Monday, December 10, 2007

Impending Disaster for GM and GMAC

As 2005 drew to a close I predicted it was the height of the Real Estate bubble, in May 2007 I predicted Countrywide Financials (CFC) impending sub prime implosion. In July I started to forecast the Real Estate/ Subprime/ Conduit effect and now I make my prediction for 2008 – the companies to watch, are


These companies stock will in my estimation drop a minimum of 60% during 08 – I am expecting to see a $10-$13 GM share price during 2008. I am further expecting to see their Bonds drop down to a B- or junk bond rating. GMAC will probably enter single digits and also have their bonds downgraded to B- or junk status

Where am I getting my forecast from???

Okay – GM and GMAC are ultimately the true kings of subprime debt, with cars that no one wants they have become an money lending business, however unlike any sensible money lending business loaning money to people who cant afford to pay (loan sharks – see article on credit card companies, the modern day loan sharks) they are offering money at rates that would make a Japanese bank wince! Further more when they sell a car, they take a depreciating asset, throw in a hint of negative equity from a prior car, an artificially inflated resale value and voila you have a 50-60 unsecured loan, not at 19-39% APR like a credit card, but at 4.2%, scarcely outpacing inflation. Now add a past history of employ pensions (read gray bomb article) and you have a company with all the liquidity of Countrywide Financial!!! (Read impending doom article)

Work on the premise that should I make this story better – who will be affected by this implosion, non less than the beloved Cerberus group of Chrysler fame and their illegitimate father Citigroup…… starting to sound like a familiar chronicle…….

Copyright Jonathan Rose 2007 - Creative Commons License

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