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]
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!
Honestly, is no one immune?
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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A Persian Gulf sovereign wealth fund has agreed to an $8 billion partnership with General Electric in a deal that will make it one of GE’s top ten shareholders. Abu Dhabi’s Mubadala Development and GE are cooperating on a commercial finance division focussed on the Middle East and African markets. The deal anticipates further partnerships in aviation and clean energy research.
Each company will contribute $4 billion of equity to the partnership over three years. At the same time, Mubadala Development will buy at huge stake in GE, the world’s twelfth largest company. Bank of America is the 10th largest shareholder of GE, with 1.2 per cent worth $3.3 billion at current prices. The largest institutional shareholder is Barclays Global Investors, which owns almost four per cent of GE.
Mubadala and GE in strategic partnership, $8 billion finance venture [The National]
After a few months in the spring in which the credit crunch appeared to ease, the vise has tightened once again. Nothing illustrates this better than the financing for the acquisition of the Weather Channel.
NBC Universal, which is a subsidiary of General Electric, teamed up with buyout barrons Bain and Blackstone. But the deal still failed to attract traditional lenders. Much of the financing, in fact, was provided by firms affiliated with the buyers.
Three affiliated lenders provided the bulk of the financing for the $3.5 billion deal. Bain’s Sankaty Capital, Blackstone’s GSO Capital, and GE’s commercial finance arm reportedly provided over half the funding. The lead bank role was was held by Deutche Bank, which likely had to promise funding to score the mandate for the fee-heavy M&A side of the deal.
The situation is almost the reverse of the deals that were seen at the height of the buyout boom, when banks were falling over each other to provide loans for buyouts and even going so far as making equity contributions to deals. Now it seems the lenders don’t even want to lend, so the buyers are having to fund the deals largely on their own.
Jeff Immelt: Is anyone from the damn public relations office back yet?
Vice President: The new girl, Tina.
JI: Wait, the hot little number who’s schtoinking that editor at that financial paper?
VP: The Wall Street Journal?
JI: Right. The Streetwise Journal.
VP: The Wall Street Journal.
JI: Get her sweet buns in here. Now. Oh, and I’d like my eggs poached this morning.
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