Here's how it all led up to becoming a day trader. Two weeks ago I saw that GM had put out an earnings report that was very negative. The stock went down that day to about $4.40 a share. I figured the bad report was already figured into the price. So, I thought, I'll just put in a lowball bid for $4.00 a share and maybe it will dip down to that level for a brief time some day. Well, the following Monday I turn on the TV and see that at 9:33AM GM stock is trading at $3.35. WHAT! I check my account online and sure enough, right at 9:30AM, I had bought GM shares at $4.00. And within seconds that price kept tumbling. Apparently, earlier in the morning a respected DeutscheBank analyst had put a price target on GM of $0.00. That's right -- Nothing! Bankruptcy was expected by Deutsche Bank. I had listened and believed when GM's chairman and others had said that bankruptcy was not an option because it would kill consumer confidence in the company and it would not be able to sell any cars. But even if GM believed that, it doesn't mean it's necessarily true that it won't go bankrupt. So, the stock could become worthless. I hadn't considered that possibility. A company that has been around for about a century could just go under.
Well, I learned that if I'm gong to be investing these days, I need to pay close attention to the business news. This week, the carmakers came to Capitol Hill asking for loans to keep their businesses running during these tough times. Unfortunately, the Congress was unsympathetic and even angry at these carmakers. So, the prospect of a bailout loan looked increasingly less likely and my GM stock price had dropped all the way down to $2.60.
Yesterday was amazing, though, and a perfect example of how the news can manipulate the market so rapidly. I'm on the computer at 10:00 AM and see that GM had just traded at $1.71! WHAT! Oh no. What do I do? I put in a BUY order for 250 more shares at Market Price, which turned out to be $1.99. My theory was that maybe I could make a little profit on the $1.99 shares to offset the loss on the $4.00 shares. Or I could lose it all if the bankruptcy fears are realized. Then at Noon, the UAW has a press conference and while the spokesman is talking, a bipartisan deal is supposedly reached. The GM stock starts rising. 2.30, 2.35. I put in a SELL order. Sell 250 at 2.40 Lock in a 20% gain on the 10:20 AM stock buy. And it executes at $2.40. Then the price keeps rising. But I don't mind. I'm just glad to be ahead of the game a little. But I still own 250 shares at $4.00. So, I calculate how much I would need to get to break even from all the buys I made this month on GM. After all the commissions I need $3.92 a share. So, I put in a Limit order to sell at 3.92 any time over the next 90 days. I then go have lunch and come back to the computer at 1:01 PM. But I can't get internet access. After about an hour of finagling with it, I finally get back online. I had wanted to lower my price goal for GM from 3.92 down to 3.40 and just get out, but I couldn't get online! Arggh! And I see on TV that the latest price fort GM was 2.65. I missed it!
But once I was finally back online, I saw that GM shares for the day had traded in the range of 1.71 - 4.00. That's right! More than my 3.92 goal. So, I try to get into my broker's account and after much difficulty, I get in there and see that YES, the trade was executed for 3.92! The price was at the 3.92 -4.00 level for only about a minute or so. Then it started sinking. But, I'm FREE of the GM stock. Total profit on $1,500 of purchases -- 61 cents. Yes, I could have regrets that I did not buy $5000 of GM at 2.00 and then sell them at 4.00 three hours later and make a sweet $5000 profit. But, the very real possibility of bankruptcy is still there, so I'm just glad to be done with all this.
What happened was that two Democrat Senators and two Republican Senators agreed on a plan to shift the $25 Billion already allocated to help carmakers retool and refit their factories for better fuel efficient vehicle manufacture. Their point being that if these companies don't survive, this $25 Billion for fuel efficient vehicles would never get used anyway. Made sense and the President was onboard with it. That's what caused the stock price to surge. Well, the new leaders in the Democratic party look at blue collar Democrats with askance and they were not about to let the Rust Belt do anything that would offend the Green Belt -- aka the environmentalists in the party. That very day, Michigan Dem John Dingell had been supplanted as head of Energy and Commerce Chair by California's Henry Waxman. So, it leaked out that Senate Majority Leader Harry Reid and Speaker Nancy Pelosi would not allow this bipartisan bill to see the light of day. And the stock sank. And then so did the whole stock market -- Dow down 444. Thanks Democrats.
Good luck to GM and the other automakers. I'm just glad that my own personal investment won't be riding on the whims of politicians.