GE below $9.00 a share..!

Topspin said:
It didn't take me long. GE stinks to high heaven, what looked like a buy because of the soon to be cut dividend and it's green potential is a bomb waiting to blow up. I'm going to call ameritrade and get options access to buy puts on GE.
why?
1. they had to put in $15,000,000,000 to protect cds positions a while back and are again at risk of having to pour more good money after bad (read betting on interest rates, the worst corp behavior).
2. They have 36 billion in commercial real estate and have only written down 1% against it. Goldman has written theirs down 25% as a comparison.
3. They have 60 billion in mortgages that they have only reserved 11.9% against those currently 90 days delinquent. Are you kidding me?

Freak give me a tip on buying puts, this will be my first go round say I expect GE to blow up in less than a year. Should I buy a but out at the end of the strike dates to be safe?
Click to expand...


When buying options, the risk increases drastically as the time to expiration diminishes. The in-the-money puts are less aggressive than the out of money puts.

Personally, I would not touch the puts on GE right now as they are pricey... an example....

The Jan 2010 puts with a strike of $10 are bidding $3.50 right now. Which means the stock needs to decline to $6.50 for you to start making money. Thats another 35% drop from here on top of the 50% decline YTD...

While I agree it is likely to drop and also likely to cut dividends, this is also GE and thus you have to look at what their other sectors are capable of. It is still profitable...

their commercial properties dont necessarily need to be written down as it depends on what type of properties they have and where they are located. It also depends on how long they have had the properties in the portfolio and whether they are mortgaged (and to what extent) or not. I own several private REITS for individuals that have actually seen their property values increase over the course of this year. Mainly due to the location of the properties and the fact that they were able to buy a few properties at firesale prices as others got caught needing liquidity.

The other issues are a concern...

Personally I will avoid taking a position on GE. It is just too big and diversified to tell what impact the financial segment will have.
 
30% of their commercial property was acquired in 2007, I find it hard to believe 1% is sufficient.
S&P has them at $14 in 12 months which is a serious gain. I'll pass on the puts for now and will watch the next couple qtrs for potential write downs and div cuts.
I've got a couple reits two, but unlike you I have had my teeth kicked down my throat on all three of them.
 
Topspin said:
30% of their commercial property was acquired in 2007, I find it hard to believe 1% is sufficient.
S&P has them at $14 in 12 months which is a serious gain. I'll pass on the puts for now and will watch the next couple qtrs for potential write downs and div cuts.
I've got a couple reits two, but unlike you I have had my teeth kicked down my throat on all three of them.
Click to expand...

I don't know about the individual assets in GE's portfolio but we have clients such as CalSTRS which have multi-billion dollar portfolio's similar (in size) to GE's and they've had 20% - 30% write down on their overall real estate portfolio this year. And 2007 was the peak so there is almost no way to avoid taking a (large) hit on assets purchased that year.
 
Topspin said:
30% of their commercial property was acquired in 2007, I find it hard to believe 1% is sufficient.
S&P has them at $14 in 12 months which is a serious gain. I'll pass on the puts for now and will watch the next couple qtrs for potential write downs and div cuts.
I've got a couple reits two, but unlike you I have had my teeth kicked down my throat on all three of them.
Click to expand...

The difference is whether they are public or not. The private REITS I use buy properties direct in certain geographic regions. They also have been in cash raises for the better part of the last two years, which means they have been able to buy into properties as others are forced out. That is what has saved them, whereas their publicly traded couterparts have been getting killed based on the amount of leverage they had and how much debt had to be refinanced in 2008/09/10.
 
Jarod said:
Toyota Motor Corp $31+ a share...

Ford $1.88 a share....


Ford might be a good buy at this price, I believe they will survive this crisis, but I am not sure.
Click to expand...

I think Ford is a great buy, if GM and/or Chrysler do fail, then when we come out of this in a healthy auto market, Ford will have that much more a share of the domestic buying market.
 
KingCondanomation said:
I think Ford is a great buy, if GM and/or Chrysler do fail, then when we come out of this in a healthy auto market, Ford will have that much more a share of the domestic buying market.
Click to expand...


If GM and Chrysler fail Ford will likely go down with them.

Ford didn't show up at the bailout hearings to ask Congress to give Chrysler and GM billions of dollars because it likes the concept of competition.
 
Dungheap said:
If GM and Chrysler fail Ford will likely go down with them.

Ford didn't show up at the bailout hearings to ask Congress to give Chrysler and GM billions of dollars because it likes the concept of competition.
Click to expand...
Fair point, but I think that's a short term outlook. No question they would have pain from having to find some new shared suppliers but in the long run they would have a huge amount more in market share because let's face it, people buy American mainly because of either traditional/national like or better initial price and GM and Chrysler are obviously their top contenders there.

I think Ford wants to see them fail, but not until they are better prepared and the market is better.

But we'll see.
 
Topspin said:
Yeah little guys like me by the public reits. And the big boys get the private offerings.
Click to expand...

The private REITS minimums are typically $2k top. But they are also illiquid until they go public or are sold. So normally you have to invest for a minimum 5 years... could be up to 10.

So its a trade off. I like the private ones because they continually raise cash and thus can take advantage of DCA into real estate. This market worked well for the private side.
 
I seriously doubt GE is 25x better than Goldman Sacks at RE. They'll likely have a residential and commercial hit to earnings this year.
 
Topspin said:
I seriously doubt GE is 25x better than Goldman Sacks at RE. They'll likely have a residential and commercial hit to earnings this year.
Click to expand...

I agree that they likely will. The questions then become.... how much of a hit and can the other GE units gains offset the hit or a portion of it?

This is why it is hard to figure out where GE will end up. If anything a straddle might be the way to play GE.... if the options werent so pricey here. That is why I am staying away.
 
Superfreak said:
The difference is whether they are public or not. The private REITS I use buy properties direct in certain geographic regions. They also have been in cash raises for the better part of the last two years, which means they have been able to buy into properties as others are forced out. That is what has saved them, whereas their publicly traded couterparts have been getting killed based on the amount of leverage they had and how much debt had to be refinanced in 2008/09/10.
Click to expand...

Our private REIT is our only client with equity right now. All our other pension fund clients are overallocated to real estate because of the demoninator effect.

Our REIT's M.O. is long term leased assets to credit tenants. They want cash flow not IRR. They want diversity though as far as product type and location (entire U.S. and the U.K.). Through broker dealers they are raising about $1 million a day on the average.

Similar to the REIT's you invest in?
 
cawacko said:
Our private REIT is our only client with equity right now. All our other pension fund clients are overallocated to real estate because of the demoninator effect.

Our REIT's M.O. is long term leased assets to credit tenants. They want cash flow not IRR. They want diversity though as far as product type and location (entire U.S. and the U.K.). Through broker dealers they are raising about $1 million a day on the average.

Similar to the REIT's you invest in?
Click to expand...

Not quite. The ones I use invest for IRR. The ones I have used in the past tend to be focused. The main one I am buying into right now is multi-family.

The one I used last year was predominantly Class A office space with LT leases to fortune 500 type companies. They raised cash throughout 2007 and 2008, but did not invest the cash until 2nd and 3rd quarter last year. They got some steals. It ended up closing with about $6B in assets. Dividend payout is currently 6.5% and they have coverage for 7%... so they have some cushion if they start seeing defaults on leases. Plus the properties they bought last year only went with mortgages on about 35-45% of the value.

They intend to take it public or sell the portfolio as a whole in the next few years (though more likely closer to 2012 than 2010).

The ones I use are also predominantly domestic.
 
I think options are way to sophisticated for me.
I'm going to start allocating some to Bonds and VNQ the index for REIT's.
 
I sold half my GE today at $10.00 a share. Made a nice profit, lets see what happens with the other half.
 
You must log in or register to reply here.
Back
Top