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Tuesday, August 22, 2006

Investors Place Different Bets On GM And Ford

Stock: (F)(GM)

Peter Nesvold of Bear Stearns recently had one of the worst stock ratings calls of the year. On August 14 he moved Ford from "underperform" to "outperform" and took GM down from "peer perform" to "underperform".

All hell broke loose at Ford within a few days. The stock bubble up to close to $9, but now trades at $7.40. Nesvold said that not all the news was out on Ford, but it was on GM. So, Ford could benefit from good news and GM had none left.

Nesvold was right about the wrong thing. Ford cut US production 21% for the fourth quarter, the bond ratings agencies took a more dim view of the Ford debt than they do already (which is almost impossible) and investors who bought on the upgrade got scalped like Custer.

Over the period since the Bear Stearns ratings change, GM's stock has been fairly flat moving between $30 and $31. The stock is fairly close to its 52-week high of $35.02, while Ford's is much closer to its low of $6.06.

Some of the crowd onWall St also took the other side of Mr. Nesvold's bet. Short interest in Ford moved up 15 million shares for August to 124 million, the largest short position on the NYSE. There is about $868 million invested based on a drop in Ford's stock. The company's market cap is less than $14 billion.

GM's short interest for August dropped to about 67 million shares down over 9 million shares from July.

The smart money is starting to move against Ford in real volume. Not good for Bill Ford and "The Way Forward".

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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