$50bn Friday – GE Swallows Its Own Tail To Lift Markets

Another day, another $50bn.  

That’s how much of their own stock GE will be buying back (20% of the company) after selling most of their GE Capital Assets to Blackston (BX) and others.  Keep in mind $50bn is about what the big Central Bankers pour into the markets in a whole month and GE is now the 2nd public company to match them this week (RDS-A dropped $70Bn on the markets on Tuesday).

Though the markets are taking it as a positive (GE must be undervalued, right?), I take it as a sign that GE is worried about Commercial Real Estate again and they are cashing out while they can and, since there is nothing worth buying with $35bn and since money is cheap, they are using the cash to fund a massive buyback to reduce the number of shares their shrinking earnings are divided by in order for the board of directors to keep their phony-baloney jobs.  

After all, you don’t need to pay out tens of Millions in salaries, bonuses, stock options, etc. to have Immelt and his Board preside over a liquidation sale – do you?  That’s why it can’t LOOK like a liquidation sale – it needs to look like restructuring for the 21st Century or some such nonsense you can expect to read about in the annual report.  

Don’t get me wrong, I love GE.  We were buying it hand over fist when it was under $10 back in the crisis but, at $25+, we liquidated our positions because we (like GE, apparently) couldn’t see how they could generate good returns off the current conglomerate mix they cem into 2014 with.  So a radical restructuring is a good idea if they ever want to see $50 again but this isn’t a restructuring, this is a retreat.  

Selling $35bn worth of assets it took decades to accumulate and borrowing another $15bn to buy back your own stock is NOT about building for the Future – it’s about propping up the present!

We already took adavantage of the early excitement to short the /ES (SPX) futures at 2,090 in our Live Member Chat Room.  We expect a sell-off into the uncertain weekend and the strong Dollar (99.97) also argues for a pullback in our equities. Yesterday we had another $1,000 per contract winner on Gasoline Futures (/RB) – simply going long off the same $1.75 line we had identified for you last week.