Ask the Best and Brightest: Why Are People Still Buying Old GM Stock?

Edward Niedermeyer
by Edward Niedermeyer

The AP [via Google] reports that 13.9m shares of Old GM were traded last Thursday alone, raising the obvious question: why? “There are people who think they are buying the new General Motors. Stop. You’re not. You’re buying the detritus,” says Harlan Platt, a finance professor at Northeastern. And Old GM’s spokesfolks agree. “We’re not in any way promoting the trading of it,” says Old GM spokesman Tim Yost. “We have no legal right to stop the trading. That’s well beyond the purview of any given company.” And though some are trading Old GM for short-term profits, a number of traders seem to be buying Old GM stock out of ignorance or unfounded optimism. One Detroit-area investment advisor explains: “the thing about people in the Detroit area is we’re homers,” he said. “We want to root for the home team. A lot of times people will do that, more with their heart than with their head.” But does Detroit’s hometown loyalty extend far enough to motivate people to buy stock in a liquidating company?

Edward Niedermeyer
Edward Niedermeyer

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  • Johnny ro Johnny ro on Aug 21, 2009

    I'm with RNC on short term speculators. Plus there are those who truly do not understand what they are buying, or do but do not grasp fully its dead future. I don't want to call them stupid though. Just making mistakes. Please don't look at my own 401k. And some will travel with some of the day traders and get out at a profit. In the long run it will be a full loss if you hold it. Thats one thing (among many) that TTAC people know better than others. On the day traders, I remember SEC estimated in late 1990s that a day trader needs a steady annualized 56% rate of return to cover the fees charged to do day trading. I also remember day traders going postal.

  • FreedMike FreedMike on Aug 22, 2009

    Well, shares traded means bought AND sold...we're focusing on the reasons to buy, but a lot of folks may be selling while they can as well.

  • Wmba Wmba on Aug 22, 2009

    @ChristyGarwood : Thanks very much indeed for the reply. So GM Canada is an asset of the new GM. Adam Opel, though, is an autonomous company at the moment, owned by neither the old or new GM. But new GM is negotiating on their behalf with the German government. Why? Just for old times sake? That's a bit weird, when you consider what Bertil Schmitt says today, Aug 22, which he has written before as well. That is, the German government will fund Magna's bid for Opel, but not Ripplewood's (this RHJ stuff is a Belgian cover name for a branch of Ripplewood Holdings). And yet new GM, negotiating on behalf of a company they have no financial interest in at the moment, favours Ripplewood's bid. I know there's been speculation that Ripplewood might sell Opel back to new GM down the road, but the whole thing really makes no sense. Other than there might be something in it for GM sometime in the future, maybe, perhaps, if Ripplewood wins. Which they won't. I don't understand.

  • Obbop Obbop on Aug 22, 2009

    "“We want to root for the home team." Silly ignorant fools. The same thinking led to my buying that 2004 Silverado when I knew deep inside that I should buy a Toyota pick-up. After the CONTINUOUS spitting in my face regarding the near-endless events of warranty non-coverage from corporate level down the the dealerships I learned my lesson.