Wednesday, June 3, 2009

Intergenerational Wealth Transfer

Above is a picture of some young guy and the first car he ever owned, a Chevrolet Corvair Corsa.  Not nearly as sporty as the Corvettes, GTO's and Pontiac Le Mans
that many of my West Point classmates bought, but for $2300, pretty cool.

Of course, that was purchased before Ralph Nader wrote Unsafe at Any Speed.

Turns out, old Ralph was right - putting the engine in the back was something that only Volkswagen knew how to do.  The General Motors attempt at that made for a dicey ride in which the car seemed to want to spin around with a mind of its own.

The Corvair was taken to Germany and sold when I left for Vietnam.  Some unsuspecting German bought it for more than I had paid two years earlier, and that was after two accidents, both spin outs!  I told him that it was very temperamental and needed to be driven with care, but he wanted it anyway...

That, however, was the last General Motors car I ever owned.  From there, several Ford products and a Mercedes in Germany until the Queen discovered a used Honda Accord.  Since then, we have bought nine Hondas in a row, and I have now graduated to an Acura.  Change the oil and those cars run like a Swiss watch.  Plus, most are made in Ohio!

But several months ago, I did buy another General Motors product - their common stock.  Just could not bring myself to believe that GM could go under.  After all, talk about too big to fail...

Well, on Monday, my GM stock became worthless but my grandchildren and great grandchildren now own 60% of whatever the "new" General Motors will be.  Their co-owners are the few remaining bondholders who successfully argued that a secured GM bond ought to be ahead of the UAW pension fund, but lost out to the Obama Administration's Automobile Restructuring Committee, who know how to count votes rather than preserve bankruptcy law hierarchy.

I can only "hope" that my small loss will become a great gain for the grandkids and great grandkids, since my best guess is that they will own GM for a long time, with direct payments being made to the "New Government Motors" from their tax dollars, as well as the interest they will have to pay on the ongoing and incredible process of doubling the National Debt.

I also "hope" that all this money being created from thin air by the Fed can somehow be removed from the economy at exactly  the right moment so as to avoid a massive dose of inflation.

However, as my former boss, General Gordon Sullivan, was fond of saying, "Hope is not a course of action."  

Pay attention, folks...  Maybe we are going to need some of the change that these tax and spend policies ought to cause.  2010 elections are not too distant to consider.

D'ya think?


4 comments:

Apis Melliflora said...

Three cheers for those Ohio made cars you've been driving. Boo to GM for getting itself into this intractable tailspin.

Great picture of you with sporty sports car.

The Dragonfly said...

Nice car dad. Sorry to hear about your 100 shares.

Rob said...

Ken,
Great posting. I think you will enjoy the video posted at this link.

http://www.youtube.com/watch?v=rAqPMJFaEdY

Christie Norris said...

Let's hope they pass the proposed tax law to allow more than $3,000 of capital losses each year. :)