“What’s good for General Motors is good for the country.” This is not a direct quote of Charles Erwin Wilson who was president of General motors in 1953 when nominated by President Eisenhower to be Secretary of Defense, but it’s close enough. During his confirmation hearings, he was asked whether as Secretary of Defense he could make a decision that might be adverse to the interests of General Motors. His answer was that he could not conceive of such a situation, “…because for years I thought what was good for the country was good for General Motors and vice versa.”
For a long time, General Motors was the biggest company in the world, employing more people than any other — save for government-owned industries of the old Soviet Union. So my grandfather, who for years was a body and fender man for a Chevrolet dealership in Magna, Utah, would roll over in his grave and cry big alligator tears to hear of GM’sfatethis year. My grandfather believed that GM could do no wrong. So when GM took billions from Uncle Sam to stay afloat this year and their stock went from a high of $100 a share in 2000 to less than 75 cents in May of this year, I figured I’d do them a favor and buy $500’s worth. Heck, I thought, it can’t do much worse! Buy low, sell high… Right? No risk, no reward. Besides, investing in GM is patriotic, certainly better than investing in Toyota.
Thousands did the same thing, and when GM emerged from bankruptcy in record time this month, thousands more followed suit. By Friday, July 10th, the price was over $5.00 a share. I decided to cash-in and did so the very next trading day, posting a sell order on-line through my brokerage firm, Fidelity Investments. At the close of the following business day, I logged back in to check my portfolio licking my chops to see how much I’d actually made. And here’s where a basic economic truth comes in: Let the buyer beware.
Turns out trading of General Motors stock, stock symbol GMGMQ had been suspended on Friday, but nobody told me, Fidelity accepted my sell order on Monday just as if nothing had changed. Checking my orders’ status Wednesday morning, I learned that my portfolio now had shares in MTLQQ, which stands for “Motors Liquidation Company”. Shares of this new stock were trading then at 55 cents. Today, these shares are worthless, literally, posted at 0.00 per share — and today is the day that my sell order will finally be filled. Complaining to a Fidelity broker on the phone Wednesday that I had a “fill” order due me by virtue of Fidelity accepting my order on Monday, the broker said he was sorry, but that Fidelity had had no obligation to inform on-line investors that trading on the issue had been suspended. If I had called him personally to place the order, he’d have given me the bad news then.
I was fuming when I hung up the phone, but I’ve had a night to sleep on it now. I’ll not be moving my retirement accounts to another brokerage firm; the same thing could have happened with any firm. The fault and the guilt are mine; I gambled and I lost — fortunately, just $500. Some, I imagine, lost thousands.
Despite what GM management claims were several company disclosures warning investors that the old GM stock would likely have no value, it continued to trade at significant volumes and at prices that made it very tempting for folks like me to get in on the rally even as the company filed for Chapter Eleven protection. But I never heard or read anything about the stock being worthless until on Wednesday, the day after I posted my sell order. Jim Cramer had posted a brief article in his electronic newsletter, The Street, saying that GM stock was worthless to investors since the company had just emerged from bankruptcy and that the SEC “aughtta” put a stop to it. Googling GM today, I do find that there had been several other postings too on blogsand newsletters warning investors. But I had been too distracted by what the rest of the herd was doing pay attention. Truth is, GM could have suspended trading much sooner and should have, but they saw that they were making money they badly needed.
All I can say is, “You’re Welcome General Motors (not the same General Motors that my grandfather once so admired I’m sorry to say). Now go out there and make some legitimate money so you can pay the government back. By the way, my next car’s likely to be a Ford.”
The moral of this story identifies more economic truths: Never put all your eggs in one basket (I was fortunate that this was only a small trade); If you’re gonna play the ponies, learn about ponies; Never act on instinct alone, and verify, verify, verify before you buy; Price is not a consistent measure of value , and finally; It’s better to miss an opportunity than it is for the opportunity to hit you in the head.
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