General Electric's Hidden Secrets

Everyone thought GE was the ultimate secure stock. But recent events have shown that the company has taken a severe hit from the financial meltdown, one that could severely impair it going forward.

On September 15, Herman Kline, a BestCashCow member wrote the following:

"I think that GE is very similar to AIG.  GE Capital drives GE.  They own tremendous amounts CDOs, CMBOs, etc.  It isn't transparent.  This junk has driven its growth.  This junk hasn't been written down.  GE is dependent on its triple-A rating.  It is very easy to see GE running into a situation where it needs to dispose of all of its prized assets to try to underwrite the liabilities that are on the books at GE Capital. 

Don't fool yourself into thinking that GE is something other than a financial interest.

They should be acting now to split the company in two to save the better half.  They are not.

Trend very carefully around GE."

Since then, the stock has lost a third of its value, Warren Buffet has made an emergency investment, and many are wondering what exactly is the fate of this stories company. 

The traditional business media are finally catching on to the story.  BusinessWeek is running an article entitled GE Under Siege that wonders:

"Managing this crisis is certainly the sternest test Immelt has faced in his seven years as chief, and it may well become the episode that defines his legacy. Says Tom Priore, who runs the credit hedge fund ICP Structured Investments: "If you thought AIG was important, GE is many times a multiple of AIG." And now GE's future, like the economy's, looks as if it could tip either way."

I was listening to CNBC several weeks ago when Immelt came on and said the company would not need to raise capital.  He told the fawning reporters (GE owns CNBC) that GE was stable, had massive earnings, and was one of the few Triple A rated companies in the world.  That was before he ran to Buffett to save the company.

What become clear is that you cannot trust any CEO to give you the straight answer. Rome could be burning but they'll look into the camera and say that nothing has ever been better.

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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Comments

  • tightwad

    October 15, 2008

    And not even politics or the ministry can one be so highly rewarded for BS.

  • Alex

    August 30, 2009

    Prophetic article now that it hit a low of $6.50 back in March. This rise is just a suckers rally. They'll go bankrupt or worse, become socialized.

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