Monday, October 13, 2008
GM splutters and gold glows brighter
On October 10, General Motors shares in America fell to the same price as they were at in 1950. The company once produced the mighty Oldsmobile, such as the hulking 1958
sedan seen here. But now ‒ bogged down its by huge factories, enormous workforce and crippling pension payments to past employees ‒ it is said to be chewing through $1 billion a month and simply not selling enough SUVs to make even a small dent in that river of cash. And they have only $14 or so billion left in the kitty. Which means (unless they, too, get a bailout from Uncle Sam’s resentful taxpayers) it won’t be long before they’re broke.
What, then, would happen to the GM and Holden brands in this part of the world? Interesting thought. Of course, things are little better at Ford - which will lay off 1500 Australian workers just before Christmas.
Out of the Northern Hemisphere we hear cries of ‘carnage’, ‘chaos’ and ‘catastrophe’. Iceland is virtually bankrupt. Governments are throwing hundreds of billions of dollars and euros at the market-collapse problem and still there’s little economic confidence out there. Yet here, if you turned on talkback radio last week, the only concern being expressed was over the government’s plan to reduce the water flow in our showerheads. And the lead story on Thursday's TV1 news was about the retirement of two Olympic-champ rowers. If that was the biggest thing going on in the world, either we're exceptionally calm and resilient in the face of our own recession, or exceptionally passive and thick.
The next day I was in a shop next door to Michael Hill Jewellers, who had a staff member out front with a bullhorn, shouting at customers to come buy glittering stuff. ‘That must be driving you nuts’, I said to the woman who was serving me. ‘Sure is,’ she replied. ‘And you know what? There were people queueing up outside the door at 7am yesterday to get in there for some bling.”
Meanwhile, in the States, women are taking their old gold jewellery to suburban precious-metal parties, having it evaluated and weighed and swapped for cash. The word in these new troubled times is that, once again, gold will be king.
I’m old enough to remember the same eagerness for gold in the late 80s, the last time we fell into a financial crevasse, when an Aucklander called Ray Smith set up the Goldcorp bullion company and lured in thousands of fretful investors who bought his gold certificates. Only trouble was, when they wanted to clap eyes on the actual shiny stuff it turned out that he had no gold bars at all – or nowhere near enough to cover the cash he’d taken in. He’d just sucked up the money instead and had a high old time before fleeing the country with the loot. He was brought back to face the music, did jail time, and put a whole generation off investing in gold for ever.
But now that few remember his name, a new gold rush can’t be far away. Checking your jewellery box, anyone?
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