The Sane Investor

December 30th, 2008

With news yesterday from Reuters after market close that the treasury department would invest “$5 billion in equity in auto and mortgage finance company GMAC” and increase “a loan to General Motors by $1 billion” using money from the $700 billion bailout fund, the plot thickens for Detroit’s finest as the battle for the American car company bumbles along.  The equity investment, one of ”senior preferred equity with an 8 percent dividend”, certainly doesn’t leave much to be desired in terms of returns, presuming the company does not declare bankruptcy.  Although the investment seems like a drop in the bucket after the whirlwind of other rescue packages and the $50 billion in loans that the Big 3 were requesting, the precedent that it creates may be anything but. (more…)

December 29th, 2008

With today’s post, I end my month and a half silence that I’ve had on this website.  To those who read my blog, I’d like to extend a warm holiday greeting, and to apologize for my lack of posts.  I just got back from studying abroad in Argentina, and if such a thing as “reverse culture shock” existed, I would say that I’m experiencing it.  However, during my hiatus, I was definitely still keeping my eyes on the markets.  This type of volatility means there are going to be some opportunities, the biggest problem is knowing what they are.  In times like these, my advice is to keep it simple, and pick simple things that don’t go up in value conditionally. (more…)

November 13th, 2008
If you were working at Circuit City, chances are you knew that something was going to happen when Blockbuster announced it had made an unsolicited $1 billion bid for the company in mid April 2008.  That still probably didn´t help soften the blow when the company declared bankruptcy on Monday.  Today the company announced that Bank of America would be providing a $1.1 billion credit line for the company, which Bloomberg cited Circuit City as saying would ¨…help pay for its emergence from bankruptcy next year¨.  But this brings up the larger thematic issue: is this an isolated event or the telling of more events to come? (more…)