CPST1

General Electric's Strange Days

From General Electric Company Q3 2008 Earnings Call Transcript:

re: total credit losses

pg.5 seekingalpha.com/artic...

That guidance for the year for 2008 would include up to $6.6 billion of pre-tax provision losses so this is a big number and it will be a big increase over last year. The 2009 framework that we talked about we gave you a range of down 10 to down 30 for GE Capital as a way to think about next year basically within that range that would enable us to have $7.5 to $9 billion of pre-tax losses off the $6.6 billion this year.

So $6.6 billion this year will be a big increase several billion dollars over last year and next year could be $7.5 to $9 billion and that would bring our total credit losses somewhere between 1.4% to 1.7% which would be very close to the peak and I think that’s important because when you look down on the left what’s different about the portfolio from ’90-’91 to day is dramatic.

Bond Expert Thursday Wrap: Blowout, Then Pullback

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What Does Warren Buffett See in General Electric?

October 14, 2008 -- Next phase of the financial crisis

...unemployment rate could climb to "north of 9" percent, Gates told more than 1,500 alumni at the school's Centennial Global Business Summit.

........Going forward, Immelt said, GE could become a buyer of later-stage technology companies initially backed by venture capital. "I think there will be a great opportunity to scale up companies," he said.
www.boston.com/busines.../

Underscoring the daunting challenges confronting policy makers, Gates described a phone conversation he had Sunday night with his friend Warren Buffett, the legendary investor who was mentioned by both presidential candidates in last week's debate as a potential choice for treasury secretary in the next administration.

"I said, 'Well, I'm glad it was you and not me,' " Gates recalled, drawing laughter from the business school alums.

What Does Warren Buffett See in General Electric?

The Short Case for General Electric
October 10, 2008

seekingalpha.com/artic...

......However, GE today is one of the most shorted stocks in the marketplace; three-month put options at $17.50 and $15 respectively are highly recommended.

The Short Case for General Electric

Highlights GE FQ308

> All in all we end the third quarter with $170 billion of backlog

>diversified globally over the last few years and today 55% of our revenue comes outside the United States

>divested Mortgage Services, FGIC, the bond insurance business, primary insurance, mortgage insurance, re-insurance, mortgage distribution and our Japan consumer finance business

> accelerated our liquidity plan and we have clear protection now if the CP market remains under duress

>equity offering gave us more cash and now the back up lines plus cash are greater than CP.


> plan to maintain the GE dividend through 2009

>Capital Finance earned slightly over $2 billion

>backlog was up $8.5 billion versus a year ago

>wind commitments are $14 billion it’s up 90% from a year ago

>>segment profit up 36% coming from the great wind and gas turbine volume

>Oil & Gas -- Op profit was up 29%
>\>Hydro acquisition which is off to a great start.gt;Hydro acquisition which is off to a great start.


>Technology Infrastructure. Revenues of $11.5 billion were up 9%

>NBCU -- revenues of $5 billion up 35%
>> Cable continued to deliver great results. The segment profit was up 24% -- MSNBC had another great quarter

>Assets of $622 billion, they’re up 12% from a year ago

>Real Estate --ended the quarter with assets of $89 billion
>>30 delinquencies are only 0.6% of average net investments -- The portfolio is very strong

>Commercial Lending and Leasing, -- down 56%
>>over $400 million of the negative marks

>risk management/credit cycle/ higher delinquencies
>>higher losses in GE Money -- losses in the Americas - $800 million to $1 billion

>Corporate and Real Estate debt -- we basically shut off the equity originations

>Capital Solutions -- If we don’t have the returns we’re not putting the capital there -- ...We think the attractive pricing is obviously going to continue for the foreseeable future here.
pg.4 seekingalpha.com/artic...

>fourth quarter outlook -- funding a lot of high return stuff over $20 billion in Commercial Finance alone

> this week the Fed announced the CP funding facility for highly rated CP issuers!!!
>> amounts up to our outstanding August 2008 which is over $60 billion for GE Capital Corp and over $10 billion for GE
>>> our team is working with the Fed to make sure all the mechanics are in place to help support the confidence of our investors

>Quality of the Portfolio -- FQ3 we had $413 billion of Commercial assets and $209 billion of Consumer assets
>> 72% of the Commercial exposures are $100 million each, and 60% are under $50 million

>>> the top 20 exposures they’re to the airlines and railroads and a couple power plants. ---- All of them are senior and secured and collateralized by the assets. There’s no unsecured exposure in the top 20 of any size.


>We don’t have any SIVs, we don’t have any CDOs, we’ve never sold CDS, and we don’t have any exposure to counter parties


>mortgages are not US -- Seventy nine percent of the portfolio is outside the US ---- over 80% has mortgage insurance on it globally


> North American receivables the delinquencies on 30 days are up to 6.2% -- loss provisions are up 34% -- total year estimates is up $800 million to $1 billion -- loss provisions are growing faster across the globe than our write offs

>> we’re putting up more provisions than the losses we’re experiencing and we’re ready for the future here

>2008 would include up to $6.6 billion of pre-tax provision losses

So $6.6 billion this year will be a big increase several billion dollars over last year and next year could be $7.5 to $9 billion and that would bring our total credit losses somewhere between 1.4% to 1.7% which would be very close to the peak and I think that’s important because when you look down on the left what’s different about the portfolio from ’90-’91 to day is dramatic.

In ’90-’91 we had very limited geographic diversity we were very US focused.

pg. 5
seekingalpha.com/artic...

>Infrastructure is about 50% of GE’s earnings in 2008 -- substantial future growth just based on the backlog because the products drive energy efficiency

>> oversold positions which give us I think some buffer for volatility

>>$15 to $20 billion of raw materials they are driven by steel, nickel, aluminum, things like that

> the environment is volatile but GE is executing

> We’re going to return $13.5 billion to investors in 2009 through dividends