The Tragedy At General Electric

This is the second time I've turned my attention to GE, and I've pretty much ignored the thing since I first wrote about it, but someone posted this screen shot of General Electric's largest stockholders and it tells some alarming tales.

First, there is the large hoard of shares owned by Vanguard and BlackRock. I have no idea why, with the universe of opportunities in investments the market offers, that the firms with the most assets under management on Planet Earth would entertain owning one share of this stock, given the trajectory it's been on for all this time. One could be forgiven for lingering a bit. It is, after all, a legendary firm with big name recognition and it still carries a lot of brand image. But after a point, those things don't matter when it's obvious the drain has started to swirl, and given the analytical tools these people supposedly have at their disposal, this was about as hard to spot as an oncoming freight train.

But note the third largest holder. The General Electric Employees Retirement Plan holds 334 MILLION shares of stock, the same amount it reported holding at the beginning of 2018. Someone calculated that's ~$8 Billion in value lost in the past two years, assuming the same amount of shares held, and JP Morgan just set a new target price for GE at $6 a share. As the third largest holder, the Plan is now caught flatfooted: any meaningful reduction in share holdings can only pressure the share price even further downwards, and the retirees are pretty much stuck. Six, Two and Even that the plan managers refused to sell a single share in all this time, or were directed not to, lest it signal to the public on it's own filings that it was losing faith in its own company. Couldn't have that. So everyone goes down with the ship.

When I wrote about GE last February, I noted that the firm's market cap had stood at $127 billion at that time, down from over $350 billion the summer prior. At today's price, GE's market cap of $72 billion is now below the total amount of it's debt stack. The firm's debt has been downgraded to BBB+, and all of the ratings agencies have it "on review." Which generally means "more of where that came from."

It's hard for me to fathom how some people think. Even though Vanguard and Black Rock collectively have over $11 trillion in assets under management, for the life of me, I can't understand what compels them to own so large a stake in a firm practically on life support, and no clear path forward besides selling off assets.