Thursday, April 09, 2009
steve eisman on GE
GE Capital is currently hiding $40-$45 billion of embedded losses in the GE Capital portfolio. This $40-$45 billion of losses, if rinsed through the income statement all at once, would wipe the company out. In fact, if GE weren't able to fund itself with the "heroin injection" of the government's commercial paper program, it would already be bankrupt.
So is GE toast?
No. Unlike banks, GE is not required to mark its assets to market, so Eisman thinks the company will just hobble along for years as the bad news gradually works its way through its income statement (the very definition of a zombie bank). The losses will hammer GE's earnings, though. Especially as the performance of the industrial business deteriorates.
similar to john hempton's analysis.