Government Motors Update

by Larry Levin

I started my last email/blog with "Have you seen the recent commercials running where the CEO of GM claims the company has "proudly paid back the government in full" or some similar claptrap? The claim is utter, complete, pure political nonsense! In short, Government Motors is lying." I was right on the money with that statement!

It looks like my sentiment is catching on with the regulators as well: some believe GM could be in hot water with the FTC over these blatant lies. After all, there is a "truth-in-advertising" law that is clearly being violated.

Fox news has picked up the story here http://www.foxnews.com/politics/2010/04/23/gm-hot-water-ftc-truth-advertising/ and says "The TV spot may land GM in hot water with the Federal Trade Commission over its truth-in-advertising laws, which prohibit ads that are 'likely to mislead consumers.'"

The FTC said it could not provide any comment on the ad or whether it had received any complaints or inquiries about GM's claims from the public or from government officials.

The FTC has a division of advertising practices that investigates possible false claims, but specific investigations are not made public. If the FTC determines that truth-in-advertising laws have been violated, the agency files complaints against the organizations in violation.

GM announced Wednesday that it had paid back the $8.1 billion in loans it received from the U.S. and Canadian governments in 2009. Of that, $6.7 billion went to the U.S. Treasury.

"A lot of Americans didn't agree with giving GM a second chance," Whitacre said in the 60-second ad. "We invite you to take a look at the new GM."

Well, meet the new GM. Same as the old GM. The company is still majority-owned by the federal government, which has a 60 percent stake in the Detroit titan; the Canadian government owns another 12 percent.

GM is not yet solvent, continues to be racked by debt and is still unable to turn a profit — something that has eluded the company since 2004. GM filed for bankruptcy in 2009 but was saved from collapse by a $52 billion infusion from the federal government.

And once again I think i should suggest that if you are in the market for a new car, buy a Ford. Stay away from the GM welfare queen.


Behold the age of infinite moral hazard! Today is the 389th day of legalized accounting fraud on a grand scale. April 2nd, 2009 was the day CONgress forced FASB to suspend rule 157 in favor of deceitful accounting.



Previous Day's Trading Room Results:

Trade Date: 4/23/10

E-Mini S&P Trades*
(before fees and commissions):

1) No "Secrets" trades filled.

2) Algorithm positions (8)

3) “Reading the Tape” positions (16) …combined Secret’s, Algo, & “Reading the Tape” total…+8.75



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