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Strategies & Market Trends : Fundamental Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: The Ox who wrote (3130)	7/20/2013 3:59:51 AM
From: Spekulatius	Respond to of 4720

Many financials turned around, even AIG and C did - the problem is dilution at the bottom which is what happened to AIG and C and then shares never recover: The same could have happened to GE in 2008 with their financial arm, if the government would not have jumped in and provided liquidity backstop. At that point they had ~500B$ in debt, much of it money market (which can be called in overnight) and a lot of their assets were fairly illiquid (think real estate investments and debt, leveraged IPO financing, leasing assets, credit card debt etc). They have shrunk the finance arm but it's still fairly big. No problem now with the credit markets calm and spreads at record low, but what happens if this turns sour again. The other main knock against GE was that it was never really cheap - essentially one was paying the multiple of an industrial stock for an industrial/finance hybrid during a time when financials were very very cheap, even the well managed ones. No conglomerate as far as I can tell. Those were the issues with GE, compared to the above, the dividend cut was a minor issue, imo.

To: The Ox who wrote (3130)	7/23/2013 10:44:33 AM
From: bruwin	2 Recommendations Recommended By E_K_S The Ox Read Replies (1) \| Respond to of 4720

"I have the same concerns with respect to the finance arm of the company." About 7 years ago, when I could still post at 'Value Investing', I expressed an opinion that GE should rather involve itself with the businesses that it knew best and move away from the Finance business. I also thought that it wasn't good for shareholders in terms of what they could be paid as a Dividend without the "Finance arm", compared to what they were getting as a result of the "bottom line" that GE were then reporting which, in turn, contributed to that Dividend "payout". "... if it's anywhere near as bad as the strongest critics claim, then they will find a way to spin it off or sell it off." Should be interesting to see what GE's directors, especially Immelt, decide to do ....