Kerkorian Accumulating GM Ford

After trying to unsuccessfully enact changes at GM three years ago, Kerkorian has turned his attention to Ford, acquiring a minority stake and bidding for 20 million shares at $8.50. This is arguably even better news than Ford's shareholders received last week when the company unexpectedly reported a meager profit of $100 million. Just the thought of Kerkorian's interest can cause a spike in the stock price, as some hedge funds learned the hard way when Kerkorian wreaked havoc on their bets by bidding for a stake in GM in May 2005. Hedge funds were long the bonds and short the stock in leveraged bets that were skewered when GM's stock unexpectedly spiked on news of Kerkorian's stake just a few days after GM's bonds were downgraded to "junk" by the rating agencies. Imagine attempting to explain to your investors how this "arbitrage" trade went awry.

Investor: How'd you lose all my bleepin' money?

Hedge Fund Manager: Um, So I was long the bonds and short.. oh never mind. We got kicked in the nuts and punched in the head at the same time.

Investor: Ok, yeah. That makes sense.

Kerkorian's interest in the auto industry isn't new or even recent. He was a big investor in Chrysler as well. He's been at this game a very very very long time. In fact, the most bullish part of this story is that Kerkorian is a nonagenarian who still wakes up every morning thinking about his next big deal while drinking his prune juice. I challenge you to find anyone who has more experience chasing auto deals than this guy. What does this mean for Ford investors? At a minimum, a short-term boost for investors that have had very little to cheer about in recent years.