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GM did not lose that money, that was the money lost on government stock sales. The government chose to sell its shares underwater for political reasons. Amer
by parasubvert 13y ago
GM did not lose that money, that was the money lost on government stock sales.
The government chose to sell its shares underwater for political reasons. Americans, unlike Europeans and Canadians, don't long tolerate partially nationalized companies, even if it makes them money.
The $10b loss is probably a lot smaller than the impact on the deficit if GM were allowed to go bankrupt. Keep in mind that most US deficits these past few years were not due to the stimulus, TARP, or any Obama legislation - they were due to the automatic stabilizers (medicaid, EI, food stamps, etc.) that have been law for decades, and skyrocketed with the financial crisis due to the vast numbers of people (over 1.5% of the entire US population) dropping out of the labour force between late 2008 and late 2009. It's up to 2.8% now.
- yetanotherphd 13y agothere is no such thing as "underwater" when it comes to stocks. In a big liquid market, like the stock market for big companies, the price reflects the true value.
- lotharbot 13y agoEven for big companies, the stock market isn't always liquid enough over the short term to reflect the true value. In March of 2008, a lot of big company stocks were selling for well under their expected long-term value because there simply weren't enough buyers with enough liquidity to keep up with the selling frenzy. Temporary spikes in supply (or demand) can drastically distort the value of any asset. [EDIT: clarity]
- deleted 13y ago[deleted]
- yetanotherphd 13y agoBut that was at the height of the financial crisis, that doesn't apply to gm stock today
- lotharbot 13y agoIt doesn't apply to the amount of gm stock an individual investor might hold, but it does apply to the amount of gm stock the government holds. Putting 26% of the company on the market would qualify as a spike in supply, and would distort the price.
- yetanotherphd 13y agoI didn't see any price spike
- lotharbot 13y agoI didn't say "price spike", I said "distort the price". There is no question that the government's large stake in GM -- and their desire to unload it over the next 6 months or so -- means that there is some degree of "oversupply" of GM stock. Investors, whether buyers or sellers, have to factor that into their decisions regarding GM stock. I'm not convinced that the market for GM stock is sufficiently liquid to mitigate that.
- toast0 13y agounderwater: the current market price for an asset you hold is less than the price you paid, or have the option to pay
- judk 13y agoDid you forget to count the wars?