Friday, July 17, 2009

Thank You General Electric!

A few days ago I wrote in this blog about my short position in General Electric.

Well, today GE did not disappoint me or the other shorts out there.

Shares in General Electric fell a whopping 6% on heavy volume---almost double the normal trading average. Here is a news story on why GE fell so hard so fast today. The bottom line? A disappointment on earnings what else?

Over the last few days GE shares were actually rising, against my short position so I added to it, making today a windfall gain for me. This call was obvious ahead of what was surely going to be grim news for the company.

GE is a great company with superior managers coping with lots of bad market calls and a still deteriorating economy. It still represents a core holding for most investors since it is a bellweather stock for the U.S. economy. But a shrinking GE will mean a shrinking stock price for some time to come. GE Capital, once the growth engine of the company, is now an albatross about its neck.

So what is the future for GE's share price over the next few days, weeks, months? Check out those gaps up and down in the chart above. Not good for a company the size of GE. I'm now long the stock as part of a new position I'll explain at another time.

Buy on the rumor, sell on the news?

No. In GE's case today it was sell on the rumor, buy on the news.

Robert J. Abalos, Esq.