GE has reported June financials that are not being well received by today's stock market voters.
Tangible book value is $13 Billion. Current stock market value is $123 Billion. A mere 4% writedown of GE Credit's receivables will wipe out all tangible book value.
Compliments of Calculated Risk, the conference call points out that adjusted for foreign exchange, second quarter orders were down 23% yoy. Here are CR's comments on GE's comments on their mortgage/real estate prognosis:
To summarize, they expect 30% of their non performing mortgage assets to cure, the value of the underlying assets in their mortgage book are down 12-18% from origination, they expect a 15% loss severity rate (including a modest benefit from mortgage insurance) - these guys must the gods of mortgage underwriting – if anyone wants to bet on the trend of future loss estimates, I’ll take the over – their corporate motto “Imagination at Work” seems fully appropriate here .
DoctoRx here now. GE cares not a whit for any blogger's advice, but here it is: cut the dividend to, say, 1% from the current 3.3% rate. As for the investment community, consider GE a possible CIT in the making. The idea that this overleveraged behemoth with operations ranging from theme parks to medical scanners to mortgage lending to-you name it- is a sensible company is strange. It's a polluted chimera that grew to maximize its share price and enrich Jack Welch amongst others, much as AIG grew to enrich its insiders.
GE stock could go anywhere, up or down, and from wherever it moves to, it could then go anywhere, up or down in either the same or a different direction. At least you know what IBM and J&J do.
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