GE slashes quarterly dividend by two-thirds

Bought GE at around $10 holding for the dividend and little appreciation in the stockwhoops!!!!!!!!!!!!!!!!!!!!!!!GE slashes quarterly dividend by two-thirds
Move should save about $9 billion a year; cash to weather the storm
By Christopher Hinton, MarketWatch
Last update: 4:20 p.m. EST Feb. 27, 2009Comments: 73NEW YORK (MarketWatch) -- Economic bellwether General Electric Co. slashed its quarterly dividend by nearly 68% Friday in a move to save its investment-grade credit rating, reversing a 31-year trend of annual increases to its payout.
The Fairfield, Conn., conglomerate said reducing its dividend to 10 cents a share from 31 cents will save the company $9 billion annually. The company has been paying a regular dividend for more than 100 years. In recent months, however, it faced persistent speculation that it would have to slash its payout to preserve cash.
"We recognize the importance of the dividend to our shareholders and the significance of this decision, but we believe it is the right precautionary action at this time to further strengthen our company for the long term, while still providing an attractive dividend," GE Chairman and Chief Executive Jeff Immelt said.
General Electric (GE:General Electric Company
News , chart , profile , more
Last: 8.51-0.59-6.48%

4:00pm 02/27/2009

Delayed quote dataAdd to portfolio
Analyst
Create alert Insider
Discuss
Financials
Sponsored by:
GE 8.51, -0.59, -6.5%) , along with many of the other 30 members of the Dow Jones Industrial Average (INDU:INDU
News , chart , profile , more
Last:


Delayed quote dataAdd to portfolio
Analyst
Create alert Insider
Discuss
Financials
Sponsored by:
INDU, , ) , has been under pressure to raise capital to bulk up its balance sheets. The company has also been determined to maintain its coveted triple-A credit rating to help keep its financial costs down.
Since the recession took grip in mid-September, GE shares have plunged nearly 70% over concerns about its dividend, under-funding in its retirement program and deterioration at its financial arm. The company has been hit hard by the tighter restrictions on credit and declining asset values.
On Friday, the stock fell 6.5% to $8.51.
Analysts at one research firm said they suspected the cut isn't enough, noting the rapid decline of its assets and a need to refinance its expensive, short-term debt over the next 12 months.
"With the tsunami sweeping over the financial sector, it is unrealistic to expect that GE will not get wet," said credit-ratings company Egan-Jones in a research note.
Standard & Poor's said it would leave GE's credit rating unchanged for now at AAA with a negative outlook.
"We estimate that the reduction in the dividend payment will allow cash balances at GE to reach at least $5 billion by the end of 2009 and to grow further in 2010," the credit-rating agency said in a report. "We would view a portion of such balances as a partial offset to GE's now net under funded post-retirement obligations, which we view as a debt-like obligation."
Furthermore, the agency said it doesn't expect GE Capital to make its current 2009 net income guidance of $5 billion.
Moody's Investor Service said it is continuing its review for possible downgrade of GE and GE Capital's long-term ratings.
The decision to cut the dividend follows General Electric's bruising fourth-quarter results on Jan. 23, showing a 44% drop in its net earnings on declines in its financial and consumer-product businesses. That trend is expected to continue through 2009, and the company said it would bulk up its cash reserve to weather the challenge. See full story.
Christopher Hinton is a reporter for MarketWatch based

Citi stock price

Heard an analyst on CNBC say that C is a busted stock and that it is virtually worthless now trading around a $1. It will basically take too long to make back your money.
U.S. government to own up to 36% of Citi
Plans to convert preferred shares, reconstitute board; investors sell stock
By MarketWatch
Last update: 4:57 p.m. EST Feb. 27, 2009Comments: 2007NEW YORK (MarketWatch) -- The federal government tightened its grip Friday on a battered Citigroup Inc., agreeing to convert its preferred shares into common stock and boosting its direct ownership in the nation's once-largest bank to 36%.
The move, which will also install three new directors, presumably aligned with the government's interest in mind, sent Citi shares down more than 30% as the firm also reported another $10 billion in fourth-quarter losses and said it will suspend common- and preferred-stock dividends.
Citi's shares closed off 39% to $1.50.
The shares had fallen as much as 50% before the bell.
The plan marks the government's third attempt in recent months to right the ship at Citi (C:Citigroup Inc
News , chart , profile , more
Last: 1.50-1.05-41.18%

4:02pm 02/27/2009

Delayed quote dataAdd to portfolio
Analyst
Create alert Insider
Discuss
Financials
Sponsored by:
C 1.50, -1.05, -41.2%) , which has been buffeted by bad risk management and huge investment losses.
"What we announced today was not an easy decision for us because we understand the impact of the dilution we are asking you to bear, but in the end, our business is about confidence," said Chief Executive Vikram Pandit on a conference call with investors and analysts Friday morning.
"As a matter of fact," he added, "the entire financial system depends on confidence, and we wanted to take definitive steps to put all capital issues aside."
The move actually leaves the government with a slightly smaller stake than the market had expected, and a bigger stake in other preferred shareholders' hands -- easing at least slightly fears that the bank would be fully nationalized.
"Of course, the government holds a significant amount of common-stock investment in us, but our commitment we have had to every shareholder, which is to provide an exceptional return as we get through this cycle, remains unchanged. And in many ways for those people who have a concern about nationalization, this announcement should put those concerns to rest," Pandit said.
Diluting common equity by 74%
The company said it would issue common stock in exchange for preferred securities, which will increase substantially its tangible common equity, or TCE, without any additional U.S. government investment.
The Treasury said it will convert up to $25 billion of preferred stock issued under its Capital Purchase Program.
Video: Hot Stocks Report: Financials
Bank stocks are back in the market's crosshairs Friday, as the government agrees to boost its stake in Citigroup. MarketWatch's Greg Morcroft reports. (Feb. 27)Private investors also will take part in the conversion of preferreds, and Citi said Government of Singapore Investment Corp., Capital Research Global Investors, Capital World Investors and other major investors have said they will participate in the exchange.
"While we anticipated the government's stake increasing to at least 35%, the privately and publicly held conversion will dilute shareholders more than anticipated," Morningstar analyst Jaime Peters said Friday.
The move will cut current shareholder's stake in the firm to 26%.
"This securities exchange has one goal -- to increase our tangible common equity," Pandit commented.
TCE as touchstone
TCE capital is a measure of the value of a company's common shares, while Tier 1 capital, a more traditional measure, includes common shares, preferred shares and sometimes deferred tax assets.
As the credit crisis has taken hold, TCE has become a touchstone for the market, and been adopted as a more reliable measure of strength.

Interview With Fund Manager David Winters SmartMoney Magazine by Russell Pearlman (Author Archive)

SM: In early 2008 you sensed something was amiss in the market, but you were still down big after that. What happened?
SMARTMONEY: So what's it like to see your fund cut in half in 14 months?

DAVID WINTERS: It's not wonderful, that's for sure. Some of the drops in some securities were just stunning. It was one of these times where you had to clench your teeth and recheck the facts. And when you looked around, you saw that everyone you respect was in the same boat. It's not like they were immune to what was going on.

SM: So did you form a support group?

DW: We'd see one another at a couple of industry events, like the 75th anniversary of the publication of the book Security Analysis. A lot of the serious value players were there, and everyone was basically, "Oh, my God, what's going on?"

SM: In early 2008 you sensed something was amiss in the market, but you were still down big after that. What happened?



DW: About a year and a half ago, we sold almost all of our financials. Then by summer we let cash build and weren't a buyer. That was something we thought was pretty darn conservative going into a tough period. By June you already had Bear Stearns fail. Could I have predicted in June, when we were down 10 or 12 percent, that in the last six months of the year the world would fall off a cliff? No.

SM: You were buying stocks on the way down, too?

DW: In October, when things looked the bleakest, we became a buyer. In retrospect, you didn't want to buy anything. There was such a demand for liquidity that often the best-quality securities went down. The only thing to have done was to have sold everything. It's been like nothing I've ever seen, and if you weren't an adult in 1937 or 1932, you've never seen anything like this.


SM: You were a "vulture" investor during the last market mess, investing in really distressed, sometimes bankrupt businesses. Do you have the same strategy this time?

DW: No. The 2002 vulture period was different because there was a lot of distress, but the world was essentially functioning. And there were actually some really quite good businesses then that were just under distress. If you look at the list of what's troubled now, a lot of these aren't great businesses. By the fourth quarter of 2008, you could buy a triple-A company at a really cheap price. We own a series of securities whose qualities are the highest I have ever seen. We're going from cigar butts to Cartier because you can buy Cartier at cigar-butt prices. These are "loaded spring" businesses. That doesn't mean they won't compress some more. But it will be great if you have a longer time frame -- three to five, maybe 10 years.

SM: So what are some Cartier companies?

DW: We've certainly been a buyer of Berkshire Hathaway (BRK.B: 2564.00, -118.00, -4.39%). It has a great balance sheet. You can do a sum of Berkshire's parts and see the stock trades at a discount to the parts. They were big buyers of securities and whole businesses in this worst period of time, and they held up no better than anyone else did. As it fell we added, because we think the sun will eventually come up. We think we can make a very handsome return on Berkshire Hathaway over the next two to three years, without a lot of risk.

SM: You're big on food companies too?

DW: We like Nestle (NSRGY), a pretty amazing company. You're paying eight or nine times earnings for its food business, and it's growing about 6 to 8 percent organically. People are going to be hungry, and Nestlé has some pricing power. They also have investments in [cosmetics giant] L'Oreal (LRLCY) and [eye medical products firm] Alcon. They sold roughly 25 percent of their Alcon (ACL: 82.36, -3.22, -3.76%) stake to Novartis (NVS: 36.25, -0.06, -0.16%) and have this option arrangement to sell the balance of the stake in 2010. Meanwhile, Nestlé is buying back its own stock -- an average of a million shares a day, consistently.

SM: And you are dipping back into the investment banks?

DW: If we can be a partner at Goldman Sachs (GS: 91.08, -1.07, -1.16%) and pay roughly book value or below, that's pretty neat. The issues of liquidity, we figure they'll get through it. When this crisis lifts, there is just going to be tremendous amounts of business -- an M&A boom and lots of advisory businesses. Goldman Sachs also is a big asset manager. We began to view Goldman Sachs as a loaded spring on a recovery. We've been buying and buying as it's gone down.

SM: You're not worried that there are any big losses or other financial bombshells with Goldman?

DW: I don't know exactly. They seem to have been able to sail through. Yes, everyone who has been a realistic participant in the world over the last 12 months has been through a wild storm. They seem to be a survivor, and we think we can make a ton of money with them.

SM: You've liked tobacco stocks for a long time. Do you still?

DW: We've added. We do not advocate cigarette smoking, but in a scenario when we don't know what's going to happen, tobacco companies have tremendous pricing power over time. And most of the cigarette companies are oriented toward maximizing their value for shareholders. We like the international companies. We like British American Tobacco (BTI: 51.04, +1.15, +2.30%) very much. It's very shareholder-oriented. They buy back stock. They raise their dividend.
They're global. We like Japan Tobacco, too. They are so undervalued, it's wild. Their results have been great, yet the Japanese market has been a very tough place to be.

SM: What worries you in 2009 or beyond?

DW: For everyone, the worry is if there really is a depression and the world stops buying everything for some protracted period of time. I think we'll do okay because we own a bunch of businesses that sell chocolate bars and cigarettes and booze. The world will be a lot happier place if we go on with life. But the longer-term issue is inflation. No one wants to talk about it.

The governments of all the world will do everything they can to restart the economy. But all this money printed has got to be inflationary. So that's why we're oriented to owning businesses that can generate cash and raise prices.

Bill Gross, the $747 billion bond man, declares the death of equities

Bill Gross, the $747 billion bond man, declares the death of equities
Peter Cohan
Feb 26th 2009 at 10:00AMText SizeAAAFiled under: Economy, People, Investing

Stocks are dead for the rest of your life. That's the gist of my exclusive interview with the head of PIMCO Total Return -- the biggest bond fund you've never heard of. But you should know PIMCO because its chief, Bill Gross, is one of the world's most powerful bond investors.

Last September it looked like he was "helping" the U.S. government by advising it to put Fannie Mae and Freddie Mac into conservatorship. While this wiped out stockholders, Gross's Fannie/Freddie bonds were boosted by the U.S.'s decision. In addition to running a $747 billion asset management firm, Gross's PIMCO advises the U.S. on its $251 billion commercial paper program and its $500 billion fund to buy mortgage-backed securities. Gross shared his economic outlook with me yesterday in an exclusive interview -- and he's not optimistic.

I've never met Gross so it came as a complete shock when I received an e-mail from him yesterday morning. I was quoted in the latest issue of Fortune suggesting that he might be too powerful for the U.S.'s good. How so? Because he's such a big buyer of government debt -- which it's selling in huge quantities to finance various bailouts -- that he could use his leverage to threaten to walk away unless the U.S. sells to PIMCO at a favorable price.

On Monday I gave a TV interview in which I suggested that the U.S. might consider avoiding this potential problem by giving PIMCO's advisory contracts to another firm that does not have the potential conflict between buying U.S. debt and advising the government.

Gross saw the interview and e-mailed me. I replied by telling him that I had some questions about PIMCO and his views on economic prospects. I found his answers informative and insightful and he agreed to let me post on his economic outlook which is very grim for those who believe that stocks outperform bonds. In Gross's view, the current economic contraction is killing the animal spirits that drive risk taking and that's contributing to the death of equity capitalism as we've come to know it.

As Gross told me, "things will never be the same. Risk taking has been destroyed and any animal spirits must come from Washington. Global growth rates -- low, low, low -- asset classes will be readjusted for that outlook. That is -- stocks will be more of a subordinated income vehicle as opposed to a 'stocks for the long run' growth vehicle."

This argument is great for bond fund managers such as Gross since it would tend to drive people out of stocks and into bonds. But his point about stocks as a subordinated income vehicle is interesting. If I understand him correctly, he views stocks as the bottom of the liquidation hierarchy -- meaning that if a firm files for bankruptcy, all the other stakeholders -- such as bondholders, lenders, and preferred stock holders -- get their money before the common shareholders see a dime.

This is why so many common shareholders are getting wiped out. And in Gross's view, growth prospects are so dim that there is no point in owning stocks since common stock investors will not benefit when there's no economic growth. Moreover, they'll be last in line for any dividends that might be available.

Meanwhile, Gross has an interesting analysis of how we got into this mess. He attributes it to too much borrowing, weak regulation and greed. He also thinks that the U.S. is going to have to come up with as much as $5 trillion to fill the capital hole in the banking system.

As Gross said, "The cause of the current situation was too much leverage leading to over consumption which was facilitated by lax regulation and good ol' fashioned greed. Human nature will never change but our institutions will. Not sure policymakers understand what needs to be done -- there still is a $4 trillion to $5 trillion capital hole that needs to be filled but politics may inhibit necessary action. Bernanke and Co. get it though and have more freedom and flexibility -- they are independent -- for now."

These are sobering thoughts from one of America's most powerful financial minds. My hunch is that over the medium- to long-run, we'll revive capitalism through venture-backed technology innovation. But I am not sure how soon that will happen. Meanwhile, what do you think of Gross's comments? Do they make you want to sell stocks?

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in the securities mentioned.

Lessons to Live By In his final column for the Wall Street Journal and MarketWatch.com, Herb Greenberg

Lessons to Live By


In his final column for the Wall Street Journal and MarketWatch.com, Herb Greenberg boiled everything he has learned as a columnist down to five things:

THE NUMBERS DON'T LIE. They can be stir-fried, oven-fried or convection baked, but in the end they always hold the keys to the kingdom.

QUALITY, NOT QUANTITY. Ignore the "beat the Street" headlines on earnings. It’s what goes into the earnings that counts.

GAAP ISN'T THE SAME AS THE GOOD HOUSEKEEPING SEAL. Generally Accepted Accounting Principles, according to which all financial statements are supposed to be prepared, include plenty of gray areas that give management enough rope to hang itself.

DON'T CONFUSE STOCKS AND COMPANIES. They sometimes go in opposite directions. The numbers may not lie, but stocks sometimes do.

RISK ISN'T A FOUR-LETTER WORD. A good rule of thumb is that before you buy, instead of asking how much you can make, first ask how much you can lose. That is what the smart guys do.

Leucadia National Corp LUK:NYSE/TradeSchwab Equity Rating® F

Leucadia National Corp LUK:NYSE
Last Price Today's Change Bid/Size Ask/Size Today's Volume
$15.49 -0.56 (-3.49%) 15.48/8 15.49/1 1,323,672 Below Avg.
TradeSchwab Equity Rating® F
data as of 02/20/2009*
As of 1:28 pm ET 02/26/2009
SummaryNewsChartsRatingsFundamentalsStatementsCompetitorsReportsOptionsFourth Quarter Earnings Announcement Expected: Earnings will tentatively be announced Thursday.

Announcement Dates
This is a verified date, gathered by Wall Street Horizon callers.Announcement Dates
The date was gathered by Wall Street Horizon callers, but it is still considered tentative.Announcement Dates
The date was inferred based on historical records. The company has not yet confirmed the actual announcement date.Announcement Dates
The date could not be inferred so the last announcement date was used as a base to which 90 days was added. This can happen if a company is new to our database, or if the sequence of reported dates was significantly different from year-to-year. If the date falls on a Saturday, it is adjusted to the nearest Friday. If it falls on a Sunday, the nearest Monday is used.
Company PerformanceMargin Requirements
Quote DetailsPrice PerformanceTotal ReturnHistorical QuoteKey FundamentalsCompany Profile
1 Day5 Days3 Month6 MonthYTD1 Year3 Years5 YearsDetails as of 1:28 pm ET 02/26/2009
Today's Open $16.35
Previous Close $16.05
Day's Range $15.29 - $16.50
52 Week Range $12.19 - $56.90
Beta 1.9
Avg. Volume (10 Day) 3,388,765
Put/Call Ratio (1 Day) 0.2
Put/Call Ratio (30 Day) 1.0
Earnings TTM Details
Earnings per Share (09/30/2008) $2.49
Price/Earnings 6.45
Forward P/E NM
Dividends

Let see currently rated by Schwab as an F, Bruce of Fairholme explained why his fund is lower his position, it's not because of a lack of fundamentals in the stock but a restriction on holding more than 5% interest in the company
Low of yesterday was $14.84/ my day order is in at $14.75 but I do not think it will get hit so I will have to reevaluate my position


Currently reviewing PPG, PAYX and BMY will post my thoughts later all dividend plays

To Trade or not to Trade that is the question

Bitten from Jon Markman column
As a rough generalization, I would define a new bull market as a cross above the 12-month average of the big indexes that is sustained for at least four weeks. That's currently 1,125 for the S&P 500 and 10,473 for the Dow Jones Industrial Average ($INDU). Any sharp advances that fall short of those levels will be just bear market rallies. . . . I keep track of these running gunbattles between bulls and bears in my daily newsletter, Strategic Advantage, and help subscribers manage their equity/bond allocations with exchange-traded funds and stocks. You can sign up for a free two-week trial here. . . . Cynics have a new term for the Obama administration's proclivity to move the market midsession by leaking out word of new proposals, such as mortgage relief. They call it "yapping," in which "yap" is an acronym for "yet another plan