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Old 02-12-2009, 10:43 AM   #41
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Yes, although GE's loan (well, preferred shares) is actually more expensive than 10% since they gave him the warrants for "free" and there is a termination fee if and when they decide to buy the preferreds back. So, either they are paying him 10% perpetually (which would be a really bad sign for GE which has half a trillion dollars in debt) or they buy him out after three years for the 10% premium in which case the "loan" rate was about 13%. If the latter, it will be "good" for GE since the company will be doing pretty well in which case that 13% rate will likely be higher since there's a good chance his free warrants will be in the money.
Bottom line, if Warren is the only guy lending cash out there, we are in a WORLD OF HURT in this economy, because Warren isn't borrowing you money at 3%.........
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Old 02-12-2009, 12:47 PM   #42
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There seems to be wide spread consensus that GE is doomed. My take on GE is that it was $40/ share in the spring of '08. Lets just say it was fairly valued. Half of GE is the finance wing, so say the stock should be $20/ share. Then lets say half of the remaining business evaporated, the stock should be $10/ share. Just about where it is now. Now if any of those reversals turn out not as dire as I've described then the stock seems (to me) to be undervalued.

The finance portion of GE is not a retail bank. Billy bob does not go to GE to get a loan on a 3br ranch. (using documents he's forged on the INTERNET) They make locomotives, co-gen plants , MRI machines, ect. and if you want to buy one of these, no problem. Sign right here.

Every company has a "story" which is the total of the balance sheet, quality of the management, how the companies products or services are perceived in the market place, ect. . This story is not static, it changes and has to be reviewed.

My "logic" is to Buy low, Sell high. Easy to say (or type) but hard to do. This means to me that I need to look at stocks that have been beaten down, or ignored by the "herd".

The only reason I even comment in this thread is because I took a position in GE in Oct. and Dec. '08. (yes I'm down). I used the cash I had sitting in an IRA from the sale of mutual fund I'd held since '88. Also no one I know would be knowledgeable on this subject to care or even disagree. I tend to learn more from people who have a different point of view.

If GE ceases to exist it would hurt but I would not be ruined. I understand the danger falling in love with a stock and I'm not "all in".

I could be wrong as I've been wrong before. I never cease to amaze myself in my ability to be creative in making mistakes. With some due diligence I've been able to limit their number and severity.

Now GE could go down the tubes. The country could go the tubes. The world could degenerate into some post apocalyptic scene from Mad Max, but its more fun to be an optimist.

Now if you will excuse me I'm going to go count the MRE's FEMA gave me (IKE) and clean my guns.
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Old 02-12-2009, 03:59 PM   #43
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Now GE could go down the tubes. The country could go the tubes. The world could degenerate into some post apocalyptic scene from Mad Max, but its more fun to be an optimist.
Both optimists and pessimists contribute to our society. The optimist invents the airplane and the pessimist the parachute. ~Gil Stern
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Old 02-12-2009, 05:17 PM   #44
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There seems to be wide spread consensus that GE is doomed. My take on GE is that it was $40/ share in the spring of '08. Lets just say it was fairly valued. Half of GE is the finance wing, so say the stock should be $20/ share. Then lets say half of the remaining business evaporated, the stock should be $10/ share. Just about where it is now. Now if any of those reversals turn out not as dire as I've described then the stock seems (to me) to be undervalued.

The finance portion of GE is not a retail bank. Billy bob does not go to GE to get a loan on a 3br ranch. (using documents he's forged on the INTERNET) They make locomotives, co-gen plants , MRI machines, ect. and if you want to buy one of these, no problem. Sign right here.
While I agree there is good value there, they have made many loans through GE capital for commercial real estate, credit cards and home loan portfolios where the value is dropping rapidly. This is the overwhelming reason for the stock decline. Long term debt is up to 345 billion up from 60 billion 10 years ago.


G.E. Meets Expectations as Profit Falls - Business | DailyAdvance.com

They do originate mortgages in the UK, they actually took back 1,000 homes in the UK

More GE Woes: U.K. Real Estate -- Seeking Alpha
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Old 02-12-2009, 07:29 PM   #45
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GE's manufacturing: It takes many hundreds of manhours and many hundreds of millions of dollars of tool/equipment investment (which costs money daily) to build, say, a jet engine. Let's say GE clears 1 million dollars profit on each one.

GE Financing: One shopping mall financed at 150% of it's present worth--which 2 GE employees might arrange in a day-- wipes out the profits from hundreds of jet engines produced at the cost of thousands of manhours.

No one knows how deep the black hole of GE finance might be. To guess that the company's stock was fairly valued last year seems quite a leap (IMO).
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Old 02-13-2009, 12:14 AM   #46
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GE's manufacturing: It takes many hundreds of manhours and many hundreds of millions of dollars of tool/equipment investment (which costs money daily) to build, say, a jet engine. Let's say GE clears 1 million dollars profit on each one.

GE Financing: One shopping mall financed at 150% of it's present worth--which 2 GE employees might arrange in a day-- wipes out the profits from hundreds of jet engines produced at the cost of thousands of manhours.

No one knows how deep the black hole of GE finance might be. To guess that the company's stock was fairly valued last year seems quite a leap (IMO).
I am mostly in Running Man and your camp. I was interested in GE at $20 last year because I thought the market was over reacting to the bad news. As it become obvious that problems of deleveraging were going to have a devastating impact on GE capital with the potential of destroying the good GE business. Frankly at this point, we also have to assume that the ability of airlines and aircraft leasing companies to payback GE capital for engines even threatens the profitable of the good business.

At $10-$12 price, I think the market is factoring in a 50% dividend cut this year or early next year, followed by a reasonable chance of the dividend being eliminated in 2010. Hopefully, 2011 will see a restoration of the dividend . Even with all this bad news, a bunch of GE easily give me a 4% SWR. But at $5, GE starts to look more like or B of A or even Ford. A company which may or may not be insolvent, but still has the potential to deliver good profits in the somewhat distant future, but also the real risk of insolvency and a complete wipeout.
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Old 02-20-2009, 03:47 PM   #47
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With GE's new sub 10 price the yield is now 13.22% according to yahoo. How long do you guys think that's going to last? I thought I was so smart when I was buying between 14 and 12. As Cramer would say. I know nothing, I know nothing, I'm nuts!
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Old 02-20-2009, 03:50 PM   #48
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GE has stated over and over again that the dividend is safe for 2009. But whether you believe that -- and what happens in 2010 -- is up for debate, and the market is sending a very clear signal about what it thinks.
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Old 02-20-2009, 04:53 PM   #49
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GE has stated over and over again that the dividend is safe for 2009. But whether you believe that -- and what happens in 2010 -- is up for debate, and the market is sending a very clear signal about what it thinks.
No Immelt stated in the last quarter they said they would review future payments, and by the time GE cuts it's dividend and earns it's way out of DVY as a dividend achiever it will have fallen an ungodly amount.

General Electric Dims Dividend Outlook - Forbes.com
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Old 02-20-2009, 11:25 PM   #50
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No Immelt stated in the last quarter they said they would review future payments, and by the time GE cuts it's dividend and earns it's way out of DVY as a dividend achiever it will have fallen an ungodly amount.

General Electric Dims Dividend Outlook - Forbes.com
Yep, he's backpedaling now after that "firm" commitment to the dividend not that long ago. It's definitely coming down. The question is what the market's reaction will be at that time. I'd say there's a good chance it will pop up on the news. But I don't want anything to do with anything financial these days. Too much darkness lurks in the back rooms there.
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Old 02-21-2009, 12:33 AM   #51
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I guess my $11 puts on GE will be exercised I got a bit more than $1 for them so I guess I am underwater on GE again...
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Old 02-21-2009, 08:17 AM   #52
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The question is what the market's reaction will be at that time. I'd say there's a good chance it will pop up on the news. But I don't want anything to do with anything financial these days. Too much darkness lurks in the back rooms there.
Agreed on the last comment. As for what the stock would do on a dividend cut, I think it depends on two things: (1) how deeply it was cut and (2) whether or not the market believed that was the last shoe to drop. They could cut the dividend 50% and if the market believed that was the end of it, GE would probably rally sharply.

But more likely, as with everything containing financials, the uncertainty of what toxic waste is in the black box will likely keep it depressed.
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Old 02-22-2009, 12:01 AM   #53
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Agreed on the last comment. As for what the stock would do on a dividend cut, I think it depends on two things: (1) how deeply it was cut and (2) whether or not the market believed that was the last shoe to drop. They could cut the dividend 50% and if the market believed that was the end of it, GE would probably rally sharply.

But more likely, as with everything containing financials, the uncertainty of what toxic waste is in the black box will likely keep it depressed.
Yep I basically agree about the div cut reaction, but who knows. Look what happened to the NY Times on Friday. They slashed the div and the stock was up 16%! It doesn't mean that it'll stay up of course. And it's still only at $4.07.

The market is a mysterious thing sometimes.
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Old 02-27-2009, 12:58 PM   #54
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It's being reported that GE is cutting the dividend to 10 per share starting in the third quarter. That's still a 4.5% yield at the current price. The question is, is there another shoe waiting to drop in a market that expects shoes to keep dropping forever?
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Old 02-27-2009, 01:04 PM   #55
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It's being reported that GE is cutting the dividend to 10 per share starting in the third quarter. That's still a 4.5% yield at the current price. The question is, is there another shoe waiting to drop in a market that expects shoes to keep dropping forever?

Feb. 27, 2009

General Electric is cutting its quarterly dividend to 10 cents a share from 31 cents a share, saving $9 billion a year, CNBC reported. The move comes amid a steep slide in the company's stock price. The company's financial services operations have been hit hard by losses and delinquencies during the credit crisis and economic downturn in the past 18 months.

http://online.wsj.com/home-page?mod=djemalertNEWS

The article link above is also mobile friendly. Mobile users, click the link to see this story now.
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Old 02-27-2009, 02:04 PM   #56
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Got to love the CNBC Pump Monkey Banshees. They are saying GE should be rewarded for "their courage" in cutting the dividend.

Jimmy Jones Cramer just said that he just bought GE for his trust and predicts from here it will be the best performing DOW stock for the rest of the year.

10 minutes of this happy talk back and forth and they never mentioned once they work for GE.

The reason that people have to state they own, work for, etc, etc, is because of Cramer pumping his company, The Street, when he worked over in 2000 and got fired for doing it. De ja vu.
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Old 02-27-2009, 02:12 PM   #57
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Got to love the CNBC Pump Monkey Banshees. They are saying GE should be rewarded for "their courage" in cutting the dividend.

Jimmy Jones Cramer just said that he just bought GE for his trust and predicts from here it will be the best performing DOW stock for the rest of the year.

10 minutes of this happy talk back and forth and they never mentioned once they work for GE.

The reason that people have to state they own, work for, etc, etc, is because of Cramer pumping his company, The Street, when he worked over in 2000 and got fired for doing it. De ja vu.
I don't listen to Cramer, he's just noise. But, when Immelt said "The dividend is safe, we have $40 billion in cash, the dividend is SAFE for 2009".......Well, I guess we just saw that the GE BOARD is now calling the shots, and Immelt should be packing up his cradboard box, because he's toast...........
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Old 02-27-2009, 02:13 PM   #58
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I don't listen to Cramer, he's just noise. But, when Immelt said "The dividend is safe, we have $40 billion in cash, the dividend is SAFE for 2009".......Well, I guess we just saw that the GE BOARD is now calling the shots, and Immelt should be packing up his cradboard box, because he's toast...........
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Old 02-27-2009, 03:00 PM   #59
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This cut, although not totally unexpected, was bigger than I thought the worst case cut would be. BTW, I just calculated that this will knock about $0.09 off the annual dividend of the Vanguard S&P 500 index fund (VFINX). Last year VFINX paid a dividend of $2.50 per share, so this will be a significant cut for index fund holders, as well.
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Old 02-27-2009, 03:29 PM   #60
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This cut, although not totally unexpected, was bigger than I thought the worst case cut would be. BTW, I just calculated that this will knock about $0.09 off the annual dividend of the Vanguard S&P 500 index fund (VFINX). Last year VFINX paid a dividend of $2.50 per share, so this will be a significant cut for index fund holders, as well.
I actually expected they would wait until the earliest possible time to cut the dividend and not make Immelt a liar, i.e the end of the year. Hopefully the .10 dividend is safe; famous last words.

My track record is starting to surpass Ziggy's as contrarian market indicator.. Unfortunately for you all I have no plans to buy or sale any securities in the immediate future, but when I do I'll let you know. Maybe I should start a clifp contrarian indicator newsletter. Each month I'll put out my stock selections and my readers will do the opposite.
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