GE update

GE was down 1.32% today in line with the DJIA loss of 1.35%.  The market thinks GE is safe and sound; a rock.  I think it's limestone sitting in a vat of acid.  Time will tell but I averaged up my Jan 2016 $13 puts today.  I sat on the bid at 0.16 all morning but they would not come down.  So I entered a bid of $0.18 and left it for an hour with no bites.  Since I think that the handicappers (options sellers) are still grossly underpricing the risk in GE shares, I finally ended up buying 100 contracts, the only print for the day, at $.20.


I intend to slowly continue to build my position in these.  If we get a big rally in these shares (perhaps into the ex-dividend date?) of the kind I suggested was possible here then I will use the opportunity to triple my position.  GE is going down even if nobody else knows it yet.  It is a leveraged shadow bank with ~$379 billion in debt and only $~10 billion in cash.  When interest rates begin to climb it will have ever more difficultly not only increasing its vendor finance operations but also in rolling its own debt over at reasonable cost.  As soon as they have a bad quarter (coming soon IMO), they will cancel the dividend to save cash.  Keep in mind that the payout ratio for the divvy is an uncomfortable 67%.  If profits go down in any manner, the divvy will be slashed because they are already using most of the profits for that purpose.  When the divvy goes, the institutional investors will abandon GE shares as they will no longer provide the much needed cash flow of insurance and pension funds.