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@VIC: Jeff Matthews on Evaluating GE- What Would/Did Warren Do?

Three articles at Seeking Alpha requires a response

@VIC: Jeff Matthews on Evaluating GE- What Would/Did Warren Do?
GE Looks Very Attractive Here.
Why Is Everybody Selling as Buffett Is Loading Up?

This whole Buffett transaction speaks to the questionable health of GE. Buffett is buying $3 billion of preferred shares of GE, with 10 % dividend, and an option to buy $3 billion of GE common shares for $22.25 at any time over five years. Who would not take a deal like that?

People - that includes analysts - are not stupid. The following events show that there are fundamental problems at GE.

+ Where GE had an unquestioned AAA rating - GE was buying its money at AAA rates, it's now paying 10%. The marginal / disappointing performance since Q1, puts into question GE managements' repeated statements - "we are protecting our AAA rating."
The.

+ Where GE purchased in recent years some $25 B of their stock at a price of about $35, it sold $547.8 million shares priced at $22.25.

+ Where GE was known for its predictability and stability of earnings - it is known for unforeseen disappointments. An analyst recently reduced his earnings forecast for GE for 2008, 2009 and 2010.

+ Where GE was increasing dividends annually - it's now stopping dividend increases that went back to the ‘70s.

+ Where GE was a picture of stability and growth - it now has to placate talking head analysts by divesting divisions at the bottom of a market, and give the appearance that something productive is taking place.

+ Where GE was a picture of stability and growth - the continuing cataclysmic stock price dive in the past year together with the relentless stock price slide in the past 5 years.
Please see the following chart on GE and tell me what you like –
clearstation.etrade.co...
There appears to be no bottom to this decline in GE. It just broke The $20 mark – below a multiyear bottom of the early 2000s.

Some questions that should be asked during these times about the future of this company?
1. Q – What would be the outcome in the price of GE shares if the AAA rating were to drop one notch in the near future?
2. Q – What will be the repercussion to the price of GE stock if there is an earnings ‘disappointment’ below the low end of accepted levels?
3. Q – What will be the repercussion to the price of GE stock if the CEO and the CFO were asked to leave?

First Time in Thirty Years - GE Won't Raise Dividend

I was speaking of roaches above, well, the Buffet deal is a king sized roach if I ever saw one!

First Time in Thirty Years - GE Won't Raise Dividend

Breaking of the consecutive rise of dividends since the 70s makes for one cockroach among a thousands running wild at GE.

Here are some visible roaches that I see:

Roach #1. Stopping the dividend increases that go back to the 70s.
Roach #2. Stopping the share buybacks.
Roach #3. Unforeseen disappoinmenting earnings in Q1.
Roach #4. The marginal/disappointing performance since Q1, with excuses that "we are protecting our AAA rating."
Roach #5. The continuing cataclismic stock price dive in the past few months together with the relentless stock price slide in the past 5 years.
Roach #6. Having to divest of divisions at the bottom of a market to placate analysts, and give the appearance that something productive is taking place.

There is an old adage on Wall Street that states "Once you have seen one roach in the open, there are thousands hiding behind the walls, ceiling, floor, and Board Room."

What can one conclude in seeing all these roaches running around at GE,
The price of GE stock will break $18 before the end of '09.
The CFO will "leave",
The CEO will "leave",
Stockholders will train a new team for another 5 years.

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