ES -- DX/CL -- isee -- cboe put/call -- specialist/public short ratio -- trinq -- trin -- aaii bull ratio -- abx -- cmbx -- cdx -- vxo p&f -- SPX volatility curve -- VIX:VXO skew -- commodity screen -- cot -- conference board

Friday, March 06, 2009

 

bronte suggests GE will make it


similarly to the banks in john hempton's view, if the government secures low cost funding for it earnings will see it through in the course of a few years.

Now if the losses are going to be that elevated (and they will) then GE should be taking the provisions when it deems them likely. That is when they are incurred. If they were to do that then the tangible capital of the whole of GE goes negative.

However if they take the extra provisions over three years then pre-tax, pre-provision earnings (ie Voodoo maths) will see them through.

Oh, if the losses are where the bears think ($60 billion range) and if the government supports GE’s liquidity (likely in my view) then voodoo maths will still see GE through – but the time period is five years and the dividend gets cut to zero.

The stock may not be a buy - but on those sort of numbers the CDS is unnecessarily wide - and Warren Buffett will make money on his preferred.


bronte also posted this laudable effort on bank solvency and the geithner plan which merits a complete read.

Labels: ,



This page is powered by Blogger. Isn't yours?