Bill-

Begging your indulgence, by permitting me to digress back to the issue of General Motors shares...

The following is not taking issue with your analysis of General Motors (GM) below, which is excellent as usual, but to offer a different perspective (old cynical me),

GM, Ford, and their ilk (the big corporations) are playing their usual confidence game on the American middle class by proclaiming “We are broke!� However, if we were to closely monitor their bookkeeping, I'm betting they are flush with cash from all the cheap labor they have engaged by outsourcing their manufacturing over the past two decades, by breaking apart the automobile Labor Unions, and by convincing we the people, through their surrogate fifth column (the politicians) that it's our own fault for being greedy, gas guzzling consumers.

I'm buying GM because in addition to being a speculator of common stocks, I'm firmly convinced that the gamers (with the assistance of “we the people�) have driven the stock to its lowest point in decades and are now silently accumulating the depressed shares. GM will eventually recover (the new catch phrase- “fuel efficient vehicles�), and the gamers will once again be rich beyond avarice and in the drivers' seat. I saw this same scenario play out in the late 1970s with Chrysler (received a U.S. government bailout) and Ford (Ford family restructured their common stock into a voting bloc) and the consumers and voters are the poorer because of it.

Thanks

OT, but Ms Tanier seems to be getting strident in here commentary re housing. The last few data points have her not so subtly implying that the slowdown is not "gradual", "measured" or the "soft landing" being touted. The latest:

"The mortgage bankers' purchase index fell back once again in the July 21 week, down 2.4 percent and back at a long-term low of 389.0. More and more housing data are pointing to weakness, including yesterday's existing home sales report that showed a sharp rise in supply and last week's NAHB housing market report that showed a sharp drop in traffic. The refinancing index firmed 0.6 percent in the week to 1,385.2, also near a long-term low reflecting rising interest rates. Thirty-year fixed mortgages averaged 6.69 percent, vs. 6.73 percent in the prior week and vs. 6.81 percent earlier in the month. New home sales data for June will be released tomorrow."

Anyone else noting this in her last few commentaries?

On GM, etc.

Yes, both GM and Ford have more than $20 Billion in cash -- but in both cases it is not a sign of financial health. Cash is not coming from a good operating performance. Cash for the most part comes from a negative working capital position -- in other words, suppliers and others are financing that cash.

As your comment seems to point out, there is something else going on. On their balance sheet for instance, I would point out to liabilities that could be changed by the billions (with just some good PR and so on) and increase their equity (thye just did some of that) -- I am talking specifically of health care (assuming pensions are a hard liability).

On their asset side PPE will need to be smaller in the future and it will be a source of CF over times through amortization.

In addition, in the case of Ford, their equity in FMCC can be monetized -- GM is in the process of doing so already.

When you buy GM, what are you really buying?
a) A leveraged position in the US equity market -- through their overfunded pensions -- funded through a massive debt issuance (like $20 Bils.) some time ago.
b) A bet that some liabilities may decrease over time with the help fo good PR, lobbists, Congress and some others -- i.e. someone else pays for it.
c) A bet on a company with high operating leverage -- in other words, improvements could result in loads of cash in a short period of time (a couple of years).
d) All of the above.

For reason that would be a little long to put on this comment, I prefer equity in the case of GM and the convertible-preferred in the case of Ford (with a current yield of more than 12% -- can be bought retail in the NYSE).

Overall GM has a better chance of getting out of this mess than Ford due to their respective shareholding structures.

JP

Maybe a comment on Amazon, since the blog was about Amazon?

I don't quite understand how you can directly compare eBay and Amazon. While Amazon does offer the ability to sell your own stuff through their Marketplace, they also have the world's largest online retail store, where you're buying directly from the company, and not another individual. This is not available on eBay, where you simply buy from small companies that create eBay stores or from individuals. Their shipping system is much better, their customized tragetted advertising and suggestions are better, and they carry EVERYTHING.

I personally think that Amazon has been doing some wonderful work in creating an online marketplace where anything can be sold, by creating APIs and systems that generate revenue by empowering smaller entities to gain online sales exposure, and by partnering with many major brands to host their online shopping sites.

Perhaps the company needs to market itself better.

As for becoming a portal, I truly hope they avoid that front, but otherwise, their services are fantastic. However, I am less familiar with their financials and would appreciate any analyst reviews you may have lying around (UBS maybe?).

I'll never forget Jeff Bezos' comment during the mania that it would be IRRESPONSIBLE for him to earn a profit! (since the game was growth)

He always wants to be Mr. Everything, and never develop the focus of an Ebay or a Google.

In general, isn't it curious that whatever "next big thing" comes along (VOIP, music downloads, social networking) several of the major internet companies rush in.

Trying to get a slice of (rather than dominant share in) the "next big thing".

Are they just behaving like "grown up" oligopolists, or is this a sign that the unique big ideas (currently visible) for internet businesses are played out?