General Electric (Symbol-GE)
I love how Buffet buys the best at discount prices while urging Congress to have the great unwashed pick up a trillion+ of sub-prime sight unseen.
Now he warns/threatens the world that he only did his deals on the basis that the billionaire bailout goes through. We mustn't disappoint the sage!
Now he warns/threatens the world that he only did his deals on the basis that the billionaire bailout goes through. We mustn't disappoint the sage!
"Every decent man is ashamed of the government he lives under." H.L.Mencken
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Hmm. While I appreciate that GE rose from its low of minus 15% on the day, I wonder if Warren's investment really means total confidence in the company, or just a sweet deal that results in a virtually risk-free instant gain for him.
The market seems to think that anything Buffett buys must be a good investment, cause Warren knows everything. What if he's wrong?
The market seems to think that anything Buffett buys must be a good investment, cause Warren knows everything. What if he's wrong?
In this environment you can't trust bond ratings. Lehman had an 'A' rating one week before bankruptcy. The trouble with GE is its massive debt load going into a recession...like_to_retire wrote:This sure is a timely thread.
I was just looking at my stable of bonds on TDW this morning, and I see my GE Capital bond with a price of $95.84 producing a current YTM of 6.33%.
I bought this bond as part of my ladder in 2006 with an acceptable YTM out to 2011 of 4.05%. I accepted this yield from a AAA rated bond.
It's not that Buffet gets some great deal that bothers me. I expect these shenanigans. It's the ratings that bug me.
What does a AAA rating mean? I went to DBRS and don't see any change in their rating for GE Capital. When I look at the present YTM of a AAA government bond I bought at the same time, it's hasn't changed much other than a small adjustment against the present day interest rates. Yet GE AAA bonds now pay 6.33%. I have no respect for bond rating services.
ltr
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Will have to go back to the interview but IIRC he said he had been in talks with JPM on this one.
He also said he'd be happy to buy a 1% portion* of the bailout package if it was for sale.
Will watch the interview tomorrow.
WW
*tranche sounds better though.
Not sure how much cash will be used. Or how much the about 30B cash will let him write IOUs for arrows.At what point does WB run out of arrows?
He also said he'd be happy to buy a 1% portion* of the bailout package if it was for sale.
Will watch the interview tomorrow.
WW
*tranche sounds better though.
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- parvus
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GE takes hit as consumers default on debt
General Electric on Friday painted a bleak picture of US consumers’ financial health, saying that rising defaults on credit cards and other loans would force it to set aside up to $1bn to cover losses this year.
GE, which in recent weeks issued a profit warning and raised $15bn from investors, including Warren Buffett, said that the crisis would curb earnings at GE Capital, its financial arm, well into next year.
The locomotives-to-movies conglomerate said GE Capital, which accounts for about half of its earnings, would suffer pre-tax losses of up to $6.6bn this year and up to $9bn in 2009, largely because of consumers’ ailing financial conditions.
In the US, credit loss provisions would rise to between $800m and $1bn from previous estimates of $600m-$800m, it said.
The downbeat outlook from GE – a bellwether of US and global economic conditions – will deepen investor fears that the financial crisis is quickly spreading from Wall Street to Main Street.
“We are going to see higher delinquencies and as we see them we are going to put up more provisions,” Keith Sherin, chief financial officer, told analysts. He said GE was also experiencing weakness in its consumer portfolio outside the US.
In the UK, one in six mortgages held by GE Capital is delinquent – meaning that customers are 30 days or more behind with payments.
The comments came as GE reported its third consecutive drop in quarterly profit, as GE Capital earnings fell by 33 per cent in the third quarter.
However, investors were relieved that GE met a forecast it had lowered a fortnight ago and said it would meet its profit estimate for 2008 after adjusting for the dilution of its $15bn equity offering.
Wovon man nicht sprechen kann, darüber muß man schweigen — a wit
finiki, the Canadian financial wiki Your go-to guide for financial basics
finiki, the Canadian financial wiki Your go-to guide for financial basics
S&P downgrades GE outlook
Of course, there is the debate of: does GE really deserve to be triple-A in the first place....but ratings agencies would never be wrong. would they?Reuters
December 18, 2008 at 3:47 PM EST
NEW YORK — — Standard & Poor's Thursday changed its outlook on General Electric Corp. [GE-N]and its finance arm to "negative," and said there is at least a one-in-three chance it will cut GE's credit rating from the top triple-A in the next two years.
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There was a great debate earlier on this thread when GE was trading at about $32 after having just fallen from $36 on April 11. For anyone new to investing, it is worth reading. FWF has some of the brightest financial minds, and it is perhaps one example of how difficult it is to predict markets. I do not mean to single anyone out....for educational purposes only.
A couple of quotes:
A couple of quotes:
$31 would represent a yield of 4.0%.
"That's absolutely mouth watering. Arguably the bluest of blue chips trading under a 15 multiple and a 4% yield."
"I agree. It doesn't seem like there could be much downside for a purchase made at those levels"
""I prefer not to hold anything which is heading south in a hurry......GE just might be a 22 dollar stock once again; certainly 27-30$ is not hard to see
The seekingalpha link from April is particularly interesting with Barron's commentary oozing with confidence on GE. Alas, back in the day, those were different times...(8 months ago) . One investor/trader had it right. In retrospect, perhaps we should have listened to him .
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- investor99
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Nothing to be embarrassed about. I'll be the first to admit that I thought several stocks were great buys at levels a lot higher than they are trading today. I don't think many of us would have expected sentiment to get this bad.I confess, I was among those who thought GE a screaming buy at $25. Mind you, I also thought MFC was a buy anywhere under $40...
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I've bought it down 3 times in the last 6 months. If they could split the companies up (financial and industrial) then things would be different. But finacial is there to vertically integrate client financing of industrial sales (try financing a railway, gas turbine plant, or nuclear reactor).
It is being dragged down by the financial mess.
It is being dragged down by the financial mess.
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That's not what I would take from revisiting this discussion. What I have taken from it is the inherent weakness in our useage of anchoring based on past information. I don't think that anyone was reading the historical data incorrectly when they were purchasing at levels near twice the current market price. The historical low valuation level is really only relevant until a stock sets a new low. What this brings into focus for me is the drawbacks of looking at past data and making an investment decision based on what might best be described as relative value -- relative to the snapshot in history that you are studying. What we have seen with the market in general and GE in particular is a move to absolute value as the risk premium is being revalued.kcowan wrote:All the more proof that timing the market is a mugs game.
In the area of market timing, it would appear that those who made conscious decisions to get out over the course of the past year or so have been proven correct on the first half of the trade; even those who exited as late as September. It remains to be seen how well this works for them as they must execute the second half of the trade -- getting back in -- equally well.
When you look at the above scenario, you could make a case that fundamental analysis failed or was lacking. Those that made some attempt to consider momentum in the decision making process have been better served.
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
Thomas Babington Macaulay in 1830
Thomas Babington Macaulay in 1830
- investor99
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Definitely nothing to be embarrassed about. Not to mention, anyone who has owned equities in the last 8 months is in the same boat. Again, I chose this thread for educational discussion only, not for embarrassment. You could also find similar discussions in threads from 8 months ago MFC, TCK, YLO, BMO, US banks, or the "safest-banks-in-the-world": Canadian banks.investor99 wrote:Nothing to be embarrassed about
That's a great post scomac. As far as the second half of the trade for the current sideliners is concerned, perhaps we will be able to revisit this discussion when the market has rebounded 60% and quote the doom and gloom from the November sideliners .scomac wrote:That's not what I would take from revisiting this discussion. What I have taken from it is the inherent weakness in our useage of anchoring based on past information. I don't think that anyone was reading the historical data incorrectly when they were purchasing at levels near twice the current market price. The historical low valuation level is really only relevant until a stock sets a new low. What this brings into focus for me is the drawbacks of looking at past data and making an investment decision based on what might best be described as relative value -- relative to the snapshot in history that you are studying. What we have seen with the market in general and GE in particular is a move to absolute value as the risk premium is being revalued.
In the area of market timing, it would appear that those who made conscious decisions to get out over the course of the past year or so have been proven correct on the first half of the trade; even those who exited as late as September. It remains to be seen how well this works for them as they must execute the second half of the trade -- getting back in -- equally well.
When you look at the above scenario, you could make a case that fundamental analysis failed or was lacking. Those that made some attempt to consider momentum in the decision making process have been better served.
Market Timing is a wicked idea. Don't try it --- ever. Charles D. Ellis - Winning the Loser's Game.
No one--not the pundits from the big brokerage firms, not the newsletter writers, not the mutual fund mangers, and certainly not your broker--can predict where the market will go tomorrow or next year. William Bernstein - The Four Pillars of Investing
Hi,
I'm also one of the big losers with GE, at least on paper. However, I don't intend to sell just now. I bought it for the dividend. I note that GE has paid dividends for over a 100 years and I don't see any dividend cuts over the last 12 years. They have a very high motivation to keep the dividend at least where it is, I'd say.
I also note that no analysts are saying it will underperform or that it is a sell. In fact it is considerably above hold, if we are to believe Reuters.
Mug, maybe. Market timer. No. Things just happend too quickly to bail even I'd wanted too. Anyway, I bought GE as a dividend stock and the market value of the stock is somewhat irrelevant. It's certainly not any kind of trigger to sell or buy.
Cheers
I'm also one of the big losers with GE, at least on paper. However, I don't intend to sell just now. I bought it for the dividend. I note that GE has paid dividends for over a 100 years and I don't see any dividend cuts over the last 12 years. They have a very high motivation to keep the dividend at least where it is, I'd say.
I also note that no analysts are saying it will underperform or that it is a sell. In fact it is considerably above hold, if we are to believe Reuters.
Mug, maybe. Market timer. No. Things just happend too quickly to bail even I'd wanted too. Anyway, I bought GE as a dividend stock and the market value of the stock is somewhat irrelevant. It's certainly not any kind of trigger to sell or buy.
Cheers
Maybe I was a litle harsh is my portrayal. As scomac has pointed out, it is the value buyers who have gotten hurt and perhaps some awareness of short-term market direction would have been beneficial in this instnace.
The other dilemma (as a buy-and holder) is that the old rules about when we should buy seem to be under revision. This was particularly true with those buying banks stocks earlier this year. What saved me was my overriding skepticism of the whole sector since 2005.
But then in 2006, I bought some GE Cap bonds that are not due until June 2013, overlooking the fact that they are exposed to many of the same pressures that the banks are. And I am lined up behind Buffet hoping for the leftovers.
The other dilemma (as a buy-and holder) is that the old rules about when we should buy seem to be under revision. This was particularly true with those buying banks stocks earlier this year. What saved me was my overriding skepticism of the whole sector since 2005.
But then in 2006, I bought some GE Cap bonds that are not due until June 2013, overlooking the fact that they are exposed to many of the same pressures that the banks are. And I am lined up behind Buffet hoping for the leftovers.
For the fun of it...Keith
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I don't think their bonds have suffered much. I see the Jun-13 at about 97.52. I have a Feb-11 that hasn't moved off price hardly at all.But then in 2006, I bought some GE Cap bonds that are not due until June 2013, overlooking the fact that they are exposed to many of the same pressures that the banks are. And I am lined up behind Buffet hoping for the leftovers.
Are you seriously concerned about your GE Bonds?
ltr
Would anyone recommend the GE bonds of 2037 trading at 78.9592? It is hard to imagine that a triple A rated bond is trading at such a discount.
GE CAPITAL 5.73% BONDS ---------- 22Oct2037 7.527% 78.9592 /Aaa/AAA
Or what about the BMO Tier1 bonds of 2018 trading at 106.1115?
BMO TIER1 10.221% NTES ---------- 31Dec2018 9.264% 106.1115 AH
Which one would you go for? Maybe I should just stick with XCB.
GE CAPITAL 5.73% BONDS ---------- 22Oct2037 7.527% 78.9592 /Aaa/AAA
Or what about the BMO Tier1 bonds of 2018 trading at 106.1115?
BMO TIER1 10.221% NTES ---------- 31Dec2018 9.264% 106.1115 AH
Which one would you go for? Maybe I should just stick with XCB.
Quite right patriot, but I imagine investor99 thinks there is more value in the company that will be realized in the longer term (I do too), and the dividend stream, if maintained, also shows a degree of rightness or wrongness. I look at businesses as being like 'a mom and pop grocery'. Mom and pop have no intention of selling the building, land, or business as long as it is paying the bills. Likewise, as long as GE is supporting me, then there is no reason to sell, no matter what the market says. If the store or GE increase in value by the time mom, pop, or I pass, so much the better for my heirs or mom and pop's!patriot1 wrote:You're proven right as soon as you sell a long position or cover a short position at a profit. One or the other will be right, and in a lot less than 10 years.
Cheers
Enjoy the Holidays!
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Sensei,Sensei wrote:Quite right patriot, but I imagine investor99 thinks there is more value in the company that will be realized in the longer term (I do too), and the dividend stream, if maintained, also shows a degree of rightness or wrongness. I look at businesses as being like 'a mom and pop grocery'. Mom and pop have no intention of selling the building, land, or business as long as it is paying the bills. Likewise, as long as GE is supporting me, then there is no reason to sell, no matter what the market says. If the store or GE increase in value by the time mom, pop, or I pass, so much the better for my heirs or mom and pop's!patriot1 wrote:You're proven right as soon as you sell a long position or cover a short position at a profit. One or the other will be right, and in a lot less than 10 years.
Cheers
Enjoy the Holidays!
we have very similar approaches for stocks. I also look at companies whose stocks I own as a sole proprietorship where I am the owner. If you have a coin operated laundromat business that's generating cash flow and supporting you (paying dividends) then you hold on to it. After my fictitious laundromat manager and employees get their salaries from my sales, and I pay for business expenses then me as an owner have to withdraw some cash for my personal use. If I decide to use all my money for expansion I might double my money quick, but I won't be able to generate any income for my own, owners usage and would have to subsist on pb&J .
Furthermore if I were to open a second laundromat location I would have to train a new manager, who might not be as good as the first one. My location might be bad too. So the best decision could be to pay myself with part of my profits and re-invest the rest in my business - buy new laundry and dryer machines and open new locations.
http://www.dividendgrowthinvestor.com/