Starting off - let me say that I've already diversified my cash into foreign currencies as a "hedge" to make money from the delta in the currencies, but I don't think that the US currency is going to crumble, but it will fall another 15-20%.


First - Let's be real, the purpose of this article is to sell Silver and Gold, pure and simple.

Second - Whilst GM does have a significant impact on the American Economy by way of the amount of revenue it pulls in and the # of people it employs, it's #3 position on the Fortune 500 is spurious at best, as literally dozens of companies have outearned GM as far as profits go for years.

Thing is, GM is still earning a profit - yes, they're cutting expectations as far as earnings, but they're still earning a profit and their Long Term debt stands at about $160B not $300B as the Article stated.

I don't know all the details of GM's Debt situation, but I seriously doubt that 100% of the interest rates on their debt is tied to theinterest rates set by the Fed - like most corporate bonds, the bonds were sold at a particular interest rate that won't change over the life of the bond.

GM will have to pay more in interest to sell future bonds, but the existing debt isn't going to suddenly get too expensive to service as US interest rates go up.

Also, GM isn't in a situation where its assets outweigh it's debts, it has a positive balance sheet with (Nearly $40B in Cash) and will free up more cash via layoffs, probably phasing out another brand and by working to cut its costs related to healthcare, as the healthcare costs it pays for present employees and pensioners is crushing the company cost wise.

I could see if the company was unprofitable and had more debt than assets and a rapidly dwindling liquid asset position, but the trend over the last couple of years has been that their liquid assets have gone up.

I would say that GM's position is tenuous, sure - but on the verge of Bankruptcy?

No.

GM should be able to service its debt, even with higher costs when they have to take on new debt, but there is room in the company as far as sheeding unprofitable assets and restructuring to make sure the money is available.

Finally, let's put GM in perspective - Toyota is already expected to Surpas GM as the #1 Car Maker in the world in the coming years and the General's relevance as a dominant player in American Business has been fading for years.

It's more emotional than anything else, if GM does go bankrupt or becomes a minor player (they arguably already are) in the car industry, there will be reprocussions, but not enough to take 90% of the value out of the dollar.

Fourth - Foreign nations are STILL buying our bonds, so saying that they no longer are is a straight up lie.

They buy our bonds, because they need us to buy their products - even if they diversify their bonds, they won't stop buying our bonds as we're their biggest customer.

The return they get from the bonds + the revenue their economies is get, makes it worth it.

They're not going to call in our bonds like a marker on the Sopranos.

Think of it like this: This guy you know, he owes you money and pays it back with interest, he also comes to your store and buys goods every day, he's your biggest customer and without him you're out of business.

Do you stop lending him money because he misses a mortgage payment, ye yet keeps paying and buying from you, or do you help him move to a cheaper apartment and make sure he can still keep paying you?


Don't misinterpret a service pitch for financial analysis.





Peace,










M2

The Blog: http://www.analyticalwealth.com/

An assassin’s life is never easy. Still, it beats being an assassin’s target.

Enjoy your money, but live below your means, lest you become a 70-yr old Wal-Mart Greeter.