Monday February 5, 2012
We don't endorse conspiracy theories, end of world Mayan Calendar theories or palm reading here at TMP. We rely on market experience, social mood, hard nosed accounitng and market analysis. On January 28, we presented a comparison of GM versus Ford Motor. We oted that if GM traded for the same P/E as Ford, GM would trade at $177.
At any rate, I got to thinking, let's take a Barack Obama perspecdtive on Government Motors. Sure the bailout was a pay off to reliable union contributors. But, in this election year. what would be the one thing that would absolutely positively without question, put the Republican criticism of the bailout on thin ice?
Hmm, what if the goverment sold its GM stock, and recovered its investment? Imagine Barack turning to Romney during the debate to answer the charge that the bailout should not have happened. Imagine that Barrack reveals that yes, the Government will be able to sell all the stock over a few weeks, 500 M would be one large trade, at yes, $53. Now what does Mitt have to say, think of the jobs, dealers, customers saved. Think of world markets to conquer. Thik of the re openning of th GM Saturn Plant in TN.
This would be Romney's worst nightmare.
Barack should have called his budy Warren Buffet to negotiate the kind of deal for us that Buffet got from Goldmand Sachs. Yes Preferred stock with a fat dividend and a jillion warrants. But no, we got Tim Geithner and about 500 M shares of common stock, period.
I did a search and discovered that the Govt needs to fetch $53 a share on its 500 M shares to get back to
The current earnings of $4.57 would only require a modest P/E of 11.59, about double what it is now. Sure that's a jump but still modest by today''s standards.
And if you believe the promise dof $8-10 B a year, even a more modest p/e could be supported. So what has to happen? Well Gaparino points out in Bought and Paid For that Wall Street supported Obama, despite his recent negative coments. Sure Wall Street is donatig to Romeny but why ot hedge the bet, either way Wall Street wins.
Goldman, Morgan, Bank of America (all bailout recipients) start talking up the stock. A few of the big mutual funds quietly move in and ramp up their purchases. Warren B. likes railroads, how about cars? GM starts consistely doing 20 M shares a day, a few analysts point out that at SPX 1350 one needs to buy low p/e stocks that have potential to be priced higher, like, well GM, hey it trades for what Nissan trades for and has 20.44 cash per shre in the bank. Is 2x multiple of cash per share unreasonable?
Is this sheer political specualtion on my part? Absolutely
Would it be the best thing that could happen to the Obama campaign in the battleground Midwest states? Absolutely
Therefore it falls in that gray realm between the plausible and the probable but certainly well ahead of possible.
We initiated a position based on fundamental investing. This again is NOT a prediction for $53. But with the election likely to be decided on the outcome of a single state, and only a hadful really in contention, I thougth it would make an entertaining specualtion for our readers.