Click chart to enlargeOne of the more ominous looking charts is that of GE. Currently (10amEST), the Dow is up 50 points, and GE is down over 5%. Just judging by the chart, GE looks like it's in every bit as much trouble as C, BAC, and the automakers. With chart activity like this, it's very possible that we see GE drop to $2 and become the next big news story, complete with bailouts and talks of bankruptcy. Whatever is going on at GE, one thing is clear... investors are running for the exits.
16 comments:
Not that technicals are anywhere near as important as the fear/despair is these days but...
When the S&P500 falls to 664.87, that would be a full 61.8% Fibinocci Retracement off of the beginning of the bull market in 1980-1982 when the S&P index was near 100. Only 27 years in the making!
Will that level be meaningful in any way? Let's touch it soon and find out!
Snot and Others,
Sorry if the question is too basic...
Can a company go bankrupt based on plunging stock price?
Even if a company has some earning but the stock price is heading toward 14 cents, how would that really effect the company? (assuming future earning is in place too)
Thanks,
Mark
GE will go bankrupt if their borrowing costs get too high. A falling stock price is one of many factors that can contribute to a loss of credit rating.
This is a company that has spent decades bloating up like a fat pig on billions of dollars in government defense contracts that pay far more money for products than they are worth. The core of the military industrial complex is falling under attack precisely because the market knows this level of spending cannot continue much longer. I know a certain subsidiary of GE that spends tens of millions of dollars on computer products that were designed 20 years ago, and could easily be replaced with new products at 1/100th the cost. The only reason it is not done is because everyone in the pipeline is fat and happy living off government gristle for so long that they cant even do the modest engineering work required to implement new designs. Think $800 for a hammer is cliche? Try $800 for an ethernet switch that we buy for $15. How about $10000 for a computer board that is so obsolete that 50 of them could be replaced by a single pc bought off ebay for $50? (I'm not suggesting they do that, but I'm just illustrating how far technology has advanced.) This sort of waste has infected GE to the point where it has completely doomed itself. Collapse is inevitable.
With all that being said, I think GE is a solid buy at $6.10. lol. Very strong support at that level.
Anon,
Companies use many creative accounting techniques (some legal, some not) to make it appear as if they have earnings, when in reality they may not. Bottom line, the lower a stock goes, the more attractive it becomes for someone to acquire the company. If a stock is just sliding nonstop to the penny range, it's a very safe assumption that no other company wants it. Regardless of how squeaky clean the books may look, there is always a reason behind a stock's decline. The chart tells you far more than the fundamentals ever will. If rival companies don't want to add the ailing company to their assets, then just assume that company is worthless, and their books are a creative work of fiction.
This chart may have been buried on the Mar 2 post, so am re-entering it here. Uncle Ben expressed his anger at the bailout today. How about fury? Teeth clenching rage? That's how I feel. Anyhow, have a peek:
http://finance.yahoo.com/charts?s=C#chart1:symbol=c;range=my;compare=bac+aig;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
Here's another question: What are the signposts, the quantifiable benchmarks the government is looking to achieve with all this bailout money. What are the specific timelines? What are its specific short term goals? 'With this amount of money, we expect this result.' Otherwise, I think we can simply expect more of the same.
Scary chart, sb.
GE is down another large percentage today, despite a rally for the Dow. If ever there was a company headed for the 2's, this would be it. If Buffett loved it at $25, then surely he's backing up the truck here at $6.
And the hits just keep on coming. Both BGU and GE up 10% from my target prices. As usual I'm not being too greedy, taking 1/3 profits at 5 and 10%. I think the rally is going to have more legs than just today, but since I pretty much went all-in on this, I have to get back to a balanced position.
Here is an article about whats going on with GE.
There's also talk of sovereign funds bailing GE because of a possible credit rating downgrade.
From the web:
Gotta learn the new lingo to understand todaze market...
CEO- Chief Embezzlement Officer
CFO - Corporate Fraud Officer
BULL MARKET- A random market movement causing an investor to
mistake himself for a financial genius
BEAR MARKET- a 6 to 18 month period when the kids get no
allowance, the wife gets no jewellery, and the husband gets no sex.
VALUE INVESTING- The art of buying low and selling lower.
P/E RATIO- The percentage of investors wetting their pants
as the market keeps crashing.
BROKER - What my financial planner has made me.
STANDARD & POOR- Your life in a nutshell.
STOCK ANALYST- Idiot who just downgraded your stock.
STOCK SPLIT- When your ex-wife and her lawyer split your
assets equally between themselves.
MARKET CORRECTION- The day after you buy stocks.
CASH FLOW- The movement your money makes as it disappears
down the toilet.
YAHOO - What you yell after selling it to some poor sucker
for $240 per share.
WINDOWS- What you jump out of when you're the sucker who
bought Yahoo at $240 per share.
INSTITUTIONAL INVESTOR- Past year investor who's now locked
up in a nuthouse.
PROFIT - an archaic word no longer in use.
# # # # #
If you had purchased $1000 of shares in Delta Airlines
one year ago, you will have $49.00 today.
If you had purchased $1000 of shares in AIG
one year ago, you will have $33.00 today.
If you had purchased $1000 of shares in Lehman Brothers
one year ago, you will have $0.00 today.
But---- if you had purchased $1000 worth of beer
one year ago, drank all the beer,
then turned in the aluminium cans for recycling refund,
you will have received $214.00.
Based on the above, the best current investment plan
is to drink heavily & recycle.
It's called the 401-Keg.
Hi - I'm working on a feature film documentary, and just saw your 3/2 posting with the AIG letter. I sent it to our producers because I think its:
1) very funny
2) such a great way to illustrate how we're all losing out because of the bailouts.
If you have time, it would be fantastic to speak with you about our documentary. In a nutshell, it's about our country's financial situation, and it should be appearing in theaters around the country.
The executives, by the way, loved the letter. We're in the process of shooting, and it would be terrific to email/speak with you whenever your schedule allows. I posted this on your AIG page, so apologies if you've already read this.
Thanks so much!
Karey
Icon, is GDX and GLD pretty much inline with what you are expecting?
Another truly demoralizing day. Why isn't the Obama Administration announcing the bank bailout details? WTF is wrong with them? How many more trillions do they want to see detroyed?
At least the NDAQ finally broke to new bear market lows so the "technicians" don't have much to hold onto anymore. Nothing but blue ocean below (as opposed to blue sky above) and with tomorrow being a Friday you know we're going lower still. This is beginning to not only suck, but it's beginning to suck Pete Schwetty's balls!!!
Yeppers. I expected GDX to close on its 50-day, and it did. A down day tomorrow produces a sell signal. But since its already up 10% from tuesday's low, I wouldnt be waiting for confirmation. At any given moment, the action in the broader market could initiate forced selling of gold and gold miners especially. The DOW needs to fall to 6450 to touch the descending rsi support line. (Or SPX @ 650.) I think that's when we will get the next tradeable bounce. But there's no convergence this time so I'm not expecting to scalp more than 5-7%.
icon: just curious about your comment about the broader market initiating forced selling of gold and gold miners. i understand gold miners, as i've definitely noticed they are more affected by the markets. but with more negative action in the markets, doesn't that create more demand for 'safer' investments, with gold being one of the ones considered safer? why would there be forced selling of gold?
tia,
rl
I've got this DOW:GOLD chart bookmarked.
I expect the DOW:GOLD ratio to fall to historical lows, however it is important to note that DOW 7000:GOLD 1000 produces the same ratio as DOW 3500:GOLD 500. And when we get down to 2:1, it could be DOW 1600:GOLD 800, or DOW 6000:GOLD 3000. Either way, its still a 2 to 1 ratio. One cannot invest in gold without hedging it against the DOW somehow. If gold does run up to 2000 or higher, it will mean the DOW is doing relatively ok. But if gold stays down then the DOW will and must be heading to the crapper. So one would have to short the DOW/S&P (long term, not through any of the proshares ETFs) in order to properly play the DOW:GOLD ratio down to 2:1.
icon: thank you for taking the time to try and explain. i took a look at the chart you posted and it makes absolutely no sense to me at all, but that is probably more a reflection on my abilities than anything else.
if i understand you correctly, you expect the dow:gold ratio to drop from current 7:1 to 2:1, but maybe i'm not understanding it correctly...
but if so, then it would seem gold would be a much better place to park your money than equities. based on your hypothetical numbers above, if we get to dow 5000 (like some folks are saying) and gold is at 2500, then my investment in gold right now is going to look real good.
i guess what i'm confused about is if you expect the dow:gold ratio to drop from 7:1 to 2:1, i don't see how that can't be bullish for gold. that would mean the dow can go all the way to 2000 and gold would still be above where it's at today, right?
again, tia.
rl
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