Jimmy Lathrop

What Does Warren Buffett See in General Electric?

If you are expecting a child, you begin to notice children and families more than you would have before.

Consequently, if, upon waking, you made a point to try and catalog every product that GE had an impact in your daily life, you'd see that it was no Yahoo! or Potash or Transocean or whatever dumb pick of the day people are touting all of the time. Light bulbs, heavy engine turbines, medical imaging equipment, GE's presence is everywhere. They have a 9 month, 180 billion dollar backlog. What else do you need to prove value today, a solid block of gold the size of the Chrysler building?

I've been as bearish as the next guy, but I never suggested we should abandon the car and take up the horse. When you hear people are shorting General Electric, that's when you know the market is really oversold. Its a Dow 30 component, many institutions held it for collateral, their brokers sent out margin calls, and forced redemptions sent GE shares out onto the marketplace at irrational prices. The market is not rational. People make fortunes at the inequalities of these irrational prices.

Listen, if I am standing in front of a grain elevator and I say to you, make a bet as to what happens if I open the door at the bottom, an unsophisticated investor will say, grain will fall so I should bet on falling grain. Anyone can bet on that. The trouble is, gravity and equilibrium will stop the falling grain. There is no force, like short selling, pulling the grain out, and if there is, it is like pushing on a string. The bet to make is that the grain will come out of the elevator and more than likely, some farmers are going to start loading up the grain elevator so the product doesn't spoil. That is what is called having a long term. The short term could seem like a long time, like a school day seems to a third grader. Seasoned professors know the semester flies by.