GE shares have been climbing my wall of worry for a long time now and so I had to step back and wait for something new to happen before beginning to post about it again. I went pretty heavy into put options on it too soon and they will expire shortly and worthless. Such is the risk you take with that kind of leverage.
Still, I am convinced that it is a shadow bank which tried to divest itself of leverage but that it will end up not being enough. I still believe that GE will BK or have to be broken up by government intervention in the next big downturn. Yes, I might be the only person on the planet saying this because all you hear in the news is upbeat stuff like this, but I look at that debt bomb that it is still carrying around after selling everything that wasn't locked down and I know that when interest rates begin to rise that GE will have to roll that mess over at higher and higher rates. It will become the ago old debt spiral with debt service consuming a larger and larger portion of operating profits.
So maybe that will happen, but WHEN? Well, nobody knows the future with certainty but this chart has all the hallmarks of a stock that is about to hit a brick wall. I'll change my mind quickly if it can break that blue line at the red arrow and hold it for more than a week or two but I model the most recent rally as the E wave of an expanding wedge. There there is no way they are going to hold that rapid 50% gain IMO and when these things break down they tend to do so with gusto.
The last trade on GE Jan 2018 $18 puts was $.57. The market is obviously feeling very confident about GE shares because that price seems awfully low given that the options have 2 years of time in them. A Hell of a lot can happen in 2 years....
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