1) Going back to one of my themes, be wary of companies that sell their best assets to bail out their worst assets.  Tonight’s poster child is GM.  How to get cash?  Borrow against the remainder of GMAC, foreign subsidiaries (most promising part of the corporation), etc.  Not a promising strategy.  As I have said many times before GM common is an eventual zero.  Same for Ford.  All the errors in labor relations over the years, compounded with interest, are coming back to bite, hard.

2) So where does GM cut expense?  White collar retiree medical care.  This is rarely guaranteed, except to unions, so it is legal to cancel it.  A word to those whose corporations or state/municipal employers presently have retiree medical care.  It is worth your while to find out whether there are guarantees of coverage or not.  If there aren’t, I can assure you that it will be terminated in the next ten years.  If there are guarantees, then you need to see whether there are standards of care guaranteed, and whether the plan sponsor has the wherewithal to make good on his promises.

One more prediction: many states and municipalities will devise clever ways to escape guarantees over the next 20 years.  That will include Chapter 9 of the bankruptcy code.

3) Note to the SEC, not that the powers-that-be read me: if you’re going to require a contract to borrow shares in order to short for a bunch of financial companies, then require it for every company, now.  Shorts are not the problem.  Failure to properly locate and borrow shares is a problem.  Let there be a level playing field in shorting, and let the investment banks that are lending out more than they have suffer.  (Ironic, huh, ‘cuz they are the ones complaining…)

4) Note to the new management of AIG: please do the following: a) locate lines of business with low ROAs and significant borrowing for funding in order to achieve high ROEs.  b) Close down those lines.  Possible areas include GIC-MTN programs, and life insurance generally.  c) Take a page out of Greenberg’s early playbook, and exit lines, or sell off divisions where it is impossible to achieve superior ROEs.  (I can see American General re-emerging, with SunAmerica in tow!)

5) File this under Sick Sigma, or Six Stigma — GE is finally getting closer to breaking up the enterprise.  It has always been my opinion that conglomerates don’t work because of diseconomies of scale.  As I wrote at RealMoney:

First, my personal bias. Almost every firm with a market cap greater than $100 billion should be broken up. I don’t care how clever the management team is, the diseconomies of scale become crushing in the megacaps.

Regarding GE in specific, it is likely a better buy here than it was in early 1999, when the stock first breached this price level. That said, it doesn’t own Genworth, the insurance company that it had to jettison in order to keep its undeserved AAA rating.