S&P: GE’s Credit Rating at Risk
If you want to know why the market went to hell in a handbasket so quickly, check this out:
Standard & Poor’s Ratings Service took the first step toward potentially lowering its AAA credit ratings on General Electric Co. because of concerns about funding at its capital unit.
Credit analyst Robert Schulz warned earnings and cash flow at GE Capital could decline enough over the next two years to warrant a downgrade, and revised the company’s ratings outlook to negative from stable. However, the agency added GE’s recent financial policy actions have been consistent with what it would expect of a company with the highest credit quality.
GE shares recently slid 8% in recent trading on heavy volume.
GE spokesman Russell Wilkerson said the company considers its credit rating safe if it simply delivers on its financial plan, adding a ratings cut will come “only if we fail to achieve our objectives.”
December 18th, 2008 at 4:14 pm
But Warren Buffet has said that GE is a “buy”.
December 18th, 2008 at 4:15 pm
Its going to take them 2 years to downgrade GE? By that time they will be bankrupt. Remember, these are the same companies that refused to downgrade Ambac, and MBIA for the longest time.
December 18th, 2008 at 4:20 pm
Lots of layoffs coming to GE in January.
The management are not the smartest guys in the room.
Commercial RE not exactly booming and GE Capital has a lot of bad paper.
Of course Immelt will maintain the dividend all the way into the tank and go down like Fuld.
December 18th, 2008 at 4:21 pm
Wonder if Jack Welch will still get his daily fresh flower delivery or the toilet paper he arranged for when he retired.
December 18th, 2008 at 4:31 pm
grumpyoldvet @ 4:21
Gee, I wonder where that moniker (“grumpy old vet “) came from.
December 18th, 2008 at 4:41 pm
GE should just convert to a bank holding company… then they can get TARP funds.
December 18th, 2008 at 4:41 pm
DL….
It shall remain a mystery to you.
December 18th, 2008 at 5:05 pm
What excuse will the talking heads have for the market going up tomorrow? Options expiration? There’s so much news each day that there’s always an excuse for what the market is doing.
Today was wave 4 (my target of 887 was exceeded but you don’t have to be exactly right to profit) and tomorrow we will continue the wave 5 to the upside that began near the close. I’d be surprised if we didn’t make a run at the 920 level that many pundits are watching.
December 18th, 2008 at 5:07 pm
GE is particularly interesting from the gov’t perspective because they make many engines for the military. There’s miltary interest in stabilizing GE.
December 18th, 2008 at 5:08 pm
if GE is going to make it, it needs to spin off GE Capital straight to the Trash Can..
they can eco-imagine all they’d like, but GE Cap, very AIG, in its own right, has the potential of killing the whole Corp..
~~
gov, old sport, keep the kimono wrapped tight~
December 18th, 2008 at 5:10 pm
How could you freggin print this anyway? “Could” go lower. Either downgrade or don’t. This wishy washy stuff is stupid and helps to destabilize the markets albeit it does make them free.
December 18th, 2008 at 5:22 pm
Have they put Bernard L. Madoff Investment Securities on watch for a downgrade yet?
December 18th, 2008 at 5:31 pm
OT but related in the sense that GE credit problems underscore the novelty of the current economic moment- GE’s problem seems anomalous- perhaps because the operative historical parallel with 1929 on is clouding our judgment and impairing our perception.
The Real Great Depression
http://chronicle.com/temp/reprint.php?id=477k3d8mh2wmtpc4b6h07p4hy9z83×18
The author of this article argues that the 1873 panic is a better prism through which to contemplate our times. I suspect that there are people who post here with greater knowledge of that epoch’s details. Is the author of the linked article on it to something? If so, does it help to have Great Depression expert running the Fed?
December 18th, 2008 at 5:36 pm
I may be an old fool myself, but I really think GE is a buy in the $12 – $18 range. If you remove the GE Capital portion, it’s a good company – they MAKE STUFF. Unlike paper pushing do-nothing, make-nothing companies like Bear Sterns, et al. GE actually makes and develops many products – good products that people want to buy.
It is unfortunate that all company’s now are seen through the “financial services” or automotive lens. Despite the doomsday talk, it is my thought that companies that actually make things that people buy will actually survive this storm – and GE is one of them.
December 18th, 2008 at 5:59 pm
austin,
to be clear, that was what I was alluding to w/: “they can eco-imagine all they’d like, but GE Cap, very AIG, in its own right, has the potential of killing the whole Corp..”
though, they’ve let their Appliance division slip, and they’ve paid mightily(high prices) for some of their acquisitions in the Water Treatment and Healthcare divisions..
past that, though, you have to wonder, GE has, like GM *did, the ability to do much more than they are..
December 18th, 2008 at 5:59 pm
S+P is a joke. Everyone knows GE is not a AAA company. Heck they would be lucky to be AA. Without massive support from the Treasury’s CP program, GE would be in trouble. It was 5 years ago or so that Bill Gross castigated GE for it’s heavy reliance on the CP market and they are still insanely reliant on the CP market,
December 18th, 2008 at 6:05 pm
GE is ofthen referred to as; a barometer of our economy. So this potential down grade was “unexpected”?
It’s probably late as it is coming from the rating agency. The talking heads blamed the DOW’s skid on the GE news. It just coincided with it.
December 18th, 2008 at 6:15 pm
Now S&P out saying 2008 is only the beginning. What is wrong with S&P would they not like to be in business anymore? How stupid are they.
December 18th, 2008 at 7:09 pm
@MRegan: That was a very interesting read, thanks!
December 18th, 2008 at 7:35 pm
Everything is AAA (and secret to boot!)
http://www.bloomberg.com/apps/news?pid=20601109&sid=ahpPBA8vqN2o&refer=home
December 18th, 2008 at 7:54 pm
MRegan,
the analogy to ‘the Panic of ‘73′, is, to me, indeed, apt. The author, Scott Reynolds Nelson is a professor of history at the College of William and Mary. Among his books is Steel Drivin’ Man: John Henry, the Untold Story of an American legend (Oxford University Press, 2006), is one of the few with enough bone to say so, as well.
the Reason ‘everyone’ is stuck on the ‘29 parallel begins with understanding that the USG’s ‘response’ to this will seem straight from Keynesian playbook, along with the fact that our private CB, the FedRes, wasn’t around in 1873..leads to why the DeLuxe ProleFeed ‘parallel’ of ‘the Panic of ‘07′ is found being regurgitated by the ‘cogniscenti’–reinforces the supposed need for the extra-Constitutional CB, and predictive programming to soften the ground for the planting of a new ‘monetary order’, a la ‘13..
that’s the quick of it..
also, the full site, above, was to underscore that his book on John Henry was quite good..
December 18th, 2008 at 8:11 pm
there is little difference in GE managing and massaging earnings for 20+ years and the ponzi scheme created by madoff.
December 18th, 2008 at 10:03 pm
mlomker Says:
December 18th, 2008 at 5:05 pm
“Today was wave 4 (my target of 887 was exceeded but you don’t have to be exactly right to profit) and tomorrow we will continue the wave 5 to the upside that began near the close. I’d be surprised if we didn’t make a run at the 920 level that many pundits are watching.”
Mlonker. Please describe to me the five wave move you’re seeing on the sp500 (intraday). I don’t see any evidence of a five wave move higher of any kind at this point. We may move higher tomorrow with all those juicy put options expiring worthless, but I really don’t see a 5W higher.
- AT
December 19th, 2008 at 1:59 am
Clearly GE are a triple AAA rated company. You don’t just become a bad company because you are have a little bit of a soft patch. I rate this stock as a buy.
GE are too big to fail. End of story.
disclosure note: I maybe selling large volumes of the mentioned share.
December 19th, 2008 at 7:07 am
jmborchers Says: “GE is particularly interesting from the gov’t perspective because they make many engines for the military. There’s miltary interest in stabilizing GE.”
What are you talking about? All of the ratings agencies have long term outlooks, short term guidance, and credit ratings. This is not some special announcement for GE.
December 20th, 2008 at 5:52 pm
Why are people/reporters accepting ratings from S&P?