stock chart from Calculated Risk:

As a side note, it looks like the taxpayer gets shafted yet again on the GM situation. Silly taxpayers. How did we so rapidly go to a system where the feds have to throw money at anything that moves? And as they run out of taxpayer money, they print cash as a underhanded tax. This can not end well.

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