Cramer's Stop Trading! General Electric Brings Bad Credit to Light (12/18/08)

Stocks discussed in Jim Cramer’s Stop Trading! TV program, Thursday December 18.

General Electric (GE)

Cramer discussed Standard & Poor’s negative outlook in General Electric’s credit rating. S&P’s managing director, Scott Sprinzen said GE has a one in three chance of a credit downgrade in the next three years. While GE is not on credit watch, Spinzen warned of earnings pressure and the need for funding at GE Capital and admitted “it is going to be a pretty severe credit cycle.” However, if GE were to make a $5 billion net income for 2009, reduce commercial paper and be more conservative with capitalization, “chances are we could move back to a stable outlook,” said Sprinzen. Cramer asked why the S&P’s report was released after GE raised capital rather than before. Sprinzen says the S&P is busy reviewing a number of companies and the report could have happened any time in the last 18 months. “There’s nothing magical about today,” Sprinzen said.

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Comments

[h2oworks:]

s&p had swks as a buy for months. Blink, the company is all of a sudden no good. GE is GE and S&P sucks wind.

2008 Dec 19 06:47 AM

[Thud:]

After the AAA subprime ratings fiasco, why would anyone even give S&P or the other ratings agencies one scrap of credibility?

2008 Dec 19 11:43 AM

[satguru:]

Hear! Hear! to "Thud". All analysts and ratings agencies should be banned. They are just a waste of time and money. Absolutely worthless!!

2008 Dec 19 12:02 PM

[BerkeleyBob:]

I agree that the rating agencies operated outside of their brief and aided and abetted what may yet turn out to be criminal fraud in the marketing of toxic loans and AIG's Enron-like antics. Within their area of expertise and competence, they perform a necessary function. I held GE common for many years, sold my position at a loss this month because of the ongoing concern about ability to deliver consistent non-phony earnings and realistic dividends and concern about GEs credit division. GE is a broadly diversified corporation which was reported to be owned by a high percentage of individual investors--I recently read 41%. I don't have confidence in Mr. Immelt's ability to deliver for the individual investor and will not re-invest until I see a significant change in its operation.

2008 Dec 19 12:40 PM

[notsosmart:]

the rating agencies are a joke.nobody should pay them so that they would go away.

2008 Dec 19 01:11 PM

[billp37:]

cnbc MAD MONEY Friday December 19, 2008 Cramer pronounces

MADoff

not

MAYdoff.

While denigrating Christopher Cox.

We're trying to get our investment money back

"Nowhere in judge Vazquez' December 11, 2008 order is explicit order written to take $11,018.00 from our SLFCU retirement-protected savings accounts. Therefore, no lawful order exists to justify taking $11,018.00 from our SLFCU retirement-protected savings accounts."

www.prosefights.org/nm...

2008 Dec 19 06:44 PM

[Emerald:]

In determining GE"s risk profile, you should know that they are basically a bank. GE depends on GE Capital for 50% of their earnings and these earnings are under severe pressure. Even the "great" Jack Welch had most of GE's debt in short term commercial paper, thereby taking extreme interest rate risk. He got lucky and after he left, Bill Gross of PIMCO called GE on this problem. A stable, blue chip AAA company? I think not. Eanings from non financial activites will also be under pressure due to a slowing worldwide economy. I own GE, but lightened up recently because of the lack of honesty and transparency. Remember, they are a bank and the banks have the same problems.

2008 Dec 20 11:20 AM

[Jake Berzon:]

I got into GE on Feb 22, 2008 @ 33.34, discounting problems within GE Capital: seekingalpha.com/artic...
I still like GE and know it will survive and even thrive eventually, but I still didn't want to ride it all the way down to $10 in 2009, so I sold it on December 4, 2008 at $18.08, a 43.9% loss (including dividends and excluding commissions): seekingalpha.com/user/... . I really do hope to get back into GE mid 2009, when I hope this bear market will find its true bottom.

2008 Dec 20 11:24 AM

[jepittman:]

S&P are the people who brought us AAA subprime mortgages. Why these people have any credibility is a mystery to me. I am no fan of GE but I woluld be more willing to trust their BoD to maintain the dividend before I would trust the opinion of S&P.

2008 Dec 20 03:14 PM

[MrBuzz:]

Cramer - the Standard & Poors - They told us about the sub prime problem before it happened? They warned us that credit rating agencies were fake and not watching what companies do. Just credit card owners?

These experts are wrong more than they are correct. Yet we or Media, calls them exerts. How dumb are we !

Without honor this nation as a republic is finished. Look at NYC and Washington. Franks and Reid and Dodd - they all took money from Fannie and Freddie. They refused legislation that could have curbed the credit crisis. But, they blocked the president's bill instead.

The people you elected to fix this problem - Helped to Cause the Problems. Its worse than a ficton writer. Cause most hard working American's and there are millions of us. Like me making $9.00/hr. Just got hours cut to 32 a week. We are still doing our best. While the Congress just gave themselves a $4,000 raise !

CONGRESS JUST GAVE THEMSEVES A RAISE - $4,000 +

AND YOU THINK THEY CARE ONE DITTY ABOUT NORMAL PEOPLE ?

2008 Dec 20 05:41 PM

[patel:]

With a leverage ratio over 50:1, GE is at far greater risk than most acknowledge.

2008 Dec 20 07:32 PM

[patel:]

With a leverage ratio over 50:1, GE is at far greater risk than most acknowledge.

2008 Dec 20 07:32 PM

[bearfund:]

When you invest in GE, you invest with Grandma Millie. If the company's real (non-financial) operations trump the albatross that is GE Capital, great. If not, we take a bailout: no way in hell does the gub'mint let Grandma lose her income and take a huge capital loss at the same time. This company will continue paying its dividend until the cows come home regardless of its actual profitability. And as a reminder, it pays 7%; Treasuries pay... well, nothing, actually. This is the biggest no-brainer on the market.

2008 Dec 20 09:51 PM

[Steven Hales:]

"If cows had written them, we'd rate them.", an S&P analyst earlier this year in an internal conversation about mortgage backed securities ratings.

Need we say more.

2008 Dec 21 10:58 AM

[steveballmer:]

Cramer is an idiot who fixes stocks, beware this morom!

2008 Dec 21 09:32 PM

[Scared to m...:]

GE's leverage rate is 6:1 not 50:1. Where are you getting your numbers?


On Dec 20 07:32 PM patel wrote:

> With a leverage ratio over 50:1, GE is at far greater risk than most
> acknowledge.

Feb 27 02:55 PM