GM got “Hummered”

With the US economy slowing, even largest corporations get affected. An easy, but overlooked by me target was GM – General Motors Corp.

I was so into shorting homebuilders and financial companies, that I didn’t pay close attention to other possibilities. Don’t get me wrong, I did come to the conclusion that with less home buyers on the market, there are less shoppers for washers, dryers, refrigerators and other large kitchen appliances. The same applied to new furniture and an easy local proof was Tucson “Furniture Row” on Fort Lowell, that lost at least half of its stores in the last 6 months.

In addition, record oil cost was killing airlines; though, with their recent history of bankruptcies, I didn’t find a single one to short. Probably, I could have gone after JetBlue, but by March their stock was already under $5. Moreover, it was the only airline company offering non-stop flight from Tucson to JFK. The route to fun, the route to life.

As for the cars, from the times I owned Ford Thunderbird and Buick, I never was crazy about American auto industry. I spent enough time in the auto repair shops to learn about multitude of issues with both models, in addition to hearing unfavorable comments about many others. Since then, I admire Toyota – an easy and comfortable car to drive with sophisticated electronics and awesome reliability. Even my new BMW – “Ultimate Driving Experience” – can’t compete with Lexus’s (a Division of Toyota Motor Sales) fabulous electronics.

Nevertheless, General Motors Corp – this corporate behemoth, founded in 1908 in Flint, Michigan, that sells products under the Chevrolet, Buick, Saab, GMC, Pontiac, Cadillac, Hummer, and Saturn, Opel, Vauxhall, Isuzu, Holden, and Daewoo brand names in Canada, Europe, Latin America, and Asia Pacific has always associated in my mind with the core of American business. Yet, its size might have just added to its inflexibility. At the time when spending on the large items plummeted like a stone, it doesn’t sound too favorable to have many brands, even less so to have Hummer among them.

Still, I wouldn’t follow the advice of Lehman strategists to buy GM put spreads. The stock is already so cheap, falling a number of times below $10 mark, that with its support level being closer than resistance, I would rather look for buying opportunities or wait until the stock hits the resistance for any short selling or put strategies.

Why should anyone spend money on puts on an oversold stock that is drifting in the midstream of the channel, not too far from the support level?