General Motors- What is Seen and What is Unseen

Share!Tweet about this on TwitterShare on FacebookShare on LinkedInEmail this to someonePrint this page

This post is by Jimbo – a long time participant in the Capitalstool.com message board.

GM looks awfully cheap at 6 times earnings and 5% dividend yield.

Very tempting – Until you see the unseen and hear the two words “PENSION DEFICIT” for whom the stock bells toll.

GM has 21 BILLION in unfunded pension liabilities.

But it could be even worse. What if the actuarial assumptions under which the current deficit is calculated are too generous and the earnings rate of the pensions funds in the future are lower than the current actuary determined earnings rates.

What if the pension deficits in time exceed the current market cap of GM.

The generous dividend feels very much like picking up pennies (or is that dimes?) in front of the steam roller.

 

Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also provide analysis and charts for David Stockman's Contra Corner which I developed for Mr. Stockman. I’ve had a wide variety of finance related jobs in the past 44 years, including a stint on Wall Street in both analytical and sales capacities. Prior to starting the Wall Street Examiner I worked as a commercial real estate appraiser in Florida for 15 years. I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. My perspective is not of the Ivory Tower. It is from having my boots on the ground and in the trenches of the industries that I analyze and write about today. 

Leave a Reply