So Long Rick: The Budweiser Test Has Spoken

There is much wrong with General Motors, but today at least one thing is right. Chairman Rick Wagoner, Jr. is gone. Since 2000 he has overseen the auto giant’s historic tumble from the pinnacle of American automotive ingenuity to the doorstep of a nationalization.

The gold standard litmus test for just how shitty your company performs that I fall back on is the “Budweiser Test”. The math isn’t as complex as that used by professional analysts, but it is quite revealing. Here’s how GM stacks up to the Budweiser Test during the Wagoner era:

If you had invested $10,000 in shares of GM stock when Wagoner took the reins (although he has been C-level at the automaker since 1998), it would be worth less than $290 today. Think about that. To put that loss into context, we apply the Budweiser Test over the same period. Now consider your portfolio manager instead taking that ten-grand and “investing” it on 667 cases of beer (a 24-pack cost 14.99 in 2000) and drinking every last one. Sounds like a bad idea, doesn’t it (but it would explain some of the other investments he was recommending)? But if he had, your investment (now 16,000 empty cans) would be worth $1,600 (remember MI is a 10¢ deposit state).

An investor shows off the return on his portfolio. Though his wife (not pictured) left him for spending $10,000 on beer and not GM shares, it was he who had the last laugh.

Capital Gains! He is 5-times richer, having bought beer not GM stock.

It certainly says something when a drunkard with no portfolio and a living room full of cans is getting a return five times higher than someone who invested in GM.  It shouldn’t take an act of Congress for a company to shed a chairman who presides over a shit show like GM’s, but I guess it did; ye Gods.

We could go on about Tricky Rick and his mismanagement of GM, his huge bonuses, gas-guzzeling SUVs and the poor reputation for quality that hounds the American auto industry, the pan-handling in Congress, but I think the Budweiser Test speaks for itself. So next time you feel like hanging your retirement fund-hat on an American car company, take a look at the alternatives—at least you’ll be able to knock a few back along the ride.


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