Jubak says sell GE. GE involved in SUB PRIME MORTGAGES!!

Discussion in 'Trading' started by S2007S, Mar 19, 2007.

  1. S2007S



    Sell General Electric (GE, news, msgs).

    General Electric's financial business is always a black box: Investors know that the commercial and consumer financial divisions generated 28% of revenue and 31% of operating profits in 2005, but we don't know what's in the company's portfolio or what its exposure is in such segments as home mortgages and auto lending. I added the stock to Jubak's Picks as an infrastructure play -- the business accounted for 29% of revenue and 33% of operating profits in 2005 -- in May 2006. It wasn't any easier to get a handle on the financial portfolio then. It's just that the risk that some of the holdings of that portfolio might generate substantial losses was much less back then. I frankly don't know that the company's earnings will take a hit because of the emerging problems in the subprime mortgage segment or in the next market-of-concern, auto lending, but the signs aren't reassuring. General Electric's WMC Mortgage business, one of the top 10 subprime lenders in 2006, has laid off 20% of its staff (about 450 employees) and closed four of its nine branches. General Electric bought WMC Mortgage from private-equity fund Apollo Management in 2004. WMC Mortgage made $33 billion in loans in 2006, according to Inside B&C Lending. In the current market, I'm going to play this very cautiously and sell General Electric shares out of Jubak's Picks. The position is just about dead even since I added it to the portfolio on May 12, 2006. (I'm also removing the "buy" rating at this time from General Electric in the 50 Best Stocks in the World portfolio.)
  2. nkhoi


    on personal note, GMAC kicked my loan back to the first lender, so look like they were trying to clear the book already. One angle is the more gov't step up in deportation of ill alien the more big houses will be in default, esp. those houses with mult families.