GM’s Piple Dream
August 18, 2007 by Douglas A. McIntyreGM (GM) CEO Rick Wagoner says that the big car company is OK despite the tough stock market and problems in the mortgage sector. According to Reuters, "GM’s exposure to the subprime mortgage market is mainly through ResCap, the home lending unit of its former finance arm GMAC." The company says that the division is doing fine right now.
But, GM’s exposure, at least over the rest of this year and into next, is in sales of its cars in the US. Wagoner says that he has no evidence from this past week that vehicle sales are being hurt, but it is too early to tell.
The number of mortgages that will reset to higher fixed rates will increase as the year goes on.
The markets can be very perceptive. GM’s shares are down over 15% during the last month. That is about the same drop that Bear Stearns (BSC) has suffered. As odd as it may seem, the market’s concerns for the companies is not entirely unrelated.
The default rate for mortgages will continue to rise. And, if pessimists are be to believed, it will become an economic bloodbath. GM cannot afford sharper drops in its US sales.
But, sharper drops are almost certainly on the way.
Douglas A. McIntyre
Essential Tips for Investing: Sponsored
A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit.