I have been repeatedly asked why GM is trading UP this morning (to over $1.00!) when the common stock is worthless. Are traders stupid?
No. This is all short covering before it goes to the pink sheets tonight.
There are some who were long the preferreds, short the stock, but that has largely dissipated. Some have been short against the credit default swaps.
This is not that unusual; the same thing happened to Lehman and Bear Stearns, remember.
But what about tomorrow? You figure it out: the common equity shareholders are wiped out.
A bigger issue is, how long do we wait to get vehicle sales above 10 million (seasonally adjusted) when sales have been so dismal recently?
Remember, the GM restructuring is working on the assumption of at least 10 m annual vehicle sales. But look at what's happening: most analysts estimate May vehicle sales at 9.4 million. April was 9.3 million.
And May was helped by a big liquidation at Chrysler.
Bottom line: we need to get vehicle sales up appreciably in the next several months.
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