My GM preferred stock keeps gaining in value!

[CTyankee]

As I understand it, this is a stock that acts like a bond. It is call-able. I thought I'd lost a boatload last year but it's still alive and has gained in value over what it was last summer. Of course, my dividend stopped last summer but I still own that bunch of shares. Both my accountant and my financial planner advises me not to sell, but wait and see. Right now I they are worth more than a fifth of their original value. They were paying 7.5%.

I guess Bill Clinton knew what he was talking about when he said "Never bet against America!"

[madmax]

1. Can I have some? ;p nt

[CTyankee]

2. At one point I thought I couldn't GIVE it away...

I'm amazed, just amazed. I was beside myself over the loss, which I had bought with proceeds from the sale of my mother's house to pay for her dementia care at an assisted living complex. As it turned out, she didn't live long enough to go into the unit.

Last year was one hell of a depressing year...but, things are looking up...

[Warpy]

18. I mentioned during the big slump that I was hanging onto my Ford stock

and wished I could grab more. I would have said the same about GM stock as soon as that bad CEO got dumped by Obama and the company started to focus on cars people would actually want instead of white elephants that generated the highest profit margin.

I'm glad your GM stock is doing well. Most of my stocks have recovered to their early 2007 level and I'm perfectly fine with that, although I still think the market as a whole is grossly overvalued.

[A HERETIC I AM]

3. They probably have been delisted.

If they are, then there may be no market for them, or an extremely limited one.

It does depend on the particular issue, of course. (doesn't it always?!?)

If you weren't aware, here is a website that you can find out all you want to know about your particular preferreds;

http://www.quantumonline.com/Index.cfm

Enter "GM" in the space under "quick search" and click the "search" button.

When that page opens, click on the hyperlink that says "Find all related securities for GMGMQ"

It's possible your 7.5% notes are symbol "GMS"

If you click the hyperlinked symbol, you'll get a page that tells you all you want to know about them, including a link to the prospectus.

To give you an example of the language associated with these types of securities, here is the description from the page on GMS;

SECURITY DESCRIPTION: General Motors Corp., 7.50% Senior Notes due 7/01/2044, issued in $25 denominations, redeemable at the issuer's option on or after 6/30/2009 at $25 per share plus accrued and unpaid interest, maturing 7/01/2044, distributions of 7.50% ($1.875) per annum are paid quarterly on 1/1, 4/1, 7/1 & 10/1 to holders of record on 15th day of the month preceding the payment date. Units are expected to trade flat, which means accrued interest will be reflected in the trading price and the purchasers will not pay and the sellers will not receive any accrued and unpaid interest. The Senior Notes are general, unsecured and unsubordinated obligations of the company and will rank equally with all existing and future unsecured and unsubordinated indebtedness of the company. See the IPO prospectus for further information on the debt securities by clicking on the ‘Link to IPO Prospectus’ provided below.

If you can break even, you've probably done well!


Here is the "Call Provision" as related from the prosepctus;

Optional Redemption

We may not redeem the Bonds before June 30, 2009, except for tax reasons as
described below under "Redemption for Tax Reasons." On and after June 30, 2009,
we may redeem the Bonds, at our option and at any time, in whole or in part at a
redemption price equal to 100% of their principal amount plus accrued and unpaid
interest up to but not including the date of redemption.

It is highly unlikely they will ever be called, as the only reason to call them would be if GM was able to issue new paper at a lower rate. That isn't going to happen any time soon.

[CTyankee]

4. Thanks for the information.

It sounds to me that you are not so bullish on my prospects, but since I thought I was completely wiped out last spring, this is SOMETHING. Also, I have to take into account what was paid out to me while GM was still giving a dividend. So while I am far from breaking even at this point, even considering the dividends I received, unless GM disappears, there is hope...

[A HERETIC I AM]

9. No, not bullish at all, and like Statistical said below, you are holding debt paper of a dead firm.

If the sum total of all your previous interest payments plus whatever they will sell for now comes even close to what you paid for them, you should consider dumping them. I don't like the idea of telling people to make specific trades on specific securities on an internet message board, but the fact is, Statistical has it spot on.

They are essentially lottery tickets now and the price moves you are seeing are the result of people speculating on little more than the "greater fool theory"

If you have say a $1000 position in these and the total of your interest payments and the value of them comes to anything more than $500, I would say you are ahead of the game, sell and free up the cash. Hoping against hope that they will ever recover anywhere close o their par is a losing proposition.

[Statistical]

5. I hate to tell you (because you seem so happy) but you need to know.

The GM you see on the TV is not the GM your bonds were issued by. Wben GM went through bankruptcy is shed off assets & debts (including your preferred). The "junk" (unusables assets, old factories, brands to be sold and all debt went into one new company (called Motor Liquidation Company) and the real value (and govt money) went into a second company called GM Company = "new GM". This is not the same thing as GM Corporation = "old GM". The name is similar so it seems like it is the same GM to consumers but legally it is a COMPLETELY different company.

New GM owes you nothing. They will never pay a penny on this or any other debt. Sorry to be blunt but your accountant is giving you bad advice.

General Motors Company (the "new GM") currently has no publicly traded securities. Please note that none of the publicly owned stocks or bonds issued by the former General Motors Corporation (now renamed "Motors Liquidation Company")], including its common stock currently traded on the Pink Sheets over-the-counter market under the ticker symbol "MTLQQ", are or will become securities of General Motors Company, which is an independent separate company.

http://www.gm.com/corporate/investor_information/

5. What happened to common stock, bonds and other securities previously issued by General Motors Corporation (now renamed “Motors Liquidation Company”)?
All of the publicly owned stocks and bonds previously issued by General Motors Corporation are still securities of that company, but its name has been changed to Motors Liquidation Company. None of Motors Liquidation Company’s publicly owned stocks or bonds are or will become securities of General Motors Company, which is an independent separate company.

http://phx.corporate-ir.net/phoenix.zhtml?c=231169&p=irol-faq

Sorry man. I question any accountant who would give such speculative advice.

Your bond is tied to the dead assets (and massive amount of debt) in "Motor Liquidation Company".

So what does that mean? Well the dead assets will be liquidated. A trustee will sell of all the dead parts of GM (old brands, old factories, old equipment, etc). GM even owned a church (don't ask me I don't know why). Some "assets" are like Hummer brand but GM couldn't find a buyer.

So all these assets spun off will be sold. Generally for pennies on the dollar. Then trustee will make payments to those who file a claim based on that "pool of money".

How much will you get?
Well it depends on what price GM dead assets sell for. However at time of Bankruptcy GM has a lot of debt and assets will be sold at liquidation prices ($0.10 to $0.20 on the dollar).

You are holding a lottery ticket not an asset. Your claim might be paid out at $0.20 on the dollar but it also might be paid out at $0.01 on the dollar or it might be paid nothing (if there is more senior debt which takes all the funds).

The "old GM" is now called "Motors Liquidation Company".
https://www.motorsliquidation.com/Home.aspx

If effect you have a bond against "MLC".

[CTyankee]

7. Thanks. Guess I'm back to where I was last year...nothing more lost anyway...nt

[Statistical]

10. Well they aren't worthless.

Price is volatile because speculators are involved. You can use that to your advantage and try to sell for as much as possible to a speculator.

Remember there is also opertunity cost to consider. Longer you hold onto dead money the longer it isn't working for you. Not trying to give investment but you may want to consider unloading them and purchasing another asset. Trying to get back to even on a broken horse is a recipe for financial ruin.

Hypothetically say you sold it in near future and bought another bond or prefered stock yielding 6% that is 6% you starting earning right away, not a year from now, or two years from now. Just something to consider. Time = potential money and holding an asset not yielding anything is costing you potential returns.

[CTyankee]

11. I know. That is true and something I myself raised with both my financial planner

and my accountant. My accountant is too swamped right now to give me advice on your information but I am forwarding it to my financial advisor and will be calling him after he has a chance to read it for his further elucidation. I am bookmarking this thread and will get back to you...

As for 6%, believe me, if I could find it I would invest in it (depending on its rating). But I get your point...even 3% is better than 0%...

[Statistical]

12. Getting 5% to 6% on corporate bonds with low risk shouldn't be too hard.

Couple examples:

Walmart (AA rated)
CUSIP: 931142BF9
Coupon: 7.550
Maturity: 02-15-2030
Yield to Maturity: 5.64% (bond is trading above par value so effective yield is lower than coupon)

GTE now Verizon (A rated)
CUSIP: 362337AK3
Coupon: 6.730
Maturity: 02-15-2028
Yield to Mat: 6.681%

I am not recommending these bonds but getting 6% on low risk companies is not very difficult to do. Now if you wanted 8% or 9% in fixed income you are going to need to take a lot more risk.

Hell the dividend on Verizon's common stock is 6.2%
http://www.google.com/finance?q=VZ

Anyways best of luck on rolling out of that bad debt and into something which will start working for you! :)

[trof]

17. I'm in the same boat. My GM preferred is worthless and delisted.

:-(

[upi402]

19. Thank you Statistical n/t

[econoclast]

6. I'm enraged!!!

GM took billions of taxpayer money yet your GM preferred stock keeps paying 7.5% and it's price is going UP?!?!?!?!?!?!

The authorities should be looking into whether or not we can "claw-back" your ill-gotten gains!!!


( Just kidding )

[Statistical]

8. See #5.

[dixiegrrrrl]

13. Could you count them as a losss to offset income, for taxes?

[CTyankee]

14. Since there was no sale there was no loss so no tax event has yet occurred.

If I sold them, then my guess is that I get a whopper of a loss which I think I can carry forward for many years (based on how much I have lost from the original purchase).

[dixiegrrrrl]

15. Man, that's a bummer.

You "lost" money in reality, but can't claim it.

Oh well, stuff them in a protected drawer and years from now, the grandkids will have collector's items.
Confederate bonds and bills are going for a nice penny these days.

[Statistical]

16. CT will be able to write it off just not yet

Until there is a sale the loss is "unrealized" and can't be written off.

Once a sale happens the loss becomes "realized". If the asset is ever completely worthless (as in $0.00) there are procedures to declare it worthless which works like a sale with a price of nothing.