GM Begins Trading and Attracts Dumb Money

What a wonderful world. You can take a company, eradicate all investors money by letting it go bankrupt and then, just a few years later lure the same stupid investors back into the same company.

The "new" General Motors stock started to trade today on the New York Stock Exchange under the old ticker symbol GM. Business as usual. Dumb money flowing in and driving the stock price of the largest IPO in the US history up. Most recently it was up 8.5% at $35.80 a share.

About two years ago GM went bankrupt. After some $50 billion in tax money and some modest restructuring GM is back in business, as far a the stock market is concerned. This is probably the most impressive investment stunt sine a long time.

The IPO price was $33 a pop. The total amount offered was $20.1 billion.

After hitting a high of $35.80, the stock price starts to go down to about $35.20. It looks like the IPO speculators are bailing out.

There is a difference between a donkey and a human being: The donkey only hits his toe once on the same stone.

Here is an interesting comment from a Yahoo user on a recent article "GM's IPO: A Warning Sign for Traders" related to the IPO:

"Lets face it, GM is in commodity business making cars distinguished little from all other car companies in the world. Their costs are still higher than many of their overseas competitors even after bankruptcy. After many years of making poor quality products, their reputation haunts them in the market and will continue to do so for years. Their pension fund is still underfunded to the tune of near $13 billion, probably much more if realistic investment returns were used for calculation. They are still under the thumb of the UAW which seems to have gained more power, not less, during the fake bankruptcy.

Regardless of what the stock market does, it would seem there is scant reasons to believe GM will be a market leader over the long term. So the question is, why are so many so anxious to buy it, given all the other companies out there with potentially greater growth and stock appreciation potential? Maybe hoping to turn it quickly and make a buck on the short term euphoria, but if too many have this idea it will be less likely to work. Especially if, as this article hints, we are now near a market top."