[quote=iliketennis]

Bondguy,

When a company's continued existence depends on large (and largely unpopular) political initiatives doesn't it become a question of whether risk of total ruin is so great that a cut-loss/cut-income strategy becomes a lot more desirable?

 [/quote]

Desirable to who? it's bad enough that the client has lost money. But now to have their income shaved by 70 to 80%? As it urns out, needlessly?

2 years ago GMAC was a tough call. However, government intervention has to be taken into account. As long as the government was in the picture any call to liquidate GMAC has to be questioned as a bad call.

As for the bailouts being unpopular, yeah, there is an element that still doesn't get how close we were to the edge, has, at best, a shallow understanding of what actually was happening, and has banged the fiscal responsiblity drum for polictical gain since. Any advisor who used, or bought into the political propaganda to make portfolio decisions for clients ought to be permanently barred.

[quote=BondGuy]

[quote=iliketennis]

Bondguy,

When a company's continued existence depends on large (and largely unpopular) political initiatives doesn't it become a question of whether risk of total ruin is so great that a cut-loss/cut-income strategy becomes a lot more desirable?

 [/quote]

Desirable to who? it's bad enough that the client has lost money. But now to have their income shaved by 70 to 80%? As it urns out, needlessly?

2 years ago GMAC was a tough call. However, government intervention has to be taken into account. As long as the government was in the picture any call to liquidate GMAC has to be questioned as a bad call.

As for the bailouts being unpopular, yeah, there is an element that still doesn't get how close we were to the edge, has, at best, a shallow understanding of what actually was happening, and has banged the fiscal responsiblity drum for polictical gain since. Any advisor who used, or bought into the political propaganda to make portfolio decisions for clients ought to be permanently barred.

[/quote]

My point about the bailout being unpopular had more to do with the uncertainty of the political success of the bailouts than political propaganda. 

And yes, you are right - government intervention has/had to be taken into account, but there still had to be a big degree of uncertainty regarding the survival of some of these institutions, correct?

In this conversation the only institution we are talking about is GMAC. Uncertainty, of course. However, by the time this was taking place, for most GMAC debt holders, because the government was involved it was better for them to hold on. That was a hard call, but really the only call. If GMAC went out it would have been a financial catastrophe for the holders. However, selling would also have been a catastrophe for holders. This was a lose/lose situation. A definate catastrophe versus a maybe catastrophe. That the securities were still making their payments and making them on time made a strong case to hold. The odds favored holding.

Additionally, the government made it clear, once it decided to bailout GM and Chrysler, that GMAC was a needed credit facility to make that happen. A GMAC failure would have led to the complete collapse of GM's dealer network as the entire network is floor planned thorugh GMAC. Technically GMAC owns 100% of the dealer's inventory. No network equals no GM. Even if the government didn't want to help GMAC, they were left little choice.

WALKED INTO THE OFFICE LAST WEEK?

OK - so you didn't HUNT This person for years, knowing they were well qualified - they dropped into your lap - needy and with only 76k in assets for you to manage? Even if there is another 400- 500k on the table in this case my gut says you should RUN away from this case.   

If you feel like adopting her, then do the following:

Meet with or have a phone conversation that outlines the risks, the reasonss why GMAC is not what it was and reference/ include supporting documentation either from your own research division or via outside articles you cite. Send the client a letter that explains the risks via USPS, with a compliance copy, a copy for your desk file and a copy that you would take with you in the event you jumped ship and needed to defend against an arbitration in the future.  You are the financial advisor. Take a hard nose look not at the instrument and not at the feeling but with some reality checks. What I see from what you are saying when I take out the instrument, and take out any emotional vibrations (Dear old Mom, dead husband.....hear the violin in the background fading as I remove them?)

With stark silence and a clear mind, it seems to me that:

She did herself no favors by being on this earth for 62 years and not understanding.

Her 92 year old mother should be delighted she has a 62 year old daughter who is paying 12k or might be paying 2k toward her upkeep. The 62 year old likely has no obligation to do that unless the principal came from the 92 year old mom and 62 is a trustee on a trust or POA on the account.

The 92 year old may not have managed her resources so well - again - not your problem, and not her kids problem.

 You don't need to go helping anyone go to arbitration, or siccing her on arbitrators as someone suggested because she'll keep leaning on you...and now you aren't a financial advisor, you are a moral support, an emotional crutch.....and all kinds of things that keep you from doing your job.

You weren't sitting at your desk looking for a needy/problem client when she came in were you?

September 8, 2008 - 12:47pm

So, why didn't you make note of that on 9/1 , 11:14 PM, big guy? 

[quote=Takingnames]

So, why didn't you make note of that on 9/1 , 11:14 PM, big guy? 

[/quote]

I was commenting on a specific post of Bondguy's that was not related to the specific issue of the OP.

And I've lost weight :( 

[quote=iliketennis]

[quote=Takingnames]

So, why didn't you make note of that on 9/1 , 11:14 PM, big guy? 

[/quote]

I was commenting on a specific post of Bondguy's that was not related to the specific issue of the OP.

And I've lost weight :( 

I'll buy you dinner! So what's your thought on the GMAC - would you sell it or hold it? (I would not have taken her on either way)

[/quote]