MarkGillCPA

GE Finally Enters the Zone of the Unknown

Let me get this straight. Your short GE because the debt has a 1 in 3 chance of begin downgraded, yet you state in your article that the debt is already trading as though it were rated lower than AAA. Looks like the market has already discounted your downgrade. So what's your advantage? The only way you can justify a short position now is if your EPS analysis is coming in much lower than everyone else. But you make no mention of what you think EPS will be in 2009 or 2010. The time to short GE was when it was trading for $40 last year, not now when it's trading at 16.50. Sure, I could see it retest that $12.58 November low, and that could give you a 20% gain on a short position (minus having to pay one of those dividend payments while you wait). But the corporate bond market is beginning to thaw, EPS estimates for 09 have already been lowered numberous times to $1.42, which appears reasonable. And right or wrong, GE has committed to the $1.24 dividend for next year, which will provide a floor for the stock. Are you really going to try to push a short position to 7 times next year's earingins? GE could just as easily trade to 20. And if GE does fall back to that 12.58 low, I'll be looking to load up the truck. Good luck with that short.