GE

April 11, 2008, 4:47 pm
Four at Four: All GE, All the Time
Posted by David Gaffen

Sometimes General Electric Co. is a proxy for the stock market. Friday, GE was the stock market. Shares ended the day lower by 12.8%, the worst one-day performance for the stock since Oct. 19, 1987, as more than 335 million shares traded, or about 10% of the listed volume on the Big Board. The sharp decline indicates that this was a massive surprise to investors, and while the company has a reputation of deftly hitting earnings, quarter after quarter, the problems in the credit markets lead one to believe that perhaps this should not have been a surprise. CEO Jeffrey Immelt, speaking on the firm’s conference call, said that “the $500 million plus in commercial finance that we missed in the quarter fundamentally took place with really the inability to do transactions in the last two weeks that we normally could get done and marks that basically we do at the end of the quarter that basically all went negative.” In other words, just like a lot of other financial companies that rely on borrowing money to make certain loans that could not later be sold. “It’s a huge lender and they fund these loans through commercial paper,” says George Feiger, CEO of Contango Capital Advisors, the wealth management arm of Zions Bancorporation. “Why should it be better off than Merrill Lynch or Citigroup or anybody? Essentially, it’s a collateralized lender on a huge scale. Nobody should be surprised GE is having the same mark-to-market problems that every other CLO is having.”