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Thursday, June 25, 2009

Don't Forget About GE

FN: General Electric (GE) is a name that hasn't come up much lately. But it should... and will.

Gone are the panic days when GE was hurtling towards zero. However, nothing much has changed. GE is still sitting on a credit bomb leveraged at least 30:1.

GE failed to reach the 200 day EMA (green line) on this short covering bounce, a definite sign of weakness. GE is now in the most bearish orientation possible, below the 20, 50 and 200 day EMA (blue, red and green lines). GE barely outperformed the broader markets on the bounce and has now reverted back to underperforming.

In a real "Green Shoots" scenario, GE with its gigantic global presence would surely be a bit more perky. Watch GE. They have a truly ridiculous exposure to both consumer and corporate credit.

In related news yesterday, credit card delinquencies blasted to a new record high of 10%. GE Money is the worlds largest store branded credit card issuer. Ouch.

US credit card chargeoffs break new record - Moody's: "The U.S. monthly credit card chargeoff rate surpassed 10 percent and hit a sixth straight record high in May, Moody's Investors Services said on Wednesday, as unemployment grew to a 26-year high.

The chargeoff rate index -- which measures credit card loans the banks do not expect to be repaid -- rose to 10.62 percent in May from 9.97 percent in April.

"We expect the chargeoff rate index to continue to rise in the coming months but at a slower pace, as it peaks at around 12 percent in the second quarter of 2010," Moody's senior vice president William Black said in a statement.

The Moody's index also showed delinquencies -- monthly payments more than 30 days late -- fell to 5.97 percent in May from 6.34 percent in April.

However, the agency said it was due to a seasonal trend, as consumers used tax refunds to pay back debts, and estimated delinquencies will resume their upward trend.

Credit card losses usually follow the trend of unemployment, which rose in May to 9.4 percent and is expected to peak over 10 percent by the end of 2009.

With credit card losses across the industry surpassing the 10 percent this year, loan losses in the industry could top $70 billion, according to analysts' estimates.

According to data released by credit card companies earlier this month, based on on the performance of loans that were securitized, defaults rose across the board in May, with a steep deterioration of Bank of America Corp's (BAC.N) lending portfolio.

American Express Co (AXP.N) -- the largest U.S. credit card company by sales volume -- and Citigroup Inc (C.N) -- the largest issuer of MasterCard branded credit cards -- also showed big credit card losses.

However, JPMorgan Chase and Co (JPM.N) -- the largest issuer of Visa branded credit cards --, Discover Financial Services (DFS.N), and Capital One Financial Corp (COF.N), showed better than expected default rates."


Doug said...

Jobless claims up, and Citigroup doubles pay - since they have access to cheap FED money.

This could end in real ugly fashion.

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Unknown said...

Nice post! Can’t wait for the next one. Keep stuff like this coming.

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