Financial services firm Morgan Stanley has replaced Ford with General Motors as the domestic automaker that will have the most promising stock reward through the next 12 months. Part of their reasoning includes a positive outlook for the upcoming Buick Verano and Chevrolet Sonic.
But then again, should we listen to a firm that thought subprime lending was a good idea?
Source: LeftLane
Comment
I wonder how many GM shares Morgan Stanley has in “inventory” or “under management.” They need to pump up the volume to sell at a high, unrealistic price, to uneducated investors. Either that or they will sell short the GM shares they pump up to investors and then laugh when the shares go down as they make money.
GM was given a multi-billion dollar gift by the federal government that wasn’t advertised during its bankruptcy. In any other corporate bankruptcy, its “tax attributes” die with the bankrupt corporation. The new corporation starts out with a fresh balance sheet. The major “tax attribute” for GM is a $45 billion net operating loss carryover that magically got transferred to the new GM. Only for GM. Only this time. That means that GM will be able to offset its future (post bankruptcy) taxable income by $45 billion. According to the GM fine print, it should save GM $14 billion in US taxes and another $19 billion in “global taxes” (outside the US). I didn’t see any mention of state taxes and if it get a break there too. Nice, huh?
Ford, which didn’t declare bankruptcy, has its own Net Operating Losses (NOLs) which it can use to offset it’s record earnings, but Ford didn’t get the “fresh start” GM was given and Ford still has to pay off its massive debt. GM doesn’t have any of its old “legacy debt” to deal with.
It’s all a bit unfair if you ask me.
However, I still see Ford and its new product portfolio as stronger than GM in the US and Ford is much more focused in its foreign markets, including Europe and Australia. GM is ahead of Ford in China, but that means Ford has tremendous upside potential in the coming years in China and the rest of the BRIC countries (Brazil, Russia, India, China).
Unfortunately, Wall Street bankers are master manipulators of the stock market and if they want GM to go up it goes up. The general public and our Sec. 401(k) accounts are doomed to the endless cycle of boom and bust while Wall Street walks away with profits no matter which way stocks go. Welcome to the new normal.