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Latest Recalls Add to GM's Woes

Back in April, when most of the big news seemed to be out of the way and recall issues began to slow, only two big obstacles were left for the stock: victims' compensation and the Department of Justice. 

The Justice Department the two fined Toyota Motors (TM - Get Report) $1.2 billion for its similar stunt in covering up a safety issue. So to think that the Department of Justice is going to give General Motors a slap on the hand and warning is foolish. 

And the victims' compensation fund is being headed by Kenneth Feinberg, the guy who orchestrated compensation funds for the Sept. 11th attack, the Boston Marathon bombing and the BP PLC  (BP) oil spill. 

And while we don't know what this charge will amount to, I just can't imagine it being cheap. I wouldn't be surprised to see a figure near, or north of, $2 billion between the fine from the Justice Department and the victims' compensation. 

Last week, I wrote that it's quite plausible that shares of GM could take out its year-to-date closing low of $31.93. Now, I can't imagine it not taking out that low. Near that price, the stock presented investors with a yield just above 3.75%, and perhaps that will act as support once more. 

But as concerns grow over future charges (it is only May, after all), and the amounts to be paid in the form of government fines and victims' compensation, that yield may not hold as support for as long as many people think. 

I want to like the stock, but a lot has to happen before I get interested. The constant flow of recalls, fines and additional charges is forcing me to keep my money away from GM's stock. Investor sentiment has held up relatively well, but alas, that tide seems to be turning sour as well.

Once again, I'm a buyer between $30 and $32. The stock closed Tuesday at $33.17, up 10 cents.

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This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

At the time of publication, Kenwell had no position in any stocks mentioned. 

-- Written by Bret Kenwell in Petoskey, Mich.

Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.
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