Dow and S&P hit 12-year lows ~ GM Warning of Possible Bankruptcy

peaceandlove · 03-05-2009, 11:43 PM

Dow and S&P hit 12-year lows

Thu Mar 5, 2009 5:29pm EST

By Leah Schnurr

Investors worry that GM's collapse would send shock waves through the recession-hit U.S. economy, given that it is a major employer and buyer of supplies from auto parts makers.

NEW YORK (Reuters) - Stocks slid on Thursday with the Dow and S&P falling to 12-year lows as General Motors' warning of possible bankruptcy and concerns about the banking system's fate reinforced investors' reluctance to take on risk.

The previous session's rally proved fleeting as worries about the financial system's health hit bank stocks again and investors focused on the possibility that troubles in the finance arm of widely held General Electric could lead to a debt rating downgrade for the entire company.

GE's stock was down 0.5 percent at $6.66 after falling to its lowest since 1991 a day earlier. Uncertainty about the exposure of U.S. banks to GE remained a significant concern and the S&P financial index fell nearly 10 percent.

Shares of Citigroup, once the world's largest bank by market value, fell as low as 97 cents during the session, trading below $1 for the first time. Anxiety rose over whether the bank can be restored to health or whether it will have to be taken over by the government.

"The loss of confidence is pervasive. There isn't any magic bullet here that's going to save Citi or Bank of America. The only thing that might save them is if the government comes in and sponsors a bankruptcy," said John Schloegel, a vice president of Capital Cities Asset Management in Austin, Texas.

Article continues: http://www.campaignforliberty.com/wire.php?view=3196

Humble Janitor · 03-06-2009, 01:29 AM

$6.66 for GM stock? Yikes!

peaceandlove · 03-06-2009, 04:07 AM

HJ, in case you didn't notice General Electric was included in this article.

Here are the GM numbers:

General Motors shed 15.5 percent to $1.86 after its auditors raised "substantial doubt" about the automaker's viability if it fails to head off losses and stop burning through cash.

GE's stock was $6.66.

Either way the G's are going down.

peaceandlove · 03-06-2009, 04:37 AM

More GE (IMPORTANT) Commentary

March 5, 2009

Source: http://market-ticker.org/

Karl Denninger Blog

Quote:

Off the wires, no link.

"DJ reports GE Capital credit default swaps worsen even as GE released a statement emphasizing its strong cash position. The CDS are most recently quoted at 17.5 points up front, from 16.5 points up front earlier today, according to Phoenix Partners Group. That means investors must pay $1.75 mln up front, plus a $500,000 annual fee, to protect $10 mln of GECC senior bonds against default for five years."

That means the first year cost is $1.75 + $500k, or $2.25 million.

That's 22.5% first year cost to insure $10 million against default!

This means that the market is saying that the odds of GE going bankrupt within the next twelve months is greater than one in five, and that assumes zero recovery.

If the bonds would recover more than 80% in the event of a default then it is implying more than a 100% risk of default, which is obviously impossible.

This is occurring despite GE's CFO appearing this morning on CNBC making the case quite clearly that there is no risk of default under any materially possible scenario. In other words, his assertion is that the odds of default are zero.

One of two things must be true:

1. GE's CFO is lying and must be indicted for doing so.

2. This so-called "market segment" (CDS) has become so ridiculously over-levered, unsupervised and able to cause failures that it is now within days or even hours of CAUSING GE to fail - not due to GE's own internal problems, but due to positive feedback that the CDS market is capable of and is generating on the initiative and as a consequence of the action of participants in that market.

Either way a major change needs to occur right here and now, lest we find ourselves with no pensions, no Social Security, no Medicare, no annuities and no government.

THIS CAN NO LONGER BE DELAYED OR TOYED AROUND WITH; WHEN "THE BEZZLE" REACHES THE POINT THAT IT STARTS DESTROYING THE NATIONAL CORPORATE INDUSTRIAL GIANTS THAT MAKE UP OUR ESSENTIAL INFRASTRUCTURE, MILITARY AND COMMERCIAL ENTERPRISES THROUGH NO FAULT OF THEIR OWN IT IS A NATIONAL SECURITY EMERGENCY AND MUST BE DEALT WITH IMMEDIATELY.

JoyAnna · 03-06-2009, 06:37 PM

Quote:

Originally Posted by peaceandlove

More GE (IMPORTANT) Commentary

March 5, 2009

Source: http://market-ticker.org/

Off the wires, no link.

"DJ reports GE Capital credit default swaps worsen even as GE released a statement emphasizing its strong cash position. The CDS are most recently quoted at 17.5 points up front, from 16.5 points up front earlier today, according to Phoenix Partners Group. That means investors must pay $1.75 mln up front, plus a $500,000 annual fee, to protect $10 mln of GECC senior bonds against default for five years."

That means the first year cost is $1.75 + $500k, or $2.25 million.

That's 22.5% first year cost to insure $10 million against default!

This means that the market is saying that the odds of GE going bankrupt within the next twelve months is greater than one in five, and that assumes zero recovery.

If the bonds would recover more than 80% in the event of a default then it is implying more than a 100% risk of default, which is obviously impossible.

This is occurring despite GE's CFO appearing this morning on CNBC making the case quite clearly that there is no risk of default under any materially possible scenario. In other words, his assertion is that the odds of default are zero.

One of two things must be true:

1. GE's CFO is lying and must be indicted for doing so.

2. This so-called "market segment" (CDS) has become so ridiculously over-levered, unsupervised and able to cause failures that it is now within days or even hours of CAUSING GE to fail - not due to GE's own internal problems, but due to positive feedback that the CDS market is capable of and is generating on the initiative and as a consequence of the action of participants in that market.

Either way a major change needs to occur right here and now, lest we find ourselves with no pensions, no Social Security, no Medicare, no annuities and no government.

THIS CAN NO LONGER BE DELAYED OR TOYED AROUND WITH; WHEN "THE BEZZLE" REACHES THE POINT THAT IT STARTS DESTROYING THE NATIONAL CORPORATE INDUSTRIAL GIANTS THAT MAKE UP OUR ESSENTIAL INFRASTRUCTURE, MILITARY AND COMMERCIAL ENTERPRISES THROUGH NO FAULT OF THEIR OWN IT IS A NATIONAL SECURITY EMERGENCY AND MUST BE DEALT WITH IMMEDIATELY.

Karl Denninger Blog

I haven't posted much, but have been reading daily. This information sounds
alarming to say the least. I've been reading and trying to teach myself more about economics for the past year, but I'm not sure I follow this information. Can someone please translate this for me?
JoyAnna

03-05-2009, 11:43 PM	#1
peaceandlove Avalon Senior Member Join Date: Sep 2008 Location: Turtle Island Posts: 2,776	Dow and S&P hit 12-year lows ~ GM Warning of Possible Bankruptcy Dow and S&P hit 12-year lows Thu Mar 5, 2009 5:29pm EST By Leah Schnurr *Investors worry that GM's collapse would send shock waves through the recession-hit U.S. economy, given that it is a major employer and buyer of supplies from auto parts makers.* NEW YORK (Reuters) - Stocks slid on Thursday with the Dow and S&P falling to 12-year lows as General Motors' warning of possible bankruptcy and concerns about the banking system's fate reinforced investors' reluctance to take on risk. The previous session's rally proved fleeting as worries about the financial system's health hit bank stocks again and investors focused on the possibility that troubles in the finance arm of widely held General Electric could lead to a debt rating downgrade for the entire company. GE's stock was down 0.5 percent at $6.66 after falling to its lowest since 1991 a day earlier. Uncertainty about the exposure of U.S. banks to GE remained a significant concern and the S&P financial index fell nearly 10 percent. Shares of Citigroup, once the world's largest bank by market value, fell as low as 97 cents during the session, trading below $1 for the first time. Anxiety rose over whether the bank can be restored to health or whether it will have to be taken over by the government. "The loss of confidence is pervasive. There isn't any magic bullet here that's going to save Citi or Bank of America. The only thing that might save them is if the government comes in and sponsors a bankruptcy," said John Schloegel, a vice president of Capital Cities Asset Management in Austin, Texas. Article continues: http://www.campaignforliberty.com/wire.php?view=3196 Last edited by peaceandlove; 03-05-2009 at 11:48 PM.

03-06-2009, 01:29 AM	#2
Humble Janitor Avalon Senior Member Join Date: Sep 2008 Posts: 3,201	Re: Dow and S&P hit 12-year lows ~ GM Warning of Possible Bankruptcy $6.66 for GM stock? Yikes!

03-06-2009, 04:07 AM	#3
peaceandlove Avalon Senior Member Join Date: Sep 2008 Location: Turtle Island Posts: 2,776	Re: Dow and S&P hit 12-year lows ~ GM Warning of Possible Bankruptcy HJ, in case you didn't notice General Electric was included in this article. Here are the GM numbers: General Motors shed 15.5 percent to $1.86 after its auditors raised "substantial doubt" about the automaker's viability if it fails to head off losses and stop burning through cash. GE's stock was $6.66. Either way the G's are going down.