A Check on My Undesired Investment

By Kevin Meyer

A few months ago I, along with about 200 million others, was forced to invest in a failed company.  Some people still think that failure cannot be allowed even if deserved.  Probably the same people that believe team sports in school create dysfunction and grades and other performance measures are inappropriate and demeaning.  Sorry, time to enter the real world.

If you're naive enough to think you can get something for nothing on a new mortgage, you should fail.  If you're dumb enough to invest in those mortgages without realizing there's no underlying value, you should fail.  If you're ingenious enough, in a mad scientist kind of way, to fashion complex financial instruments out of those packages of worthless mortgages, you should fail.  If you keep producing cars that no one wants, ignoring improvement methods right in front of your noses, and paying people several times the prevailing rate, you should fail.

So out of morbid curiosity, I wonder how my investment is doing.

Two of the biggest car makers in America, Ford Motor Co. and Toyota Motor Co., called a bottom to the long decline in U.S. auto sales. 

Yes, Ford and Toyota reported improved sales last month.  Unfortunately my president... err financial advisor... didn't invest in those companies.  He invested my money in GM.  What happened at GM?  The sales decline accelerated last month.  Great...

Fortunately I decided to hedge my forced investment, and put some equivalent funds in Ford.  How's that investment doing?  Check out the chart on the right.

Not too shabby.  My hedge probably worked and I'm about even.  I wish the other 200 million taxpayers were so lucky. 

But I'm very concerned.  Ford has to compete against a "company" not constrained by real-world economics.  They are backed by an entity that can simply print more money (as long as the Chinese continue to buy the supporting debt...) and change industry policy and regulation as necessary to guarantee an outcome... whether in the public interest or not.

Will Ford be able to pull it off?  I have my hopes, and I'll continue to support them with my capital and perhaps even a purchase. 

 

Comments

[Rob Wagner]

Much as I dislike this investment, I believe the investment was made to assist the somewhat innocent victims in this, the non-management workforce. Yes, for many years many of them and their forebears insisted on fat contracts, and benefits, and privileges, and etc...that they may not have 'earned' by many accounts. Lest we forget, it was their incompetent top-level managers at GM that messed up this one by being poor negotiators and lousy leaders. The bargaining union folks did what they were supposed to do (more or less).
But I guess we could allow, in the name of economics, GM and Chrysler to collapse. THAT would be very capitalistic, to be sure. And all those undeserving victims of lousy leadership would suffer for it.
Let's try to remember that the real culprits here are the leaders...as it usually is. What is their punishment? What loss do they suffer? Lido loses his company car...woo hoo! Wagoner lost his job...I'm crying for him and his fat (undeserved) estate. As for the stockholders that lost their investment...I feel least sorry for them. They kept electing the wrong guys...at least theoretically (but I degress about corporate ownership responsibility...another topic for another time).
I hope for Ford too...but I won't invest in them. I've already thrown enough good money after bad. GM leadership is still lousy, and still doomed to failure. In this case, I wish GM HAD been nationalized. At least we could, as a government, fire the idiots in power at GM and put in people that know what their doing.
Wait...govt guys...running GM? Wow! We're screwed!