Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: zonder who wrote (13498)	10/15/2004 8:59:58 AM
From: mishedlo	Respond to of 116555

U.S. Sept. retail sales jump 1.5%, double expectations Friday, October 15, 2004 12:45:35 PM afxpress.com WASHINGTON (AFX) - U.S. retail sales jumped 1.5 percent in September as auto sales recorded the fastest increases since October 2001, the Commerce Department said Friday. Seasonally adjusted retail sales grew twice as fast as the 0.7 percent expected by Wall Street economists. Excluding the 4.2 percent rise in auto sales, retail sales improved by 0.6 percent in September, double the expectations on Wall Street. Sales in July and August were revised slightly higher.

To: zonder who wrote (13498)	10/15/2004 10:16:45 AM
From: mishedlo	Respond to of 116555

GM's finance operation will show a profit when leasing cars and assuming a certain residual value for the car at the end of the lease period. If at that time, residual values are less than the assumptions that were made when the car was leased, those profits will disappear. It seems to be dawning on the market that GM's residual values were over stated. GM can only put this off for so long. That is why GM slashed their forecast. I think it is just a beginning. Falling stock prices for a company using its own stock to prop up its pension plan is going to cause a day of reckoning on its pension plan assumptions. GM is trading at a 52 week low. GM is underwater on any stock it used to "fund" its pension plan. A debt downgrade will increase this problem, possibly dramatically. Mish

To: zonder who wrote (13498)	10/15/2004 10:31:23 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

GM’s problems are only beginning. Falling stock prices for a company using its own stock to prop up its pension plan is going to cause a day of reckoning on its pension plan assumptions. GM is trading at a 52 week low. GM is underwater on any stock it used to "fund" its pension plan. A debt downgrade will increase this problem, possibly dramatically. IMO It was a moral hazard for the GM to “fund” its pension plan this way. It exaggerates any move up or down. In this case I can not see how GM failed to see these problems coming down the road. GM’s pension plan assumptions are among the most liberal out there. As long as the pension plan woes loom over GM, it just will not be able to compete against Toyota and Honda. Compounding the problem is a lack of models outside SUVs, rising gas prices, and loss in market share. Ultimately I believe GM’s debt to be worthless. When and how we get there is a story for another time. In the end, I expect its pension plan will be dumped on US taxpayers via the PBGC (pension benefit guaranty Corp). Unfortunately, the pensioners will get severely reduced benefits as well, just like airline industry. It is a lose lose situation all around. Mike Shedlock