BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow...

BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? General Motors Corp. rose for the first time in six days after GMAC LLC said it may buy a 'non-U. S. mortgage unit' and the automaker said it has 'no further obligation' to inject capital into GMAC, its former finance arm. GM's November 2006 agreement to sell 51 percent of GMAC to a group led by Cerberus Capital Management LP ended any requirement to fund GMAC beyond $1 billion injected in the first quarter, said Randy Arickx, GM's executive director of investor relations, in an interview today. My comment: The headline is interesting because it is recycled news that's nearly a year old. GM is attempting to stir up good sounding news any way it can. GMAC is 'closely monitoring' its Residential Capital subsidiary and 'we do believe we have the right plan in place to address it,' spokeswoman Gina Proia said. ResCap lost $2.3 billion on subprime mortgages in the third quarter. GMAC said it has made a non-binding expression of interest in the unnamed company and faces competition from other bidders. GMAC is also considering selling portions of ResCap. My Comment: So let's see if I have this straight. GMAC is considering absorbing ResCap, Selling ResCap, and/or buying a 'non-U. S. mortgage unit'. This is one confused company. GM reached a three-year high of $42.64 on Oct. 12, two days after a new labor contract with the United Auto Workers was ratified. GMAC's third-quarter loss widened to $1.6 billion, the biggest in its 88-year history, from $173 million a year earlier as it absorbed the $2.3 billion deficit at ResCap. The GMAC loss cut $757 million from GM's earnings in the quarter. Credit-default swaps tied to GM climbed 73 basis points to 860.8 basis points, according to CMA Datavision in New York. An increase signals declining investor confidence in the company's ability to pay back its debt. My Comment: GM would be bankrupt now if it did not give up majority interest in GMAC. Technically it is bankrupt anyway. The only uncertainty is how long Wall Street is willing to go on pretending that GM's cash flow will allow it to pay back its debts. As long as GM can obtain short term financing and roll over its long term debt, it can stay in business. The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.