Do you mean stock market capitalization when you say "company's value"?
As I see it, the real mystery is why do investors often pay so much for debt-laden companies? -raghu. Ugggh . . . is it because debt . . . . as a legacy cost can be deferred, in pretty much the same way as credit cards operate, and if . . . if . . . the company is generating profit and positive cash flow, it can generate more debt - borrowing at fluctuating rates, pay bonuses and even achieve a rise in stock price, which in turn can be used to pay off the legacy cost. General Motors has stated that its legacy cost, including pension payment is such, that it faces the prospect of bankruptcy in the not so distant future, which is always generally stated during a contract year, which this is. Its legacy cost is however . . . real. bur they tend to include them in financial reports during contract years. Pensions become legacy cost because the companies are not required to fully fund them, which is a crime against the American people. Ok . . . a crime against me. My son just reminded me that his generation has no pension plans. I told him that if he did not support the revolution against the capitalists I was moving in with him and his wife and two beautiful daughters and would be up all night playing loud music from the 1960's and watching Blade Runner for the one millionth four hundred and forty four thousand time. Chrysler . . . money . . . legacy cost. The Chrysler division is being bid on at a low of 4.3 billion and a rumored high of $7 billion, when Daimler paid the better part of $40 billion in 1999, to possess Chrysler's $3 billion in cash on hand. The 40 billion paid was not in cash, but . . . I.O.U.'s (legacy cost) and the $40 billion in debt was well worth possessing $3 billion in real money. Sectors of the company play the market world wide and there is always the possibilities of making money. Daimler-Chrysler is owned by banks with one German Bank allegedly owning to much of the company and this bank pays the market. Money is made on the way up and on the way down. Hence if Daimler can dump the Chrysler Division for say $6 billion and transfer the legacy cost to a group of investors willing to gamble on cash flow . . . then my pension is really screwed, in the not so distant future. Daimler has in theory been paying its debt . . . obligations in the credit (bond) markets; pocketed $3 billion real Yankee doodle dandies, expanded and strengthened its automotive infrastructure in the US; and some investors are going to want to buy Chrysler because as a division it can still sell say transmissions to Daimler for cash and beef up its cash flow and continue to defer the legacy cost. The real story on this is that the old Eldon Gear and Axle plant in Detroit is being shut down and a new axle and transmission plant if being built on 32 mile Road by Saint Claire Shores, 25 minutes from Detroit. Being able to sell to Daimler as a condition of purchase for an investor is important to cash flow. OK. Now . . . National Health Care provided by the Feds and State jurisdictions would ease the legacy cost, a portion which is health benefits for retirees. Health care for everyone eases cost for all businesses and the individual in America. Its impact on legacy cost for companies like auto would be dramatic for at least several years. One can guess what sector of money is against National Health coverage outside the ideologues arguing over the principles in their head. Money connected to medical as it exists. Is not on a basis level, all of this to be understood as the economics of debt or a credit card scam? Everybody hates the banks and the institutional system of debt, except the debt holder. This debt holder is also an investor because that is what he does. Each side - not level, gets pretty complicated for me because I am not doing the work. All is rosy until you cannot pay the monthly note, or yearly note. Now on a quarterly basis you can make a lot of investors a lot of money and then the speculators help drive the process, who do not care what is lurking in the dark 13 months from now. When I retired in October 2001, I wrote sometime after that I hoped to get at least 10 years of pension being a wise ache. Well, I guess I got another four years, which will put me at 59. Damn. I'm joining the "don't buy nothing movement" and getting a good bike. Here's my legacy. Melvin P. ************************************** See what's free at http://www.aol.com.
