[Claeren]

Originally Posted by Finner

Thats not really that much to GE. ~1% of there yearly earnings.

I guess so.... just because it is cheap does not mean it is a good buy. (But what do i know?!)

It seems to me GE-Capital is a massive blackhole bigger in liability than all of GE is in total assets.

There IS a reason that they agreed to essentially handi-cap themselves with a "Buffett Tax" for the rest of the companies future, and that reason cannot be a good one. Maybe you see it differently?

And I imagine that the "Buffett Tax" will be more than 1% of earnings going forward as well.


Lots of public doom around the company right now, IE:

http://emac.blogs.foxbusiness.com/20...sures-from-ge/

I’ve already warned you that GE has serious quality of earnings problems, including a debt load that swamps its net worth. GE also has on its balance sheet loads of illiquid securities that push its tangible book value, or net worth, under water.

And it uses off-balance sheet vehicles to house potentially bad debt, debt which, if loaded back onto its balance sheet, would swamp its tangible book value (see blog “What Buffett May be Missing at GE”).

GE is on the SEC’s list of companies whose stock cannot be shorted under the agency’s temporary ban. Short sellers borrow stock betting that the price will fall, then return the shares after pocketing the difference when the shares do plunge.

Corporate risk disclosures are par for the course for publicly traded companies. GE’s filing, however, is loaded with unusually pointed language and new information.

Also, the fact that GE had to sell new common stock and give Buffett such a rich premium (a 10% dividend), along with fears it may have to tap its $62 bn in credit lines, is raising concerns on Wall Street about whether GE is well-capitalized and whether its coveted triple-A rating is in jeopardy.

Of concern, too, is the fact that GE had to shore up its balance sheet by stopping its stock buyback program, freeze its dividend for the first time in 32 years, scrap the sale of its credit card unit and curtail borrowings at GE Capital.

In a significant disclosure, the filing warns that GE gets “a large portion” of its borrowings via the commercial paper markets, but that “there can be no assurance that such markets will continue to be a reliable source of short-term financing for GE Capital.”

GE also warns that if the market continues to worsen, or if it can’t unload assets to weed back its gangly operations, the company would hit a wall as it “would seek to repay commercial paper as it becomes due or to meet our other liquidity needs” using its recent $12 bn common stock offering “and the Berkshire Investment,” as well as drawing upon its credit lines, “and/or by seeking other funding sources.”

Meaning, more capital raises. It adds: “Under such extreme market conditions, there can be no assurance such agreements and other funding sources would be available or sufficient.”