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General Motors

From Yahoo News, GM shares down over 4 percent on Delphi worries

Delphi has said it must reach at least a framework for an agreement by Thursday or it will file court papers Friday to reject its current contracts.

Such a filing could prompt a strike at Delphi, potentially shutting down GM plants and forcing the automaker to burn through billions of dollars a week, analysts have said.

The New York Post says

“If there is a long strike, they’re both out of business,” said Burnham Securities Inc. analyst David Healy, who owns some debt issued by GM’s finance unit.

In some surprising news

The world’s largest automaker, which lost $10.6 billion in 2005, said in a filing with the U.S. Securities and Exchange Commission that it has received federal subpoenas for investigations on how it handled payments from suppliers and also for its transactions in precious metals for its manufacturing operations.

Bloomberg reports it as

The automaker also said in the filing that it “recently” received Securities and Exchange Commission subpoenas related to selling and then repurchasing precious metals and a federal grand jury subpoena relating to supplier credits.

GM Precious Metals Delphi Mover Mike

The Myth: Rising Rates Bad for Gold

Here’s the latest bunch of crap fed to us by Bloomberg, of all news sources on March 29th,

Gold Drops as Investment Appeal Eroded by U.S. Rate Outlook

It is less attractive to hold gold when interest rates rise because the precious metal does not yield a fixed return, unlike bonds.

“The hill that gold has to climb is getting steeper and steeper as interest rates go up,” said Paul Walker, chief executive officer of London-based research company GFMS Ltd., said today in an interview.

Since June of 2004, when Fed Funds hit 1%,
short-term interest rates have been propped up 15 times by the Fed and gold has risen, and risen, and risen. Here’s interest rates and oil:

and gold was $398.70 on 7/2/04. It is trading today at $572.40

Maybe, you say it is different this time. No! The late ’70s saw gold go up as interest rates went up. Gold started in 1971 at $42 and peaked at $850 in 1980!

So how will you know when it is time to sell your gold? Right now, the bullion banks want to get out of their shorts by buying from you and keeping investors asleep as to the movement of gold. After they are long gold and you are short then they will use the MSM to feed you another line of bull. That line will say that gold is the only investment there is that will protect you. As you cover your shorts and buy, they will be selling all their gold to you at tremendously higher prices. It’s a great game for them and you will be skinned like a “rube” if you do what the press advocates.

You want to “stick it to the man”? First buy gold or silver in whatever form you prefer, then take delivery of it. They will be competing with you for supply and by taking delivery, you have eliminated the ability of someone to loan your supply to them.

BTW, Who is GFMS, Ltd.?

GFMS is the world’s foremost precious metals consultancy, specialising in research into the global gold, silver, platinum and palladium markets.

GFMS is based in London, UK, but has representation in Australia, India, China, Germany, Spain and Russia, and a vast range of contacts and associates across the world.

Our research team of fifteen full-time analysts comprises qualified and experienced economists and geologists; while two consultants contribute insights on important regional markets.

Executive Chairman Philip Klapwijk and CEO Paul Walker appear regularly at international conferences and seminars, and their articles have been widely published. All analysts travel regularly and extensively to stay in touch with GFMS’ unrivalled network of contacts and sources of information around the world.

They should be ashamed for spreading this nonsense!

On February 21st, 2005, their forecast for gold price for the year:$416 to $503 and Average $461. For the week of 2/25/2005:

O=432.5 H=438.2 L=432.5 C=436.1

With gold at $436 and the average estimated to be $461, I wouldn’t be to excited to buy gold.

Gold Precious Metals Finance Mover Mike

UN Security Council Will DEMAND…

Yahoo News says

The five permanent members of the
U.N. Security Council agreed on a statement Wednesday demanding that
Iran suspend uranium enrichment, setting the stage for the first action by the powerful body over fears that Tehran wants a nuclear weapon.

[…]

The West believes council action will help isolate Iran and put new pressure on it to clear up suspicions about its intentions. They have proposed an incremental approach, refusing to rule out sanctions.

U.S. officials have said the threat of military action must also remain on the table.

Russia and China, both allies of Iran, oppose sanctions.

[…]

In Moscow on Wednesday, Russian Foreign Minister Sergey Lavrov repeated his stance that Moscow would not support the use of force to solve the Iranian nuclear problem.

You can demand all you want, but if you rule out sanctions and oppose using force, you are not making a credible demand. You are only talking, giving Iran more time to achieve its ends. There is no sovereign power that will accede to these demands. It appears Europe has learned no lessons since giving Czechoslovakia to the Germans in WWII.

UN Iran Nuclear Weapons Mover Mike

American Idol – March 28th

Ok, so I’ve had an hour to think about the AI show and at first I was disappointed and it was tough to pick the worst.

Lisa had a lot to prove and she failed to win me over.

Kellie was cute as a bug, she kicked the dumb country girl, looked more like a Carrie Underwood, but missed on the song choice.

Ace just does nothing for me.

My man Taylor sang Trouble. I thought he sang it well with feeling, however not too different from LaMontagne’s version

Mandisa sang a gospel, too over the top and I’m sorry, but I can’t get past those thighs!

Chris, great song, but he’s become a “johnny-one-note”.

Katharine, singing a Christine Aguilera song, The Voice Within. I love this song and have played it 50,000 times (exaggeration), but it was just alright. It started slow, she nailed the second half of the song, but she is a little weak on the high notes. She is just so darn hot!

Bucky is a cowboy singing a cowboy song. It was better than Lisa, not a top five singer!

Paris nailed the song, but it was not the right song for a 16 year old to sing.

Elliot sang with soul this man can sing, the soulman, my tops for the night.

I don’t care if it is Lisa, Ace, Bucky or Mandisa. I’m picking Bucky to go.

American Idol Entertainment Katharine McPhee Mover Mike

Goldman Sachs is Leading, Again!

Rob Kirby is quoted at Le Metropole Cafe (by subscription only, but a free trial is available)

I wonder if it’s a coincidence that Dubya’s new chief of staff (Josh Bolton) just happens to be a former Goldman Sachs director. Seems the most pressing issues facing this Administration might not be exactly as advertised – seems to me it’s all about the Broken Monetary System and what to do next. This is why they need to bring a Goldman insider on board – the web of deceit is obviously too complex to bring anyone else up the curve.

Amazing.

Bolten’s recent background:

Currently, OMB [office of mangement and budget] Director Goldman Sachs Executive Director, Legal & Government Affairs 1994-99 Council on Foreign Relations member

You may recall that Robert Rubin was from Goldman Sachs and he was primarily responsible for the capping of gold to indicate inflation was low and to keep interest rates down.

As I’ve posted about before, Goldman Sachs is long April Gold contracts and short a huge pile of December Gold contracts on the Japanese Commodity exchange (TOCOM). I wouldn’t want to be short, but then I don’t have a “pipeline” to the FED and Treasury, like these guys do. Still, at the end of the day, central banks are short 12,000 to 16,000 tons of gold and I wouldn’t want to hold that position either.

Josh Bolton Goldman Sachs Finance Mover Mike

Bad News from GM!

As Ross Perot would say, “Now that’s just sad!
From the WSJ, GMAC Sale in Doubt

After a few days of positive headlines, General Motors once again had bad news for investors. After the closing bell, the struggling auto maker’s GMAC financing unit said in a filing with the Securities and Exchange Commission that it was not certain it would be able to sell a stake in itself after all.

Reuters reports, Credit investors ponder GM-sized hole in universe

There is no understating the scale of GM’s problems…GM, or its financing arm GMAC, is present in around 65 percent of synthetic collateralized debt obligations (CDOs), according to Standard & Poor’s, and underlies an estimated $1 trillion of default swaps.

Can you spell “derivatives” boys and girls?

D-E-R-I-V-A-T-I-V-E-S!

Then Reuters points out

“A bankruptcy filing is unlikely this year,” said Christophe Boulanger, auto analyst at Dresdner Kleinwort Wasserstein. “Unless Delphi goes on strike — in which case they would stop production and it would all be over.”

A bankruptcy of GM would be carnage.

Part of that carnage would be in the back offices of financial institutions, which will have literally millions of transactions to unwind, and banks are already under regulator pressure over backlogs in credit derivatives.

There’s that word again, derivatives, Derivatives, DERIVATIVES!

GM GMAC Derivatives Finance Mover Mike

GMAC to Restate

From MarketWatch,

General Motors
after halting trade of its shares, said late Tuesday it will restate financial results for its financing arm, GMAC, from 2003 through the third quarter of 2005. The restatement relates to the improper classification and presentation of cash flows for certain mortgage loans. The company said the restatement won’t impact previously reported total cash and cash equivalents and it will have no effect on GMAC’s income. In a 10-K filing for GMAC, the company warned that further credit downgrades “jeopardize our ability to continue operations.

GM GMAC Finance Mover Mike

Altman’s Z-Score

Are you familiar with Altman’s Z-Score? This is a new one on me, since I was a broker. Everything, with the aid of a computer, is so much simpler today. I used to spend hours calculating ratios by hand and then comparing them on a legal pad. Wow, am I getting old!

Hat tip to Bill Cara for mentioning the Altman’s Z-Score in relation to GM.
The Z-score was developed by Edward I. Altman, Professor and Vice-Director of New York University’s Salomon Center, Leonard N. Stern School of Business,

from an analysis of 33 Chapter X-bankrupt manufacturing companies with average assets of $6.4 million, and, as controls, another 33 companies with assets between $1 million and $25 million.

Altman’s Z-score calculates five ratios:
1. return on total assets,
2. sales to total assets,
3. equity to debt,
4. working capital to total assets, and
5. retained earnings to total assets.

These ratios are then multiplied by a predetermined weight factor, and the results are added together. The final number–the Z-score–yields a number between -4 and +8. Financially-sound companies show Z-scores above 2.99, while those scoring below 1.81 are in fiscal danger, maybe even heading toward bankruptcy. Scores that fall between these ends indicate potential trouble. In Altman’s initial study of 33 bankrupt companies, Z-scores for 95 % of these companies pointed to trouble or imminent bankruptcy.

Cara is concerned that the Z-Score for GM is 1.08, and could imply pending bankruptcy or at least, in his words, the stock is only a speculation!

So, in light of the Z-Score information coupled with Ask Uncle Bill and his statement

Today, PE’s are down, companies have strong balance sheets, and tons of cash laying around burning a hole in the pockets of management. (emphasis added)

what is the Z-Score for GE and the other 28 dow Jones Industrials?

AA 1.92
AXP N/A
AIG N/A
BA 1.82
CAT 2.13
C N/A
KO 6.59
DD 2.49
PFE 3.25
XOM 5.32
GE 0.61
GM 1.08
HON 2.34
HPQ 2.90
HD 6.62
INTC 7.97
IBM 2.61
VZ 1.23
JPM N/A
JNJ 7.76
MCD 3.15
MRK 3.29
MSFT 10.28
MMM 5.57
MO 2.59
PG 4.27
UTX 2.69
WMT 1.96
DIS 2.13
F 1.33

The financial stocks like Citigroup and JP Morgan get a N/A. Ford (F) is not in DJIA, but just shown for comparison to GM.

By this quick analysis 14 of the 30 are under 2.99 and “indicate potential trouble.” Ten percent, GE, GM and VZ, are “in fiscal danger, maybe even heading toward bankruptcy”.

Why look at the 30 Dow Industrial stocks? Because, this is the cream of American Business and the largest companies in the US. If anything they can be considered the trend setters. Also keep in mind, Dow Jones for appearance sake wants to showcase these companies. They want to see the DJIA ever higher.

Now if you want to do some quick research on your investments go to http://www.advfn.com. It is free but you will need to register.

One more piece of business. In the Carnival of Investing, hosted by Fat Pitch Financials, The Dividend Guy posts Stock Analysis – My Approach with GE, he singles out GE as a company that has a great record of dividend increases, plugs in the financial data of GE using the Stock Selection Guide originated by the National Assn. of Investment Clubs and comes out with a price range:

GE is a SELL in the $51.83 to $63.52 range
MAYBE in the $40.15 to $51.83 range and
BUY in the $28.46 to $40.15 range. The share price of GE was $35.57. He says

At the end of the day, I was comfortable with my analysis and decided to buy GE. Time will tell if this was a good move or not, but at least I will be getting a steadily increasing dividend.

I pointed out to The Dividend Guy, in the comment section, that the website of GE says

As a result of GE’s restatement of its financial information in its amended 2004 Form 10-K dated May 6, 2005, readers should no longer rely on our previously filed financial statements and other financial information for the years and for each of the quarters in the years 2004, 2003, 2002 and 2001. Readers should also no longer rely on our previously announced results for the first quarter of 2005. (emphasis added)

His comment section did not take my comments, so apparently he may be sleeping comfortably.

Altman’s+Z-Score 30 Dow Jones Industrials Finance Mover Mike

Andrew Card White House Chief of Staff, Resigns!

Someone has to take the fall for what the Washington Post calls

a series of mishaps, including the failed Supreme Court nomination of Harriet Miers, the bungled federal response to Hurricane Katrina, the slow public disclosure of Vice President Cheney’s shooting accident and the unexpected Republican revolt over a plan to turn over management at a half dozen ports to an Arab-owned company.

That person is not going to be George W. Bush, so Andrew Card fills the bill.

(Andrew) Card has held the top staff job at the White House longer than any person since Sherman Adams under President Dwight D. Eisenhower and had earned enormous respect within the building and around Washington for his calm professionalism and stamina.

All is perception!

George W Bush Andrew Card Mover Mike

Palladium gained $9

Back on October 28th, 2005, I wrote in Palladium and Platinum

…the price of Palladium was up $9 to $221. That’s a darn good gain in one day. I took a look at the monthly chart and again, darn, if it doesn’t look like it wants to go a lot higher. It was over $340 last year in mid-April and over $1100 in January, 2001.

My guess, it has made a huge base and if it breaks out, $340 would be the first target (up 53%).

On March 27th, 2006, Palladium gained $9 to $337!

Not a bad call, up over 50% in 5 months.

Palladium Precious Metals Mover Mike

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