Every year starting in around late December and continuing until around this time, I found myself at the end of each day hoping that the S&P had gone down. Rooting against GS, of course, made obvious sense, but I was also keenly aware that I was soon going to be buying a whole lot – relatively! – of equities and it would be nice to get them at a discount. This guy knows what I’m taking about:
The logic is simple: If you are going to be a net buyer of stocks in the future, either directly with your own money or indirectly (through your ownership of a company that is repurchasing shares), you are hurt when stocks rise. You benefit when stocks swoon. Emotions, however, too often complicate the matter: Most people, including those who will be net buyers in the future, take comfort in seeing stock prices advance. These shareholders resemble a commuter who rejoices after the price of gas increases, simply because his tank contains a day’s supply.
Like everyone in my former industry, I had no emotions, so I simply counted my expected-value gains when stocks went down. And because I dealt in derivatives, I spent some time thinking about the inflection point: when, in expectation, do you stop being a net buyer and become a net seller? For a profitable and growing P&C insurer is the answer never? For a banker … well for me at least it was in March of every year as my bonus-time discount rate of future bonuses was extremely high for reasons you can probably guess. (Hint: Now I blog.) For Warren Buffett … I mean … what should you take away from this long letter explaining why BRK is undervalued? (Also: does this change your discount rate?) Read more »
General Electric Co. refuted a statement claiming the company would return a “$3.2 billion tax refund” for 2010, following criticism of its tax rates and policies. “It is a hoax,” said Anne Eisele, a GE spokeswoman. The statement, which purported to be from GE Communications, claimed the Fairfield, Connecticut-based company was responding to a “public outcry” and would “allow the public to decide how to spend” the returned money. [Bloomberg]
It is no secret that GE Capital has been the lodestone for GE. What looked like a bit of genius, the vertical integration of finance for the customers of GE’s manufacturing and power interests, quickly ran wild in consumer finance and developed a highly opaque balance sheet that has left investors jumpy and hinted at large, unknowable liabilities. Well, GE wants you to just settle the hell down now.
Speaking at an investor conference, Chief Financial Officer Mike Sherin said that 93% of the diversified conglomerate’s long-term debt funding — between $42 billion to $45 billion — is complete for this year and that there is no need for having to tap any external capital. Further, he said the Fairfield, Conn.-based company is “committed” to GE Capital, its troubled financial arm, and hinted a spin-off was unlikely.
Michael Neal, the chief executive of GE Capital, said that in a worst-case scenario, his business unit could face credit losses of up to $13.7 billion this year. However, the unit is predicting 2009 losses of $9.7 billion.
It says something that losses of only $9.7 billion are good news, but almost any number, if it was believed, would do something to avoid the cosmic censorship beyond the event horizon of GE Capital’s balance sheet. General Electric execs seek to strike optimistic tone [Marketwatch]
That is just a lot of fuss over a simple lost vowel, we know- but this was no ordinary vowel. General Electric’s third “A” in this case. The platinum and diamond encrusted antique letter, which had been worn ceaselessly by the old girl since the Eisenhower Administration, was reportedly stolen and silently replaced in the middle of the night with some poor excuse for a lowercase “T.” As if no one would notice or something.
Strangely, senior employees at CNBC have donated hundreds of thousands of dollars of their own cash to organize a search for the missing piece, while Starbucks has announced it will be accepting GE options issued as part of employee stock options programs in lieu of their much-in-demand “10% of any latte beverage” coupons.
One of our tipsters points out that Henry Kravis has been secretly lusting after the letter for years and openly speculates that, even as you read this, the big HK is leaning back in a massive leather chair and pressing a concealed button under the arm which subdues the lights and opens a secret panel on the far wall to reveal the carefully illuminated missing letter. We aren’t going to find it at any of the usual fences, our tipster laments. General Electric Loses S&P’s Top-Level AAA Rating [Bloomberg]
We know we aren’t the only ones who enjoy watching the folks at CNBC agonize over their evaporating “performance aligned long-term compensation.” Given where GE stock is headed after the ix-nay on the ividend-day (presently down about 9% 10% after recovering a few percentage points from the low point) we bet it is a volatile day for GE stock options. Whew!
So what are we to make of CNBC breaking news like “GE: Claims that we will be required to raise new near term capital are ‘inaccurate'”? I think we know what we are to make of them, don’t you? Fun!
We hear on the rumor mill that UBS has downgraded GE on the dilution effects new equity issues are likely to have. GE looked like a genius for being in the finance business, both for the returns, and to boost sales by having tight control over underwriting for their more cash challenged customers. Today, that division is, of course, a huge weight around GE’s neck. GE enjoyed the fruits of yesterday’s rally. The stock hadn’t flirted with the teens since 2003, and watching it slip below $20 recently was a bemusing, if sad, experience. No word on what Jack may have called Jeff in the later hours of those days.
Charty Goodness after the jump.
Update: Added 10 year and 5 days charts to satisfy some irate (but erroneous) commenters.
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