Stocks Rising — on Bad News
QGeneral Motors announced major layoffs on Nov. 26, but its stock went up. Shouldn’t it have fallen? — H.L., Ann Arbor, Michigan
AThe shares popped as much as 7.8 percent that day and ended the trading day 4.8 percent higher. Stock price movements reflect investor sentiments about a company, so the fact that GM’s shares rose means that investors liked what they saw. Layoffs — especially GM’s huge reduction of 15 percent of its salaried workforce — are bad news for workers, and often for communities too. But sometimes they can be good for companies, if payroll costs shrink and operations can still generate growing profits. GM’s announcement was about more than layoffs and plant closings: It’s reorganizing productd evelopment and engineering teams to reduce new-model development costs and bring new products to market more quickly. Over the next two years, GM will double the resources allocated to electric-vehicle and autonomous-driving development. It expects the restructuring to cost about $2 billion in cash (mostly for severance payments), and another billion or two in accounting costs, while yielding savings of about $6 billion a year by the end of 2020. That’s what made investors hopeful. *** QCan I become a millionaire before retiring, and if so, how? — N.D., Brooklyn, New York A Start saving and investing in earnest now. If you invest $5,000 per year into the stock market and earn its historical average annual return of roughly 10 percent, you’ll be a millionaire in about 31 years. It will take about 23 years if you invest $15,000 annually and earn an average return of 8 percent. There’s no guaranteed return for stocks, but if you invest well and for a long time, you can amass a lot.