Warren Buffett on GE: ‘Clearly there were mistakes made’
Crux note: The latest domino to fall for this iconic American company may see its share price tumble ever further…
Regular Crux readers know that Porter Stansberry has maintained his bearish outlook on General Electric for over 15 years (about how long he’s been banned from appearing on CNBC for speaking the truth).
In fact, Porter has warned investors about the company’s questionable balance sheet and the sketchy ethics of its managers since 2002, but people didn’t want to hear about the inevitable collapse of such a beloved company…
Back in the early 2000s, this company was the single largest publicly traded company in America, the single biggest component of the S&P 500 Index, and probably the most widely held investment in America.
No one believed us.
In a January issue of his daily Stansberry Digest newsletter, Porter reminded readers of just how little shareholders have gotten in return for years of misplaced trust because “GE is the worst-performing stock in the Dow Jones Industrial Average over the last five years.” The company is credited with causing some of the biggest losses in the history of America’s capital markets.
These are Porter’s words of wisdom for everyone following this story…
Never own a company when its managers run the company’s balance sheet in a way that you’d never organize your own company. And never rely on the mainstream media to tell you the truth about America’s biggest companies.
Slowly but surely, investors have caught on to how dire things at GE have become… And it’s now troubling enough for legendary investor Warren Buffett to make his opinions public.
Continue reading below for the rest of the story from Bloomberg…
“Clearly there were mistakes made, and they made mistakes in long-term care,” Buffett, the chairman and chief executive officer of Berkshire Hathaway, said Monday in an interview with CNBC. “The accounting at GE has not been a model at all in recent years. But you can make mistakes in something like insurance reserving big time, and long-term care has probably been the biggest single element in mis-reserving in insurance throughout the industry.”
Buffett helped inject capital into GE during the financial crisis and got a common stock holding in the industrial giant once some warrants expired in 2013. Berkshire has mostly sold that stock, Buffett said Monday. The billionaire investor said he hasn’t bought any GE stock recently and hasn’t been approached by the company about any divestitures of large businesses. Buffett said in his annual letter to shareholders released Saturday that he needs to make one or more “huge” deals to build earnings from non-insurance businesses.
“If we liked the business and the price was right, we could write a check for cash and that would apply to GE,” Buffett said. “They’ve got a few big businesses – I don’t think they want to sell them – but they have some smaller units that they’re interested in selling. We’re always in the market for a big business that we can understand and that we like.”
Crux note: As Porter told his Digest subscribers, GE’s legacy is one of a company financed by more than $130 billion in debt, hungry to borrow more and more cash, which eventually cost American taxpayers billions from a government bailout. But GE isn’t the only familiar face in the borrowing game…
Over the past five years, American Airlines’ total debt has grown by $16 billion… Ford Motors carries roughly $150 billion in debt… and AT&T holds more than $160 billion in debt…
This kind of unsustainable debt load is the topic of Porter’s new book: The American Jubilee.
Americans are now responsible for trillions of dollars’ worth of student debt… credit-card debt… and auto-loan debt… And this desperation may soon fuel what Porter is calling the biggest political event that our country has seen in decades.
Order your copy here.