I don’t remember very much about the lecture, except this: He advised that if you were young and had some cash to burn, you might want to think of investing in some high-risk new computer company, like Microsoft. It probably wouldn’t make it, but if it did, there would be big rewards at the end of the rainbow.
But if on the other hand you just needed a secure place to park your money, if you were an old fogy and not a risk-taker, then you ought to invest in something boring and totally safe.
Like General Motors. The big gray automotive monolith was then still the biggest corporation in the world. It was there; it had seemingly always been there, it always would be there.
Everybody knows that when GM President “Engine Charlie” Wilson was nominated for Secretary of Defense back in 1953, he said “I’ve always thought that what was good for the country was good for General Motors, and vice versa.”
Well, nothing stays the same. If you had invested in Microsoft early on, you‘d be fabulously wealthy now. But anyone who was still clinging to General Motors stock last year lost every penny.
The company went bankrupt, and the stock became worthless. But in recent months, GM has resembled the legendary phoenix rising from the ashes. After shedding debt and obsolete factories, a smaller, sleeker General Motors is making money again.
GM has made profits of more than two billion dollars since the first of the year. But it is no longer really a private company. The U.S. government now owns most of what is sometimes sneered at as “Government Motors.” But that is expected to change soon.
General Motors is gearing up to again offer stock, so it can raise money, begin buying out the government, and once again be a technically private company. But are they rushing things?
Some think this is way too early. Others darkly suspect GM of doing this now to pay back the Obama Administration for saving the company last year. The Democrats are expected to have a hard time in the November elections, and one of their few visible achievements has been General Motors’ return from the dead.
However, there are lots of other analysts who say that this is perfect timing. The Associated Press’s Bernie Condon says “buying during bad times is the best way to make money with auto stocks, provided you have a stomach of steel."
My stomach is more like oatmeal. But my guess is that if the price is set low enough, GM could be a steal of an investment, at least for the next few years, when auto sales bounce back.
But I think potential investors should be asking more about the company. Does General Motors have it together? How does the quality and cost of their vehicles compare to the competition? Do they have a realistic, long-range business plan?
If the answer to those questions is yes, the stock offering ought to take care of itself, and of those who invest in it as well.