Ray,
Let me think about that for a bit. 40%+ is a large sell-off. I have reservations about that happening, even under the scenario you allude to.
GE has a ton of stock out there. Of the free-trading shares, much of it is locked away in retirement accounts, pension plans, and mutual funds that, for all intents and purposes, don't trade the holdings. Similarly, a bunch of GE stock is locked away in the hands of insiders, who likewise don't trade on it. They may borrow against its value, or otherwise leverage the holdings, and they may exercise options from time to time, but by and large, they tend to hold rather than trade.
The only way I see GE dropping more than say (another) 20% is in a general market sell-off, which I think is a distinct possibility this year. When the level of the sea drops, all boats that float in its water drop with it. And if that happens, those leveraged shares become fodder for a market sell-off.
Nonetheless, it is an interesting point that you make. Time will prove you right (or wrong). (BTW, I made a call back prior to 9/11 that called for the Dow to drop to 7137. The call was based on earnings projections back around August of last year. Earning have dropped considerably since then, and we've seen nothing even near 7137. So, I'm still sticking to my numbers, and look for the Dow to drop by a chunk. Whether or not it happens depends on when Joe Six Pack finally throws in the towel on stocks such as GE...)
KJC |
