Thursday, March 5, 2009

Ominous Signs From The Light Bulb.

General Electric closed at 6.66 today. This is both an ominous and scary sign. And a bad portent

General Electric is now down a stunning 58% this year alone. This of course means that the clowns at CNBC have to get an empty suit to come on the air and say things are really great, and that the hedge funds and short sellers are to blame once again....Hmmmm, lets see..

1- Fannie Mae
2- Freddie Mac
3- Bear Stearns
4- Lehman Brothers
5- Wachovia Securities
7- Wells Fargo
8- AIG
9- Wamu

Each one of these companies had a pawn come to Englewood NJ, to plead that everything was OK at their companies, and that vicious rumors perpetuated by the hedge fund/short community were responsible for their sinking stock prices. Have we come to the point where GE is also in this category? Has all hope been lost? Is it truly all over but the crying?

Today's missive from GE was that GE Capital business is not great, but not disastrous as every one is speculating about, that other business are running ahead of plan. I read through their last earnings report, every line of business was weak.

Enough of this. What are the facts?

1-A Ratings downgrade from Triple A to Double A is almost certain. Once this is done, GE is going to need some huge funding requirements. This will seriously hamper their overnight lending and commercial paper business. Don't rule out a downgrade to Single A, as of course the "Fraud" Bond Ratings Agencies might want to get ahead of the curve. Moody's is currently evaluating $446 Billion in GE debt for a possible downgrade. But of course the CFO thinks even after this, GE will not need any further capital to prop up their business. The CFO also stated that the situation would have to get "disastrous" before they tap TARP.

This prompts me to say:

EARTH TO CFO! The situation is beyond DISASTROUS! The situation is CATASTROPHIC!
Have you seen the stock price? Look for not only a ratings downgrade, not only GE receiving TARP Money, but you guessed it...An Obama/Geithner Special....A Bailout coming soon. Another $10 Billion down the toilet....You heard it here first.

2- If business is truly good, GE Capital is not disastrous, and the company still sports great cash flow...Why cut the dividend to save roughly $9 Billion annually?

3-Why are there rumors that GE is about to cancel railcar orders from Greenbrier Industries? Could it be because even though cash flow is great, they are expecting ratings downgrades and capital funding requirements?

4-I found it funny that the CDS Swap Spreads actually got worse after the CFO spoke on CNBC. That's what we call the dreaded vote of confidence. He should have come on and said we are all going to hell in a hand basket, he probably would have been fired, but then again I want to be entertained.

5-GE Capital has $50 Billion in Commercial Real Estate Loans that need to be marked down, because we all know that business sucks.

All of this just means that you don't have to put everything that GE does under a magnifying glass to come to a negative conclusion. The facts are there, 6.66.

Most of the carnage (Like there needs to be a reason to sell the banks) the last few days in the Financial Sector directly has to do with the situation at GE. All of the major Banks and Wall Street Firms do heavy business with GE Capital. The reason that there is a floating rate desk, an overnight desk, and a Repo Desk at these firms is primarily because of GE.

Not So Random Stuff-

J.P. Morgan dropped like a stone today. Total technical breakdown. JP and GE are intertwined on many levels. Can Jamie Dimon pull another Scam like he did with Bear Stearns and Wamu to save JP this time? Can he engineer another heist at others expense?

The drop in Wells Fargo is breathtaking. Cut the dividend? Don't waste your time. I have written that Wells is insolvent....enjoy the ride down to the dollar menu, where BOFA and Citigroup are on line to get fries.

Rochdale Securities Analyst Dickie Bove is at it again, pushing Wells Fargo as another great buying opportunity. Can someone please put a pillow over this guys face already?

CDS Swaps on all of the Banks hit new highs. Self fulfilling prophecy. The end game is near.

Why are institutions like US Bancorp, Goldman, JP Morgan, BOFA, and the Moose so focused on paying back TARP? Is it possible they don't want to open themselves up to the absurd actions for years they have gotten away with? Increased government oversight into the banks lending, excessive credit card fees, ATM fees, brokerage fees, entertainment (Strip Clubs) expenses, and most most importantly executive compensation have made these institutions wary of actually ever taken the money. But the questions remain? How are they going to pay it back? Its not happening as the market is seeing the writing on the blood red.

Barclay's going down the drain. This will be the next Bank that the UK Government nationalizes.

When will Citigroup, BOFA, Alcoa, and GM be replaced in the Dow Jones Industrial Average?

Moody's has become the Grim Reaper. They are about to drop the hammer on GE, Wells Fargo, and JP real soon. The vicious drops you have seen is an attempt by investors to get ahead of the inevitable.

Political Thoughts-

Finally....The situation in Pakistan is very troubling. Being a Hindu has me deadly worried that the imminent demise of the Pakistani state will bring intense horrible terrorism to India. Pakistan has been a failed state for decades, but the terrorist actions this week against the Sri Lankan Cricket Team is just another example of a totally out of control country that really has no future or hope. The Pakistani Government has no control over their Intelligence Agencies or the Radicals. Reading the papers, Pakistan is a desperate country that is up to some serious mischief. Pakistan has never taken responsibility for cross border terrorism and has never recognized India's Hindu's. This is the reason IRAN cant get a Nuclear Bomb... I hope the leftists and liberals wake up to the fact that maybe Bush was right about the Middle East. History will prove Bush/Cheney right on this issue.

The U.S. can't have another 9/11 happen again.

Israel and the Mosad have the right idea about Iran.

I am seeing some gray hairs on Barack Obama's head. I really feel for this good man. He not only has to deal with Iran, Pakistan, Iraq, and Afghanistan, but our own economy and damn banks!... Maybe I was too hard on him on a previous post.

Enough Politics!

Have a good night.


  1. To many people are busting Obama's Balls. But on this I agree. Geithner is the wrong choice.

  2. "He should have come on and said we are all going to hell in a hand basket, he probably would have been fired, but then again I want to be entertained."

    Love it! Time to pull up an easy chair, pop a bag of popcorn and enjoy the show.

  3. Is that Z who is leaving comments or T.O.? Either way thanks for the comments. We need a Jerry McGuire like moment one of these days, where one CFO/CEO comes out and just states the obvious...Yes...we suck...we steal...we lie...we need to reform...That truly would be entertainment