GMAC is Back, and Dumber Than Ever

Posted: Apr 10, 2014 12:01 AM
GMAC is Back, and Dumber Than Ever

How soon we forget. It seems so long ago that we were dealing with liar loans, Ninja loans, and a host of other subprime funding vehicles. Perhaps one of the biggest culprits was the General Motors Acceptance Corporation. GMAC was a poster child for what was wrong with the lending practices so prevalent at the time. Of course, nothing that a 17 billion dollar bailout or the conversion to a bank holding company couldn’t or wouldn’t fix. As the movie character Chuckie so frightenly proclaimed “We’re back” bigger and better than ever. GMAC has done the Hollywood thing and gone through a facelift to emerge as Ally Financial.

Of course like all other companies recently who either see or smell danger on the horizon it’s time to dump their shares on an unsuspecting public.

The Ally IPO will certainly be a thing of beauty. Expected to come at between $25 to $28 per share investors are asked to do two things besides holding their nose when they buy this company. The first is to ignore the most recent report issued by the company itself that says: (1) if the economy slows down like the current projections being given after the most recent trade deficit numbers, then high delinquencies, repossessions and loan losses could be significant. (2) the company is now expanding into nonprime financing (is that like Nija?) (3) there is no assurance that our monitoring of our credit risk will be sufficient.

So just ignore the “here we go again” attitude all you IPO’ers and plunge right in.

The second thing that investors should be aware of and are being asked to disregard is where the capital raised is going. Like Facebook, Linkedin and Twitter, etc the funds are not going for Cap EX. such as plant, equipment or even, heaven forbid, the hiring of more people. Like the social media IPOs, which were to reward the thirty somethings, with a hefty payday, the Ally funds will go to the federal government to reduce ownership from 37% to 14%. It seems even the feds are planning to exit at the top.

I guess I should be happy that we taxpayers are being returned our capital that we lent out in 2008. Perhaps the feds will use this new found money to replenish the social security fund, enhance Medicare, or pay for a few new drones over the Middle East. Sure, and Chuckie was loveable!

Alas all you Ally fans, “Caveat Emptor”!