| Every time I write about the economy, I feel there is something I'm missing that I just cannot put my finger on. I may be closing in on the elusive bit based on a conversation I saw a few days ago between two people who are related to one another through their offsprings' marriage. The woman asked the man, a retired financial analyst, about opening a Roth IRA. He immediately jumped into a discussion of the different brokerage houses, and which was better. He ignored two things. The minor one was that there are other options which cost less in fees. The major one was that the woman asking the question was retired, and Roths are restricted to earned income, and therefore she would not be opening one. A lot of "the economy" is like that: the "professionals" look at one set of data, while the rest of us look at reality. First up, General Motors - that company you own a part of as a US taxpayer. A few days ago, "them that know" were all agog about how GM had started returning money it borrowed, and that $6.7 billion return overshadowed the $1.2 billion third quarter loss. Thing is, GM didn't actually give back any money. The financial types knew this, Tim Geithner and Larry Summers knew it, but it got buried because the MSM financial press either knew and it didn't suit their purposes, or they didn't look carefully enough at the numbers. Here it is: Moreover, G.M. is not, in the strictest sense, paying back taxpayers at all. Rather, it is refunding $6.7 billion of an $18 billion escrow account that was given to it by the government when it emerged from bankruptcy. The rest of that account will be used to cover fourth-quarter losses (including $2.8 billion pledged for the rescue of G.M.’s major parts supplier, Delphi), repay loans from the Canadian government, and possibly prop up the automaker’s shaky European operations. That escrow account is due to expire in June, at which time G.M. will repay what remains of the $6.7 billion from this week’s pledge — and then pocket the estimated $5.6 billion remainder.
Got that? Fritz Henderson, current CEO, sees a potential solution in offering an IPO. I very rarely offer any investment advice, but if you are considering this IPO, ask yourself how many Americans will pony up $40,000 for a Volt potentially made in Asia by GM..... |
