Author Topic: Big Banks GE Short Manipulation  (Read 1544 times)

Kcinegnet

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Big Banks GE Short Manipulation
« on: August 15, 2019, 10:28:42 AM »
Anyone following the GE accusations per Markopolos? I'm in it for the long term and curious what do others think of this? Could be a great buying point.

Seems like there has been awful lot of manipulation via GE the past few months.

Blueberries

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Re: Big Banks GE Short Manipulation
« Reply #1 on: August 15, 2019, 11:11:44 AM »
Why risk it when there is easier money to be had?

FIRE4Science

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Re: Big Banks GE Short Manipulation
« Reply #2 on: August 15, 2019, 11:25:11 AM »
-13% drop today, seems pretty easy money when shorting.

bwall

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Re: Big Banks GE Short Manipulation
« Reply #3 on: August 15, 2019, 12:47:59 PM »
I wouldn't touch GE with a long pole. A short one, perhaps. .  . . ok, who wants bad puns. . ..

I think that Markopolos' claims have merit. And, at -13%, the market thinks so as well.

The core of Markopolos' claims are GE's long term care insurance which was booked as earnings (income, profit, whatever), and not held in reserve for the eventual pay-out. Booking them as such helped GE to 'make the numbers' quarter after quarter for years (decades?). Now the inside parties (beneficiaries) are in need of care and it's time to pay the piper, so to speak. Lots of losses ahead.

Caveat Emptor.

Kcinegnet

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Re: Big Banks GE Short Manipulation
« Reply #4 on: August 15, 2019, 01:03:46 PM »
Why risk it when there is easier money to be had?

"Be greedy when others are fearful" -The Man, The Myth, The Legend

Chris Pascale

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Re: Big Banks GE Short Manipulation
« Reply #5 on: August 15, 2019, 10:05:26 PM »
I had the same initial thought - the current price is that of the 1990's, and I like GE as a company.

If they survive (no company lasts forever) this round, we might get to pick up shares for a dollar or less. It's happened with other giants, like Fannie/Freddie.

MustacheAndaHalf

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Re: Big Banks GE Short Manipulation
« Reply #6 on: August 15, 2019, 10:19:10 PM »
Why risk it when there is easier money to be had?
"Be greedy when others are fearful" -The Man, The Myth, The Legend
But Warren Buffet doesn't own GE.
https://www.cnbc.com/berkshire-hathaway-portfolio/
In an interview last year, he said the price wasn't right to buy GE - after they had fallen -50% within 2018.  GE miscalculated reserves needed for their long-term health insurance business, and had to cough up billions...  and there was already an SEC and DOJ investigation into GE.  So that seemed like a bad year...  ...and now GE has fallen almost -50% again, to $8/share, for roughly the same reason: they probably don't have the billions they need to cover the costs arising from their long-term health care business.

I don't know GE, but Buffet has also mentioned that the insurance industry has this sort of problem.  New companies get in the market, and offer great discounts - better prices than Buffet's company could afford.  Then, years later, the costs arrive and those same companies go out of business.  I think it's telling that Buffet hasn't bought GE, and is very familiar with the type of problems their going through.  But who knows, maybe his next filing will show GE shares.

talltexan

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Re: Big Banks GE Short Manipulation
« Reply #7 on: August 16, 2019, 06:45:22 AM »
I had the same initial thought - the current price is that of the 1990's, and I like GE as a company.

If they survive (no company lasts forever) this round, we might get to pick up shares for a dollar or less. It's happened with other giants, like Fannie/Freddie.

Can you go into more detail about why you like GE as a company? I see good parts (their aviation/jet engine business), but I also see storm clouds.

MaaS

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Re: Big Banks GE Short Manipulation
« Reply #8 on: August 16, 2019, 10:46:17 AM »
I'm not even close to capable of having an informed opinion on the claims being made, but I wouldn't touch GE. In my view, it's a failing company. The pension obligations alone are astonishing. The company will eventually be sold off for parts IMHO.

UnleashHell

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Re: Big Banks GE Short Manipulation
« Reply #9 on: August 16, 2019, 11:01:44 AM »
no idea if the allegations are true or not but I wouldn't be surprised if some people have made a lot of money on some massive short positions this week.

Travis

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Re: Big Banks GE Short Manipulation
« Reply #10 on: August 18, 2019, 01:05:40 AM »
no idea if the allegations are true or not but I wouldn't be surprised if some people have made a lot of money on some massive short positions this week.

This actually include Markopolos - the guy making the claim.  Is it shady, or putting your money where your mouth is?
« Last Edit: August 18, 2019, 01:09:55 AM by Travis »

2sk22

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Re: Big Banks GE Short Manipulation
« Reply #11 on: August 18, 2019, 03:31:51 AM »
Just goes to show that the time for conglomerates is over. I bought a few GE shares in 1999 at the hight of the bubble and have held them all the way down. Saving them now for when I really need a tax loss.

Travis

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Re: Big Banks GE Short Manipulation
« Reply #12 on: August 18, 2019, 05:11:34 AM »
Just goes to show that the time for conglomerates is over. I bought a few GE shares in 1999 at the hight of the bubble and have held them all the way down. Saving them now for when I really need a tax loss.

1999? Ouch, you timed that one perfectly.  It's recovered most of what it lost last week, but even if only half of what Markopolos claims is true, that stock isn't going anywhere for years until they can clear this insurance thing from their books.

Indexer

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Re: Big Banks GE Short Manipulation
« Reply #13 on: August 18, 2019, 05:43:39 AM »
Just goes to show that the time for conglomerates is over. I bought a few GE shares in 1999 at the hight of the bubble and have held them all the way down. Saving them now for when I really need a tax loss.

Tax losses can be carried forward. You can sell it today and use that tax loss in a future year to offset gains. You don't have to keep holding onto it.



Whether to buy GE?  I would say no. Is this a short term problem that will likely correct itself, like BofA in 2009, or is this a long term problem?

I lean towards long term. They have a lot of pension obligations, and if they can't do well in a strong economy what will they look like in a recession?

BicycleB

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Re: Big Banks GE Short Manipulation
« Reply #14 on: August 18, 2019, 12:35:36 PM »
Just goes to show that the time for conglomerates is over. I bought a few GE shares in 1999 at the hight of the bubble and have held them all the way down. Saving them now for when I really need a tax loss.

:)

no idea if the allegations are true or not but I wouldn't be surprised if some people have made a lot of money on some massive short positions this week.

This actually include Markopolos - the guy making the claim.  Is it shady, or putting your money where your mouth is?

I think it's possible for shady activity to appear like this - you short the stock, then circulate bad news about it. But I think shorting is a legitimate activity. Circulating false stories to make a quick profit on fake news would be shady. I suspect Markopoulos is sincere in his allegations and has reasonable evidence to back them up, so probably "putting your money where your mouth is".

I'm happy for him to make some money, keeping the amount of accounting fakery down to a manageable level. I'd rather have a fair reliable price for my VTSAX than a high fake one.

chasesfish

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Re: Big Banks GE Short Manipulation
« Reply #15 on: August 18, 2019, 03:39:34 PM »
Sit on the sidelines for this one, you don't know how a battle of billionaires will turn out.  The accountant plus his hedge fund are on one side while people like Stanley Drukenmiller (who made a pile of money shorting GE) just went long on this stock.  The CEO (who isn't really rich by any means) dropping $2mil of his own money on the stock is interesting too.

Last time I saw something like this was Ackman & Ichan on Herbalife.  I think Ackman was right that it was a pyramid scheme, but he lost.

If you want some good activist investing right now, look at Aramark.  Probably buying tomorrow.


2sk22

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Re: Big Banks GE Short Manipulation
« Reply #16 on: August 19, 2019, 10:12:30 AM »

Tax losses can be carried forward. You can sell it today and use that tax loss in a future year to offset gains. You don't have to keep holding onto it.

Whether to buy GE?  I would say no. Is this a short term problem that will likely correct itself, like BofA in 2009, or is this a long term problem?

I lean towards long term. They have a lot of pension obligations, and if they can't do well in a strong economy what will they look like in a recession?

Thanks for the info about carrying forward the loss. I just checked and its down 80% from what I paid in 1999! I don't think any retail investor ought to be buying such a shaky company at this time. I wonder if the index funds are the main buyers?

2sk22

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Re: Big Banks GE Short Manipulation
« Reply #17 on: August 19, 2019, 10:18:27 AM »
I tust took a look at the holdings of FSKAX, the Fidelity total market index fund and they have over 18 million shares in GE!

markbike528CBX

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Re: Big Banks GE Short Manipulation
« Reply #18 on: August 19, 2019, 10:50:05 AM »
Thanks for the info about carrying forward the loss. I just checked and its down 80% from what I paid in 1999! I don't think any retail investor ought to be buying such a shaky company at this time. I wonder if the index funds are the main buyers?

Index funds are nearly always capitalization weighted. GE capitalization #shares x price/share has gone down so there is no reason to buy for an index.

Actively managed funds may or may not be buying.

Also, has GE done any stock splits since 1999?  You might be ok on a stock-split basis.
I.e. (1999 #shares x price/share) - (2019 #shares x price/share) = gain or loss

Edit:
According to https://www.macrotrends.net/stocks/charts/GE/general-electric/stock-splits
GE split 3:1 in 2000. So if you bought in 1999, you now have 3xthe shares you bought in 1999.
« Last Edit: August 19, 2019, 10:57:02 AM by markbike528CBX »

marty998

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Re: Big Banks GE Short Manipulation
« Reply #19 on: August 20, 2019, 03:11:25 AM »

Index funds are nearly always capitalization weighted. GE capitalization #shares x price/share has gone down so there is no reason to buy for an index.

This is not correct. Index funds will buy when people tip more money into the fund.... they'll just buy GE in proportion to the index.

If GE if 1% of the index (for argument sake), and if investors tip $1 billion into an index fund this week, then the fund has to go out and buy $10 million of GE stock.


MustacheAndaHalf

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Re: Big Banks GE Short Manipulation
« Reply #20 on: August 20, 2019, 08:08:33 AM »

Tax losses can be carried forward. You can sell it today and use that tax loss in a future year to offset gains. You don't have to keep holding onto it.

Whether to buy GE?  I would say no. Is this a short term problem that will likely correct itself, like BofA in 2009, or is this a long term problem?

I lean towards long term. They have a lot of pension obligations, and if they can't do well in a strong economy what will they look like in a recession?

Thanks for the info about carrying forward the loss. I just checked and its down 80% from what I paid in 1999! I don't think any retail investor ought to be buying such a shaky company at this time. I wonder if the index funds are the main buyers?

Not only that, but it's actually better when you don't have long term losses.  Then $3,000 of the loss counts against your income, which is more valuable.  The rest carries over to next year, when it cancels against long-term losses first, and then up to $3,000 against income.  That loss might be more valuable than GE stock to you.

markbike528CBX

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Re: Big Banks GE Short Manipulation
« Reply #21 on: August 20, 2019, 09:18:51 AM »

Index funds are nearly always capitalization weighted. GE capitalization #shares x price/share has gone down so there is no reason to buy for an index.

This is not correct. Index funds will buy when people tip more money into the fund.... they'll just buy GE in proportion to the index.

If GE if 1% of the index (for argument sake), and if investors tip $1 billion into an index fund this week, then the fund has to go out and buy $10 million of GE stock.

True, but only if there is a big influx of money.  And as you note, the GE buying is incidental to normal fund operations.  I took 2sk22's question to be if indexes are buying on the GE dip.

BicycleB

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Re: Big Banks GE Short Manipulation
« Reply #22 on: August 20, 2019, 10:40:58 AM »

Index funds are nearly always capitalization weighted. GE capitalization #shares x price/share has gone down so there is no reason to buy for an index.

This is not correct. Index funds will buy when people tip more money into the fund.... they'll just buy GE in proportion to the index.

If GE if 1% of the index (for argument sake), and if investors tip $1 billion into an index fund this week, then the fund has to go out and buy $10 million of GE stock.

The part about index funds nearly always being capitalization weighted is correct. You're both saying that GE will be bought and held in proportion of its capitalization relative to the index. So you're both correct that if GE declines, the fund doesn't need to buy any for that reason.

I think markbike probably agrees that the only reason for the index to buy GE is in response to customers buying more index shares. I know I do.  :)

marty998

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Re: Big Banks GE Short Manipulation
« Reply #23 on: August 20, 2019, 03:08:26 PM »

Index funds are nearly always capitalization weighted. GE capitalization #shares x price/share has gone down so there is no reason to buy for an index.

This is not correct. Index funds will buy when people tip more money into the fund.... they'll just buy GE in proportion to the index.

If GE if 1% of the index (for argument sake), and if investors tip $1 billion into an index fund this week, then the fund has to go out and buy $10 million of GE stock.

True, but only if there is a big influx of money.  And as you note, the GE buying is incidental to normal fund operations.  I took 2sk22's question to be if indexes are buying on the GE dip.

Got it, agree, I understand you now :)

Funny how a simple statement can be construed two different ways.