General Motors and the Intellectual and Moral Bankruptcy of Wall Street

Lew Rockwell.com reports:

On June 25, 2007, Wall Street powerhouse Morgan Stanley put out a “buy” recommendation with respect to General Motors’ common stock. Robert Barry, Morgan Stanley’s star analyst, proclaimed a 52-week target price of $42 per share. Less than five months later, on November 7, 2007, Wall Street analysts were stunned by General Motors’ staggering third-quarter (9/30/07) loss of $39 billion – one of the largest bookkeeping losses in history, which was mostly related to the writedown of deferred tax assets.

Fifty-three weeks after Morgan Stanley’s buy recommendation, GM’s stock hit a 54-year low of $9.98 per share – on July 2, 2008, after Merrill Lynch’s recommendation had gone from a “buy” to “underperform” (i.e., sell) on that day. In one sweeping move overnight, Merrill Lynch analyst John Murphy cut his target price on GM by a whopping 75%, reducing the target price from $28 to $7. So how is it that GM suddenly went from respectability to mediocrity – in one analyst’s mind – overnight? In fact, why did it take until July 2008 to concede that GM was on life support? Wall Street, belatedly, is willing to acknowledge the fact that General Motors is teetering on the verge of bankruptcy.

You'll want to read this whole article.It's well worth your time.