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We have a lot to cover. First and foremost, there are your replies to yesterday's question about the coming GM IPO. Daily Profit readers absolutely flooded my inbox with responses. And it's probably no surprise that you are not happy about how the GM IPO is being handled.

Many of you said you would never buy a GM product again. I wonder if GM considered how angry potential customers might be over this IPO? If not, they should have.

I'll include a few of your letters at the end of today's letter.

It's beennearly 3 years since the stock market topped and began selling off in anticipation of what would become a banking crisis and housing disaster. Economic recovery is a process of de-leveraging, which basically means getting debt in order.

For many companies, this meant firing workers to lower costs. For the banks, it meant changing the accounting rules to under-report debt. For the average citizen, it's meant saving more and spending less. And for citizens who have become unemployed or own house with an underwater mortgage, well, it's been very rough.

Investors have been fixated on employment data for signs that the economy is getting healthy. So far, they have gone wanting as the jobs market has been stubborn.

But employment isn't the only sign of health. The New York Fed released a report yesterday that showed consumer indebtedness fell 1.5% in the Second Quarter.

In particular, credit-card debt has fallen to the lowest level since October 2005. the number of open credit cards has fallen 23% over the last two years.

Mortgage originations are up 20% from their lows at the end of 2008. Last week, home refinancing loan demand hit the highest levels in over a year. And auto loans are up 32% from their lows in early 2009.

American households are getting back on their feet. And as I've said in the past, rising employment will be one of the last things to improve.

The government is looking at new options to help the housing market and deal with Fannie Mae and Freddie Mac. Normally, this would be a good time for a "we're from the government, we're here to help" joke. But the conference on housing reform featured a panel that included institutional investors and banking executives, so there's hope.

I found the comments from PIMCO's Bill Gross particularly interesting.

"To suggest that there's a large place for private financing in the future of American housing finance is unrealistic. The only way to bring housing back and to create liquid, financeable mortgage finance going forward would be to provide a government guarantee. It would be provided for by adequate insurance, by sufficient down payments, and over encompassing regulatory environment that instead of allowing no docs and liar loans provides adequate supervision for any mortgage going forward."

"PIMCO would not buy a private or a privately insured mortgage pool unless it was accompanied by a 30 percent down payment, too high in today's market to permit new housing or even secondary market purchase. Without government guarantees, mortgages rates would be hundreds, hundreds of basis points higher, resulting in a moribund housing market for years."

"Policymakers should quickly re-engineer a refinancing opportunity for all mortgagees that are current on payments and are included in GSE securitized mortgages. The American economy is approaching a cul-de-sac of stimulus, both monetarily and fiscally, which will slow it to a snails' pace incapable of providing sufficient job growth going forward. Unemployment rates will approach and remain at double digits unless a positive fiscal stimulus is provided in the next six months. This home financing to my way of thinking, and to PIMCO's way of thinking, where you take 5, 6, and 7 percent mortgages and turn them into 4 percent mortgages, basically will provide a crucial stimulus of $50-60 billion in consumption, as well as potential lift of 5-10 percent in terms of housing prices."

It may be unlikely, because refinancing mortgage loans that are current would hit the banks pretty hard, but this is a good solution.

To bring up de-leveraging again, between (approximately) 2004 and 2007, the U.S. economy was leveraged to consistent growth and rising asset values, like homes and stocks. That means that our spending and investments were all made based on certain assumptions, like "houses will appreciate 10% a year" or "stock will rise 8% a year".

Unfortunately, real debt accrued on the basis of an assumption can be crippling when those assumptions are proved false.

When valuations fall, the owners must be able to adjust. Bill Gross' suggestion would help the de-leveraging process by restoring some balance to debt and income.

OK, let'sget to your responses.

PV wrote : Actually, I'm suffering as a previous owner of GM stock, which is now somewhere .40 I think. I've not looked in the last few days. And I don't even know what the future of owning that is. So again, we as taxpayers get, because I don't want to use the language it deserves to be called, garbage in our faces and there's nobody out there that even cares. The GREED in this nation is deplorable.

Normally, in a bankruptcy proceeding, the old stock will be cancelled after new shares are issued.

Frank wrote: I think the stock holders of the previous GM Stock should be offered the same opportunity as the banks to purchase the IPO shares before the market demand affects the price. They were the ones that supported GM while GM management ran the company into the ground.

I agree wholeheartedly.

Glen: I believe GM IPO should be available to all without need for special relationship with a broker to acquire it. How did google do it?

Google IPO'd in a Dutch Auction format. This would be a very good idea for the GM IPO.

Webb wrote: Your idea of taxpayers getting a few shares is brilliant. What better way to lower the government's rule in our lives and give us back some of what we lost. (This is irrespective of whether you or I would buy the new GM stock or not.)

Just plain common sense shows us that any money we send to Washington gets laundered and reduced in value before any of it gets to intended parties. In this case the intended parties should have been the ordinary American taxpayer, but the benefactors will be the cronies of the big financial firms that fraternize with their cronies in the government. Trickle down doesn't work this way.

Dale wrote: What about all the share holders who got left with nothing when GM stock went under? Why should the company be able to start taking money again? It had how many billion of share outstanding that went to $0 and now it wants people to trust GM with their investment! Not me, I would rather invest somewhere else, anywhere else, than give money to GM again.

What happen to honoring your debts, first? What a rip-off.

Unfortunately, bankruptcy laws allow individuals and corporations to write off debt. Donald Trump has done it, and he's forced his bondholders to restructure by threatening to do it. Global Crossing built out huge portions of undersea fiber optic lines and then shafted shareholders and bondholders by declaring bankruptcy.

Poorly invested money often gets lost. If there's one thing individual investors need to get better at, it's understanding that the financial markets are about money. Your money.

Eileen wrote: We should all be able to benefit from this GM IPO. If only GM and the banks profit, then why did we help them out at all? Yes, I agree that as taxpayers, we should all be entitled, if not to a few shares in our Tax Return, but to be able to partake in the IPO. It's not free; we still have to pay for the shares.

As an employee of formerly AIG now Chartis Insurance, we all lost all of our AIG Stock, etc, and will never be able to regain any of the money that we as individuals lost. I am very resentful of companies that were bailed out and do nothing to repay their loyal employees, only the important Executives.

The GM IPO should be open to all investors, not to a select clientele of the 'Big Brokerages". Those are not the people who need the money. This money will just be added to their existing wealth, to make them richer. Our system is not fair…

The point that executives thrive while workers suffer may seem unfair. But that's capitalism…

Michael wrote: As far as investment banks and GM benefiting from the IPO, well, that is capitalism at its core, raising capital. If one does not like it, one does

not like capitalism. I have made this point many times over the years, but

the issue refuses to die. It is usually resurrected when some blatant

economic injustice, like what we are seeing here, is unable to be remedied

by the current rules, which are ALWAYS stacked in favor of the Big Players,

whether the average investor/taxpayer notices or not. So, business as usual

is nothing unusual.

As far as any taxpayer getting a share or two of GM as a payout/payback,

that would be nice. But, if the Treasury gets paid back, isn't that the same

as taxpayers getting paid back, since the Treasury is where our tax monies

go?

Let's compare apples and apples here. The government has always been here

to protect monied interests. They are doing that job right now. To stir up

some resentment over this situation has a distinctly political, even

Republican, whiff of bias and hypocrisy. Either we let the markets and the

Feds make their deal, or we break down the financial Bastille and storm the

place, giving the military/industrial campaign money machine the boot, and

give bake sales for foreign wars and bank bailouts, not school supplies.

Right you are, sir. Excellent points.

Ernest wrote: Since the US Treasury (taxpayers) gave GM approx. $60 Billion and it

appears the IPO will generate only $12 to $16 billion--the deal sucks and the only winners are Obama's political supporters the UAW and IUE, who now own a piece of GM and for whom their retirees at Delphi are having the pensions and benefits supported by GM, or more correctly the taxpayer. The whole deal was just a political payoff and the US Treasury aided and abetted in the deal.

The IPO itself will raise $12 to $16 billion. But don't worry, GM will have plenty more shares to sell in secondary offerings. I expect the government (taxpayer) will be paid in full.

EH wrote: I don't understand how you think the taxpayer is left "completely in the lurch" if the treasury is paid back in full. It seems to me I have been paid back in full. I, the taxpayer, am the treasury. I, therefore, have been paid back. Where is this imaginary "lurch?"

Of course, you are right. The Treasury will be paid in full.

Jack wrote: You are correct! But what can us lowly taxpayers do to correct the situation? Nothing until we vote republican and that won't help either!

It's unfortunate that our elected leaders engender so little confidence.

Roy yelled: I DON'T UNDERSTAND HOW ANYONE CAN BUY GM STOCK IF YOU DON'T KNOW HOW MANY SHARES ARE GOING TO BE OUTSTANDING.

FORD HAS 3.2 BILLION SHARES AND THEY WILL MAKE AROUND TWO BUCKS A SHARE THIS YEAR.

WHAT INFO IS OUT ON GM?

The number of shares outstanding will be included in the IPO prospectus. But your point is a good one. We can only know the market cap of GM when we know how many shares will be issued.

Nonetheless, I think the stock runs.

LAT: The GM IPO will generate less than the government/taxpayer paid bailout which is now around $48B. The balance (to be determined ) will be written off and comes from the taxpayer. While I did not want GM to fail, the government should not have showed the overt favoritism to the union by giving GM the BILLIONS without requiring more equity and/or debt so that the taxpayer would not have to pay for the bailout. The Obama administration clearly was using taxpayer money to buy union votes and, in particular ,UAW members votes.

Currently GM 's interest costs per car are negligible while FORD's interest cost per car recently were $331. We all know that FORD did not get bailed out. FORD, as a result of good financial management, procured funds and credit lines to finance the FORD operation through the anticipated difficult times. GM through its extraordinary inept management was able to get through the difficult times with a Obama directed bankruptcy resulting in minimal debt. For this, the taxpayer was given equity in a GM of the future with no future obligation of paying off the balance remaining of the $48B bailout. Not a bad deal for GM but a lousy deal for the taxpayer with the caveat that with GM continues to operate, employ people ,pay their bills, pay taxes ,etc.

No doubt Ford is a better run company than GM. I would expect that to be reflected in its valuation.

James: It seems that every day there is some new 'deal' between the politicians in Washington and the investment banks. Most career politicians have turned their positions of honor into positions of profit; the latter being their priority as they advance "their careers"… on the taxpayers backs. Don't let them fool you, career politicians are on the dole just like every "I won't go out and get a job when I can just sit back and get a check every month from the guv'ment" people out there.

I just get agitated (to say the least) when I hear of our politicians making back door deals like this GM deal. It was setup like this right from the start. Our 'representatives' have betrayed us and the office of which there occupy. Honor isn't a part of most politicians vernacular these days as they've forgotten the bigger picture of why they hold their office in the first place; to serve their country first and foremost, not to profit from their office. It is a shame!

I believe that every tax payer should have some benefit from the GM/Wall Streetbailouts. The problem is that these 'banks', namely GS, JP & Stanley are simply politicians without the office. Most Washington career politicians kowtow to these "companies" every day without even a thought about their honor. Money and personal profit seems to be the only driving force here. Where are the honorable politicians! Give me a politician who is not willing to profit from his office and I'll show you an honorable politician period.

Amadeo wrote: I'm an Italian individual RETIRED bondholder of old GM. Since July 5, 2008 up to now, I have lost more than 80,000 EURO, just in interests that should have been matured by my 365,000 EURO of bonds.

This is a tremendous amount of money for me and my family, as retired .

I read a lot about progress of new GM, but nothing about poor people like me and thousands others. I lent all our life savings to one of bigger company in the first capitalism market of the world, for making it at work. I did not play to stock market.

I'd like to know what can I expect for having back my money or part of them, since now I'm FORCED STOCK PLAYER, what I never desired to become and on which I have absolutely no experience.

How long must we wait to see some result?

I'm sorry to hear about your losses, and all the other losses from bondholders. With common stock, you know you're at risk. But bonds are normally better protected. As for becoming a stock investor, keep reading Daily Profit and I'll try and get you up to speed.

*****Thanks for all your comments. Finally today, I want to share a recent research paper my staff and I completed on the IPO market. It was written for SmallCapInvestor PRO members, but I thought you might enjoy it. You can read it HERE