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Friday, April 11, 2008

GE Disappoints, Citing Finance: Bottom? What Bottom?

GE disappointed and has gapped down over 11% pre-market. Honestly, what did you think would happen, continued, super, hyper growth in the midst of a GLOBAL credit crunch?

GE Says Profit Fell, Citing Finance; Forecast Reduced (Update3): “General Electric Co. reported its first decline in quarterly profit since 2003, missing analyst estimates with a 12 percent drop in earnings as a freeze-up in credit markets blocked asset sales and forced it to write down the value of investments.

The world's third-largest company by market value fell as much as 11 percent, the most since 1987, in early New York trading after GE also cut the full-year forecast that Chief Executive Officer Jeffrey Immelt had once told sharesholders was “in the bag” for 2008.”

Everything GE does is related to finance, requires financing or is financed by GE.

“General Electric's miss came without warning as it was forced to reduce the value of some securities in the last two weeks of March as capital markets seized, Immelt said. That also prevented GE from selling some finance assets. GE put its U.S. credit card business and Japanese consumer finance units up for sale last year. The health-care unit also trailed expectations.

Farifield, Connecticut-based GE missed its own forecasts for its commercial and consumer finance units.”

This should be the catalyst for the next leg down. 1390 was tested and held on the S&P 500. The trend remains in tact and remains DOWN. This bounce is over.

WaMu Estimate Cut by Goldman; Short Sell Recommended (Correct): “Washington Mutual Inc., the largest U.S. savings and loan, had its earnings estimate cut by Goldman Sachs Group Inc. analysts, who recommended selling the shares short. The lender declined 5.9 percent in early trading.

Washington Mutual will probably lose $3.30 a share this year, Goldman Sachs analysts, including New York-based James Fotheringham, said today in a note to investors. Goldman previously forecast a 2008 loss of $1 a share for the Seattle- based company.

The lender raised $7 billion this week from a group of investors led by David Bonderman's TPG Inc. after losses on subprime loans ate up capital. Washington Mutual may have a total of $23 billion in mortgage-related losses, Goldman said today. The firm cut its 12-month price target on shares of Washington Mutual, also known as WaMu, by 17 percent to $10.

“Given WaMu's disproportionate exposure to states” where home prices are forecast to decline, Goldman expects losses between $17 billion and $23 billion, the analysts wrote.”

Wow. WaMu desperately raises $7 billion and pops about 30% that day and Goldman immediately pounds in short? That can’t bode well for WaMu at all.

Personally, I think WaMu is dead and just doesn’t know it yet. Insolvent. Bankrupt. Great posts on WaMu:


Ben Bittrolff said...

Washington Mutual Falls on Short Sale Recommendation (Update3)

Goldman estimates losses of up to $23 billion...

Anonymous said...

Read your post all the time.


Anonymous said...

Great analysis Ben. Keep up the great work!

Anonymous said...

That WaMu story is up to 6 updates, and I wonder if their editors are still aiming for clarity.

It's now talking about an *additional* $23 billion in mortgage losses. After the stock losses. Am I reading this right? Plus, in reference to it's stock,

"The lender fell 72 percent in 12 months, leaving the company with a market value of about $9.7 billion."

Anonymous said...

Hello! I like your blog. How do you like financial institutions? Do you like that there is such an incredible amount of these companies? On the one hand it is great that you have a choice, but on the other hand it makes you feel lost in this large number of companies. If it is a problem of choice then ask a friend about the experience or go to and read the customers’ feedbacks. Consider WAMU, for example.

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