Time to Reenter GE 63 comments
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As the debate rages as to whether the recession is coming to an end or gathering strength, I started thinking about General Electric (NYSE: GE). Anyone who was astute enough to buy in when the stock briefly plummeted to below $6 in early March has more than doubled their money already (the shares closed on Thursday at $13.04, figures in U.S. currency).
Regular readers of my newsletter will remember that contributing editor Tom Slee advised selling General Electric back in March 2008 when it was trading at $36.31. 
We received some criticism for that call, with one irate member saying we were dead wrong and he was going to hold on to his shares because "GE is a proxy for the American economy". Well, we all know what happened to the American economy! In fact, GE shares traded slightly higher than $36.31 for a few days after Tom made his call and then began a long, steady slide that didn't end until March 4. In terms of timing, Tom got us out almost at the exact top of the cycle, a rare feat indeed.
Now that more than a year has passed and GE has taken its lumps, I suggest it may be opportune to reconsider one of America's great industrial companies once more. Just because we've sold a company once doesn't mean we won't buy it back again if the situation changes. I think we're at that point with GE.
Certainly in the years since Jack Welch, GE's former longtime CEO, left the business in the hands of Jeffrey Immelt things have not gone well for the company. This may be bad luck or bad management but GE shareholders have had little to cheer about in recent years and even less in the last six months. But when the stock fell to a 13-year low of $5.73 it was, in retrospect, a screaming buy.
The stock has since recovered along with the general market and closed on May 8 at $14.53 before pulling back. At the current price, the stock is still less than half the year-ago level of $32.52, reached on May 14, 2008. Lately the stock has been meandering in a narrow range, looking for a reason to move higher. The question is what will make the stock move - which is essentially the same question that we are grappling with in the broad market.
Our disgruntled reader got one thing right, even if he rode the stock all the way down: General Electric is indeed a proxy for the U.S. economy. So if you believe the worst is behind us that should also be true of General Electric.
General Electric is, to my mind, a great Obama infrastructures play given that it has extensive businesses in energy infrastructure and technology infrastructure. The company is also active in nuclear energy, wind and solar energy, water treatment, smart grid technology, etc. Another pet Obama initiative is the modernization of the American health care system. GE has extensive assets in the health care industry and will certainly benefit from this initiative. The company has also applied for TARP funds to help finance a major initiative in battery technology so they will be at the forefront of the electric transportation movement.
Unfortunately, the company also has exposure to the weak consumer spending market through their consumer electronics business, appliance business, and consumer finance business. It is exposed to the advertising business through their media and entertainment division that includes NBC Universal, CNBC, and numerous other television and cable assets. Normally, these have been a good part of the corporate asset mix but this division has been negatively impacted by the downturn in advertising dollars and will likely be soft for the rest of this year.
But it's been GE's financial business that has caused them most of the problems these past few months. For several years, a significant amount of GE's profits were derived from the financial activities but that has not been a great place to be since a credit meltdown began in mid-2008. Through that same division they had significant exposure to the commercial real estate market that has been hit extremely hard in recent months. The best that can be said is that the company is working its way through these issues and, given the current price of the stock, it is likely that most of these problems are already priced in.
The other issue with the company is its sheer size and complexity. Some analysts have recommended that the company be broken up or significant assets sold but so far there's been no indication that major pieces of the business will be split off. There's been a lot of talk of selling the appliance division and this might happen once the overall economic environment improves.
But despite the negatives, the fact remains that this company has leading-edge industries in most of the important areas that are likely to help pull us out of this recession.
I haven't even mentioned the aviation and rail divisions. These will be under some pressure in the mid-term since the airlines and rail companies are struggling. However, they were the world's largest manufacturers of jet engines and locomotive engines and as the airline and rail fleets begin to age GE will benefit. The company is developing hybrid locomotives and fuel-efficient jet engines which will be in high demand once oil prices rebound, as they are certain to do over the next couple of years.
Financially, the company is a behemoth with $182 billion in sales and over 300,000 employees worldwide. Last year's sales increased by just under 6% which given the environment is pretty good. The price/earnings ratio is less than 10 and even with the last dividend cut the stock yields over 9%. It is very likely that GE will raise the dividend next year, assuming the economy begins to pick up.
So what will be the catalyst that gets GE stock moving again? I believe it will be earnings, which should show improvement in the fourth quarter of this year and begin to accelerate in 2010. I think it's likely that the stock will return to a $30 price level within a year and a half. Investors who buy now should not experience a lot of trauma since I think that the massive sell-off in March marked a bottom that we are not likely to see again in the stock. I wish I could say that I had jumped into GE at those levels. I didn't, but I own it now and will likely buy more.
Action now: Buy with a price target of $30.
Disclosure: Long GE
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This article has 63 comments:
Of course the same experts are nowhere now. But no worry... we have more experts. When GE goes to $25, even more of these super-experts will come out of the woodwork. And when GE goes to $50, EVERYONE on Wall Street will be a super-expert and then EVERY small investor will be told this is a core part of every portfolio.
By Johnathan Vrozos JV
johnathanvrozos.ca
in the economy and not cut the dividend, which so many people wanted. Long term still a great company, but I have to wonder why if
this company has been in business for over one hundred years, why they did'nt have more cash
reserves to offset a slown down, and maybe buy some assets that were depressed. Going forward they are in a good position to take advantage of areas that will be strong in the future. Maybe it's time to spin off some non-core assets, when their value recovers
You need to check your numbers. With a quarterly payout of $0.10 against a stock price of $12.86, the yield on this stock is 3.1% after the dividend cut, not 9%.
On May 17 09:41 AM star_talking wrote:
> Regarding the dividend yield...don't see how you come up with "over
> 9%." Although the next dividend won't be declared until early June,
> the board has already announced a slash from .31 to .10 and, at the
> current share price, that yields about 3%. What have I missed? BTW,
> I hope you are right!
In February 2009, GE cut its quarterly dividend, beginning in the second half of 2009, to $0.10 a share, from $0.31, to preserve cash.
GE has earned more than half its income in the last 15-20 years from financing, not manufacture. For all the hoopla and cheer leading, Jack Welch's GE made most of its money from M&A in his first decade and later from the explosive growth of GE Capital -- the manufacturing businesses were less than 40% of profits (and less than a quarter of profits at one point). Right about the time Jeff Imelt took over, Bill Gross (of PIMCO fame) complained that GE relied too heavily on commercial paper for its financing -- the classic borrow short term, lend long term maturity mismatch mistake that brought down the savings and loans in the 1980s. I have no idea whether Gross intended to say this or not, but implicitly he was saying that GE was a bank.
GE has some great products, some of which interest the Obama administration -- but even if we assume Congress makes immediate decisions (when has that ever happened?), it will still take many years for these other divisions to grow big enough to replace the finance divisions' collapse, much provide for growth.
GE makes a lot more financing and servicing aircraft engines than it does selling them. Does anyone believe there will be explosive growth in the airline business when half the fleet is parked idle in an Arizona desert?
GE already has a two year backlog of wind turbine orders, because it is not obvious that there will be lots more installations after that -- hence no reason to invest in new production capacity. Wind turbines are noisy, kill migrating birds, and obviously only work when it is windy (which in most areas is intermittent). That doesn't mean wind turbines are a lost cause -- only that they are not, and will never be, a big enough business to drive something the size of GE.
Health care is a nice idea. But please explain how Obama is going to control health care spending and simultaneously provide GE with big profits? Controlling healthcare spending is going to involve lower profit margins for health care providers and suppliers like GE, not higher. Again, a nice business -- but GE will struggle just to replace the collapsing finance businesses.
This is not to say GE is finished -- as I said above I think GE will do fine in the long term (possibly when it gets a new CEO?). It is simply to say that GE has several years of restructuring to transform itself from a bank back into a manufacturing company. The success of the restructuring is not a foregone conclusion (even though I give them great odds), it will be 4-5 years (minimum) of very high execution risk.
That execution risk will be under Jeff Imelt, who so far has done a disasterous job managing earnings expectations. The guy is getting pulled in 1001 different directions, which is tough for even the best CEO.
The two guys Imelt beat out for the CEO slot don't seem like much competition -- one went on to almost ruin Home Depot and then Chrysler. The other almost wrecked 3M. One big problem with having a CEO like Jack Welch is succession risk -- and it is not obvious that GE really planned this as well as many would like to believe. Two of the three top candidates were disasterous at other companies. Imelt "grew up" on the manufacturing side of GE, which makes him well qualified to handle the **future** GE, but also made him a fish out of water for dealing with the current bank-like GE.
GE was a great company. It might (probably) will be a great company again. But in the next 4-5 years, it has a lot of execution / restructuring risk and should not be considered "blue chip" unless and until that restructuring is completed
> the explosive growth of GE Capital --
> Bill Gross (of PIMCO fame) complained that GE relied too heavily
> on commercial paper for its financing -- the classic borrow short
> term, lend long term maturity mismatch mistake that brought down
> the savings and loans in the 1980s. I have no idea whether Gross
> intended to say this or not, but implicitly he was saying that GE
> was a bank.
The govt offered TARP funds or $2.00 share may have been a reality. GE looks like a dinosaur trapped with some out of date divisions and good ones that are only good with cheap capital availability. I will not after more than a year of deceptive corp anouncements ( no div. cut ect ) invest in GE.
Restucture, clean out the whole board ( they agreed with current problems for years ) Revalue stock to real INDUSTRIAL earnings.
Leave finance of products to outside banks ( in house has obvious problems )
If that happens, I'd rather ride the market down with shorts and inverse ETFs and buy GE at a lower price later this summer when the market hits a new bottom.
As well it should. Having been in it and now out, at a loss and then profit, I'm now waiting. Currently it seem's that two divisions support the whole company, and there has been some weakening.
However, the non-bank parts have fundamental value that will recover or hold or grow as the economy allows. GEC's exposure to Eastern Europe, CRE, consumer credit, etc. will take some time to pass, but it will happen.
Long-term, I'm bullish but waiting. I think it is *currently* worth no more than $10, and I'll wait for that price before I get back in. The P/E multiples being assigned right now are not justified: shaky growth for now, low dividend for now, uncertain sustainability of the whole conglomerate by core businesses for now.
Bright future: when the dollar tanks and the Euro and Yuan (and others rise), GE's dollar-denominated industrial goods and services will have a price advantage for materials and labor originated here.
Caveat: the question is which will happen first, the GEC issues, wherein a weak dollar might be disastrous, or the industrials gains that might provide enough cash to weather the GEC problems.
HardToLove
Sure it was a buy at 6 .
Who knew it would go to 6?
Was it a buy only then , or at 9 before it hit 6 , 12 before it hit 9 ....
Now it has risen to 14 + and backed off to 13.
THIS IS ABSOFREAKINLUTELY NOT THE TIME TO RE-ENTER GE.
Sure , it could rise. Nobody can say for sure.
But you dont responsibly pump a stock that has taken the upward run this one has from its oversold level suggesting to buy near its peak ,
When all indications are that a correction is due.
Look at the overbought level (green , top of chart linked below) it is now just coming off of.
Look at the bearish MACD cross (black crossing below red , bottom of chart) after a loooong run up -
Indicating the recent small drop is the beginning of a change in trend.
Shame on you.
I dont know enough to guess at the longer term direction of GE ,
but you dont rec it now after a long run up and tech signals that it's peaked.
At leaast wait for a meaningful correction before pumping this.
stockcharts.com/h-sc/u...
I think GE will eventually recover, as it has a very strong technological leadership in many important areas (energy, medical, transportation, etc).
However, if corporate history is any guide, it may well be decades before we see the old dividend reinstated. The unfortunate historic reality is that dividends get slashed to half, or a third, or a quarter, or less, of their current values, then, when the company recovers, they are typically increased by a few percent per year. Crony BOD's have gotten into the habit of allowing executives to run companies for the benefit of managements and boards, not owners (aka shareholders), so everyone gets his bonus, but shareholders get no dividend (or a paltry one).
(disclosure: Long GE with significant position and patiently awaiting its recovery)
On May 17 08:02 PM connorport wrote:
> I believe the writer means that it would be a buy now at $13 with
> a target price of $30. We may see this level but not until GE announces
> a full reinstatement of dividends. Many flocked away from the stock
> but at the current price you really can't go wrong buying it if you
> plan to hold long. New investors to the stock today will not only
> reap the rewards of a reinstated dividend in a year or so but also
> a 100+% value increase. If i owned GE @ say $35 average then now
> would be the time to averaged down and volume up on the stock. If
> dividends are cut for now then selling covered calls may be one way
> to offset the loss in income. Anyone using covered calls to offset
> the dividend losses?
GE is the largest 3rd party consumer credit card issuer in the US. Hundreds of "store" credit cards are actually issued and serviced by GE Capital.
GE Capital Leasing is the largest airplane leasing company in the world. Another section of GE Capital finances aircraft engines (not necessarily GE's own). GE Capital Leasing finances airplanes themselves, which GE does not make.
GE also finances modular buildings used for temporary office space (often by construction companies). They finance shipping containers, rail cars, and trucks -- none of which GE makes. The lease terms generally go for at least a year. More importantly, the life of the asset (what GE has to finance) is many years. Having the lease expire while the loan on the asset is outstanding is the classic S&L maturity mismatch problem.
GE Capital was a huge underwriter of mortgage backed securities -- even though GE is not a bank and did not create the loans. Mortgage loans are not short term.
While the credit card loan age obviously varies with how fast consumers pay the charge back -- the majority of GE's financing goes on for many years. This is why PIMCO's Bill Gross said it was inappropriate for GE to be relying on short term commercial paper years ago (long before Lehman's issues). Jeff Immelt conceded the problem and worked to secure longer term financing with varying success... hence your suggestion that GE's loans are short term is just plain wrong and has been refuted by GE itself.
And your statement:
> It didn't need TARP, it needed cash.
betrays that you don't really understand what the TARP program is
On May 17 08:02 PM Lummox wrote:
> GE Finance is different from most other banks. The majority of their
> loans are for financing their internal business divisions. These
> are all short term loans or leases. So it made sense to get financing
> from the money market. After Lehman's collapse, the market dried
> up and GE, couldn't get capital to finance their Sales. So the converted
> their finance arm to a bank, so they could get money directly from
> the FED. During this time money market accounts were hitting 24%.
> It didn't need TARP, it needed cash.
Why does nobody understand that during deflationary times cash is king and debt is death? Stop talking about their businesses that they might want to get into soon or those that are "operating" (in quotes because they would not operate without debt) today because none of it means A THING with that sword of Damocles debt hanging over the company.
GE is going to go bankrupt or be nationalized OR BOTH, count on it.
2. Last year I sold at $22 and $15. I bought a partial position back at $5.75 (not including transaction costs). At the least, I know how to trade this thing.
I'm 100% absolutely terrified and at least 35% convinced this thing is a donut and I'm considering taking my profits and running like a little girl.
A smart investor.
On May 18 09:26 AM dawase@gmail.com wrote:
> 1. They say that GE is a reflection of the US economy. Funny that
> the comments here are a mirror image of the argument that people
> are having about the recovery generally.
>
> 2. Last year I sold at $22 and $15. I bought a partial position
> back at $5.75 (not including transaction costs). At the least, I
> know how to trade this thing.
>
> I'm 100% absolutely terrified and at least 35% convinced this thing
> is a donut and I'm considering taking my profits and running like
> a little girl.
I agree with the author that GE deserves a place in your portfolio if you dont have any. I feel happy that I sold all my GE at an average of $35 and bought back much of it at an average of about $10 a share.
I got some as low as $7.40 in early March. The $6 price was a fleeting moment in time. I believe in GE and want to hold it for the long term. In late 2007 it was apparent that we were entering a financial crisis and I never hold financials in a financial crisis.
I believe in GE and want to buy more. At the same time one should act with caution in believing the financial crisis is over.
So buy GE but average in over time and dont get greedy.
GE considered getting funds from TARP, but was *told* that it was not eligible because TARP is legally restricted to providing funds to regulated banks. Because GE is legally not a bank, it was not eligible.
That said, GE began receiving financing directly from the Federal Reserve, which is also supposed to only provide funding to regulated banks -- actually the Fed is supposed to stick to money center banks only...
So because of a legal technicality, GE got its TARP money through the Fed instead of directly from the Treasury. This proves that politically connected companies, with CEO's advising Obama, do not need to concern themselves with the law like the rest of us do.
GE Capital meanwhile got taxpayer money from the TLGP program -- which would not be necessary for any company that actually deserved an investment grade rating. GE Capital's customers are taxpayers; GE's creditors are taxpayers. So in essence taxpayers are lending money to themselves, with GE taking a cut because of its political connections.
The TLGP program is run by the FDIC, which is *supposed* to insure bank deposits up to $100K, not billions of bonds issued by an imposter industrial company. Again, the spirit and letter of the law don't matter when your CEO is advising the president.
Hardly behavior any company should be proud of.
On May 18 08:14 AM AE wrote:
> Anne from GE -- quick factual correction to above. GE has not applied
> for or taken any TARP money. The company does not participate in
> TARP. We have participated in the FDIC's Temporary Liquidity Guarantee
> Program (seekingalpha.com/symbo...), a program in which
> the government agrees to guarantee company-issued debt, and we have
> paid the government (and taxpayers) $1.3B so far to participate.
GE has a zigzag pattern on the quarterly and yearly charts that started mid-2000. Equal move price target is $3.60 as a quick and dirty target.
GE monthly chart is still missing a final leg down from it's $42.15 Oct 2007 drop similar to that of Dow Jones and SnP. If it drops from the current high of $14.55, next target in the short term that can last for 6 months is $5.30 to $2.80. Very hard to know how GE will perform in the short term basis since it is now at it's most extreme volatility where price practically may or may not follow underlying fundamentals.
Expected recovery to or above $42.15 should not last longer than 5 years from the last bottom where-ever that might be. That is just how a zigzags usually perform with the recovery against the zag lasting no more than half the time it took for the zigzag to form. More than 5 years of hesitant recovery and traders/investors will be questioning the long-term viability of GE.
This type of analysis is good for those who have extensive expertise in technical analysis. Not really very important for long-term investors.
GE currently at $13 is still 78% cheaper from the high of $60.50 in year 2000 and was able to give a discount of 90% in March 2009 low of $5.73.
There is practically not much use in trying to squeeze so much from an almost dry towel as it goes 80% or more discount since high volatility can easily drive it up or down unpredictably in a very short period of time.
I already hold GE stocks as it went down to $5.73 or rather as it went down cheaper by more than 80%.
Buy more on the dips. If it goes lower than the last low of $5.73, so much the cheaper for long-term hold.
As far as fundamentals is concerned. It too can turn on a dime mush like technical price.
Buy JNJ if you are more into the fundamental side. It is one of the most "fundamentally sound" companies at the present.
However, technically speaking, JNJ has a potential terminal triangle at the top that has started forming since late 1999. Meaning, JNJ will have to consolidate it's gains since the 1990 before it can make another long-term rally.
JNJ has broken down out of the potential terminal triangle in Oct 2009 at $63. If it fails to recover back to the last high of $72.76 within the next 5 months; there is a higher probability JNJ will go lower and spend years if not decades of it's time in a massive consolidation range.
There are some free literature on the web regarding the terminal triangle. Most TAs call this a diagonal rising wedge. Study Elliott Waves analysis for more in-depth analysis of terminal triangle.
www.wealthalchemist.co.../
Reading a 10Q is one thing, going to Riverside and viewing these properties is another... (SoCal Real Estate Developer 07-08)
seekingalpha.com/artic...
I agree, it's a terrifyingly apt comparison.
On May 18 09:26 AM dawase@gmail.com wrote:
> 1. They say that GE is a reflection of the US economy. Funny that
> the comments here are a mirror image of the argument that people
> are having about the recovery generally.
I love GE as a company. Just like I love JNJ and Microsoft and Google and, now, Apple. But, I'm not buying any of them right now as all of them could have earnings cut in half at any time. I am reminded that a fair number of people still have jobs, earning money, and parking billions in the market every month. That's not a recovery...it is a setup for more wealth obliteration.
I think we'll see $6 again as I believe the worst is yet to come for the US economy, but that timeline (2012?) can take years to play out...or months (see my first sentence).
"Why does nobody understand that during deflationary times cash is king and debt is death?"
I think everyone understands this (and the opposite truth during inflation). So, you have people betting strongly that we are headed for inflation.
There might be some temporary deflationary signs, but inflation is carb-loading for a nice long stay.
I personally am convinced that Executive/Congress have agreed that inflation has worked in the past, will cure many current ailments, and can be controlled.
I think your $30 target would be hit the day after this was announced....it would allow the negative parts to be separated from the positive ones...right now there is too much fear surrounding GE Financial which taints everything else they are doing.
GE's board of directors should push to have this done if they want to truly work for the sharholders and not the company's top management.
the only flagrant piece of garbage i read is about wind turbines. 1. at $0.07/kWh (NOT including subsidies), wind generators are working, and GE's new 2.5 gW wind generators make it even cheaper 2. wind turbines kill about two birds per turbine per year, far less than buildings, grow up!
GE is well-positioned to continue to expand sales in china's distributed power systems, so it is a good way to safely capture some of china's infrastructure growth. US smart grid applications (if those potential power generation-through-sav... turn out to be real, i am not convinced yet) could add several billion of sales per year as well.
considering the history, the current bottom line and china exposure, a large percentage of my portfolio is GE ~13.
I do expect new lows, though, in the next year or so. THAT would be a screaming buy. Even for me.
"GE Begins Hudson River Cleanup"
www.reuters.com/articl...
Potential for some hideous costs on this clean-up.
Having said all that, getting into the situation where they needed the money in the first place was pretty unforgivable.
On May 18 10:12 AM sabre_jenn wrote:
> Anne, your statement about GE and TARP is incomplete.
>
> GE considered getting funds from TARP, but was *told* that it was
> not eligible because TARP is legally restricted to providing funds
> to regulated banks. Because GE is legally not a bank, it was not
> eligible.
>
> That said, GE began receiving financing directly from the Federal
> Reserve, which is also supposed to only provide funding to regulated
> banks -- actually the Fed is supposed to stick to money center banks
> only...
>
> So because of a legal technicality, GE got its TARP money through
> the Fed instead of directly from the Treasury. This proves that
> politically connected companies, with CEO's advising Obama, do not
> need to concern themselves with the law like the rest of us do.<br/>
>
> GE Capital meanwhile got taxpayer money from the TLGP program --
> which would not be necessary for any company that actually deserved
> an investment grade rating. GE Capital's customers are taxpayers;
> GE's creditors are taxpayers. So in essence taxpayers are lending
> money to themselves, with GE taking a cut because of its political
> connections.
>
> The TLGP program is run by the FDIC, which is *supposed* to insure
> bank deposits up to $100K, not billions of bonds issued by an imposter
> industrial company. Again, the spirit and letter of the law don't
> matter when your CEO is advising the president.
>
> Hardly behavior any company should be proud of.
>
The truth is that the financing model for their industrials is a sound business; they got carried away in the consumer financing - and that is what is currently being radically downsized by Immelt at present.
So going forward you will have a green-focussed major industrial that will benefit from worldwide infrastructure build-out over the next 20 years, that responsibly finances their businesses by not getting carried away on the consumer side. Sounds like a good company to me. And cheap too.
On May 17 09:45 AM Village Idiot wrote:
> >even with the last dividend cut the stock yields over 9%
>
> You need to check your numbers. With a quarterly payout of $0.10
> against a stock price of $12.86, the yield on this stock is 3.1%
> after the dividend cut, not 9%.
On May 18 10:39 PM bigtime99 wrote:
> I love how everybody on this board claims they bought in below $7,
> at the peak of the panic...
> The truth is that the financing model for their industrials is a
> sound business; they got carried away in the consumer financing -
> and that is what is currently being radically downsized by Immelt
> at present.
> So going forward you will have a green-focussed major industrial
> that will benefit from worldwide infrastructure build-out over the
> next 20 years, that responsibly finances their businesses by not
> getting carried away on the consumer side. Sounds like a good company
> to me. And cheap too.
On May 18 05:23 PM MyPoorNordberg wrote:
> Went long at $6.77 per share on March 6, 2009. As I was making the
> trade I felt as if it was the dumbest trade I ever made (gotta remember
> everything looked like it was going to zero on that day). Then a
> strange calm came over me. If GE goes to zero, we have bigger concerns
> in this country than my trade. Might as well swing the bat when
> the opportunity presents itself.
On May 18 02:17 PM Hot Richard wrote:
> Ponzi,
> "Why does nobody understand that during deflationary times cash is
> king and debt is death?"
>
> I think everyone understands this (and the opposite truth during
> inflation). So, you have people betting strongly that we are headed
> for inflation.
>
> There might be some temporary deflationary signs, but inflation is
> carb-loading for a nice long stay.
>
> I personally am convinced that Executive/Congress have agreed that
> inflation has worked in the past, will cure many current ailments,
> and can be controlled.
Cut the malignant GE Capital arm off, and I'll be a little more excited.
By the way, I bought 100 March $10 calls for a dime, chickened out like a real little girl, sold early and left a dollar on the table. I made up for it by selling Mar $5 and Aug. $2.50 puts for about .40 though!
Announced by GE at the end of February:
online.wsj.com/article...
Bankruptcy? I think you are a bittter short seller right now. If you are short, you should understand this: Debt in an extreme deflationary environment would be bad.
However, with the Fed increasing its balance sheet by $1 Trillion since September and monetizing debt, that greatly diminishes the chance of a severe deflation. Conversely, if the inverse scenario occurs with a inflationary environment becoming the trend, those in debt will surely benefit. The US Government happens to be the biggest debtor in the world and they print the money. If you want to bet against Uncle Sam's interests, do so at your own risk.
Disclosure: long GE
On May 18 05:11 AM Did U Think The Ponzi Scheme Would Last? wrote:
> All this chatter and not one peep about GE's debt. People, we are
> in the middle of a deflationary crash. Do you know what that means?
> GE will not be able to roll its 523 b-b-b-b-billion dollar debt load
> over at favorable terms, and more likely, not at all. The government
> will have to bail it out too which will result in massive shareholder
> dilution if not outright bankruptcy.
>
> Why does nobody understand that during deflationary times cash is
> king and debt is death? Stop talking about their businesses that
> they might want to get into soon or those that are "operating" (in
> quotes because they would not operate without debt) today because
> none of it means A THING with that sword of Damocles debt hanging
> over the company.
>
> GE is going to go bankrupt or be nationalized OR BOTH, count on it.
> GE only missed one dividend, the return will certainly not be 3.0%.
> you dopes you need read more and blog less
GE have announced that the dividend is being reduced to 10¢ from Q3 2009, with no suggestion that it will be raised again any time soon. They did not "miss" a dividend, they have cut the dividend going forward.
It is very unlikely that they will raise the dividend directly back to 31¢. Much more likely is 4 quarters of 10¢ followed by increases of 10-20% each year over the coming years. It will take a long time for the dividend income to return to what it was previously.
GE Dividend's Safety is Anyone's Guess
www.thestreet.com/stor...
If you want to separate yourself from the sheeple that don't understand economics, especially the historical aspects of them, I strongly recommend reading "Conquer The Crash" (subtitled "you can survive and prosper in a deflationary depression"). It was written by Bob Prechter in 2002 where he completely predicted that today's events would could about very soon.
On May 18 02:17 PM Hot Richard wrote:
> Ponzi,
> "Why does nobody understand that during deflationary times cash is
> king and debt is death?"
>
> I think everyone understands this (and the opposite truth during
> inflation). So, you have people betting strongly that we are headed
> for inflation.
>
> There might be some temporary deflationary signs, but inflation is
> carb-loading for a nice long stay.
>
> I personally am convinced that Executive/Congress have agreed that
> inflation has worked in the past, will cure many current ailments,
> and can be controlled.