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IBM-GE-AMZN drop, S&P Squeezes…


31.Oct.2018

Yesterday’s rally occurred despite GE sinking 10% (YTD -40%) to 2009 lows after the company scrapped its dividend following an exceptional loss of USD22bn in its power unit which also led the SEC to widen an accounting probe. IBM which has been for a long time a master at realizing assets for exceptional profits has now likely made the single purchase too much, at a stellar price with borrowed money for a company that will accrue very little to its bottom line. IBM will acquire the debt of Redhat and issue some more debt of its own to buy this company as it also announced it would to buy back USD4bn of its own shares to help investors swallow the pill… "Our strong cash generation allows IBM to both invest in world-class innovations and to return money to shareholders," said CEO Ginni Rometty. The judgment of the market was a further 4% decline in IBM share, extending a decline of around 7.6% the day before (and of 15% over the past week). IBM also got a quick credit downgrade of Fitch from A+ to A which placed the company on watch negative, indicating the rating could be lowered again. GE’s decision to cut its dividend was the 8th largest in the history of the S&P500. The impact of GE on the S&P500 is now only 1/10th of that of Apple but its shares are held by many pensioners as a core “good father” equity investment. D. Trump referred to the stock market correction as “a little pause” and cautioned against the risks of voting Democrats. “The Stock Market is up massively since the Election, but is now taking a little pause - people want to see what happens with the Midterms. If you want your Stocks to go down, I strongly suggest voting Democrat. They like the Venezuela financial model, High Taxes & Open Borders!”. D. Trump may have forgotten that the Venezuela model is what it is, courtesy also of his own sanction regime that contributed to halving the country’s oil production. 

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