My long standing warnings about [GE] are looking prophetic now.

Long time readers know that when nobody else in the universe thought there was any trouble brewing at GE, I was using my Elliott wave model to predict a major top and then a massive drop for the shares.  I also wrote time and time again how obvious it was that GE was running a vendor finance scam.  It sounded so stoooopid and conspiratorial back then to most people but of course they do not do their homework like I do and so there is no way they can see the same things I see.

But the time now runs short for the GE Ponzi and I say this for two reasons.  First, the Elliott wave model looks like the A wave is complete and we are just waiting for this B wave to finish.  B waves can be complex so I am not saying it is finished yet.  It might turn out to look like per below.  That would be a classical horizontal triangle B wave.  But other variants are still possible.



So the stock is eventually going to collapse even more but I predicted many times that GE will BK and or be broken up to avoid the appearance of the actual BK that happens.  But that second "softer" BK event, the one where the system steps in to save face by papering over the fraud and theft that happened at GE all these years even back to Jack Welch (who I will now refer to as "the Bill Cosby of CEOs" because of the way he wagged his fingers at wrong-dooers while being a scum bag himself), I think that is off the table now.  And the reason is that the same forensic accountant who figured out Madoff was a Ponzi is now out with a 175 page report calling GE "a bigger fraud than Enron".   Harry Markopolos wrote in that report that, “My team has spent the past 7 months analyzing GE’s accounting and we believe the $38 Billion in fraud we’ve come across is merely the tip of the iceberg”. 

Well well well.  There is is.  Harry M is not going to make up fake facts and he is not going to overlook real ones.  The guy is a forensic accountant.  He's a Sherlock Holmes of the financial shell game.  He's not guessing or speculating or postulating.  He fucking knows. He's got the hard data. 

But I beat him to the punch by many years.  I wrote that GE was running a vendor finance scam.  It's an old con game that can be explained very simply:
- GE wanted to sell things but nobody has cash in a debt Ponzi so they needed to find people who would go into debt to buy their products (aircraft engines, etc.)
- But all the usual suspects had bad credit.  Airlines are well known to be boom and bust bankruptcy plays.  So no real bank would loan them money at low interest rates.
- But despite having massive debt and little cash, the credit markets rated GE debt AAA.  And so GE used this fact to become a shadow bank.  It would "sell" its products to deadbeat debtors on credit and then carry the associated debt on its books.  It would claim massive profits from these sales and the likes of Jack Welch were hailed as heros for it.  But these were not real profits because they were generated with unpayable debt.

Markopolos is simple providing the details about what I already knew was true.  Look at the model I presented there and compare it with current actual.  In that post I wrote, "When this chart support breaks down, GE will most likely go into freefall".  And that is pretty much just what happened.

GE now has $13.6 bn in cash holding down $110bn in debt.  But with all of its vendor finance operations having been sold off (and I am sure the federal reserve was using its post 2008 powers to force GE to do it), GE will no longer be able to generate all those fake sales it once used to and the weight of its debt will eventually crush the equity holders and the bond holders will take a massive beating as well.

I have to give the fed credit for winding GE down during the good times.   I recall a time when GE had $36bn in cash holding down $512 billion in debt.  GE found suckers to unload all those fraud-filled finance unit onto.  The solution for pollution is dilution.