This is a bankruptcy bet on General Electric by the third week of June.

[seemslikeadream]

http://www.bloomberg.com/apps/quote?ticker=GE:US

http://market-ticker.denninger.net/archives/846-Here-It-Comes-GE.html
Tuesday, March 3. 2009
Posted by Karl Denninger in Politics at 11:35

Here It Comes (GE)
This is what is going to happen, as I noted in BlogTalkRadio yesterday afternoon, if "The Bezzle" is not removed from our system NOW.



Take a look at that folks. That's a snapshot of today's volume for June GE $2.50 PUTs.

That's over 52,000 contracts traded today, controlling 5.2 million shares.

They were purchased for about 30 cents, which means that the price has to be under $2.20 for them to go "in the money".

This is a bankruptcy bet on General Electric by the third week of June.

That's right - General Electric.

Folks, this is precisely what I was talking about last night on BlogTalkRadio. Go listen to my monologue on "The Bezzle", right at the front of the show, very carefully.

This is precisely what has happened with many financial institutions already and what happened to hundreds of companies during the 00-03 Tech Wreck.

General Electric is a stalwart of our financial and industrial system. A bankruptcy by GE would be catastrophic for our economy and capital markets. The follow-on damage with suppliers and customers would be even worse.

If "The Bezzle" is not brought under control right damn now this is what is going to to happen to company after company. We WILL see the S&P trade at one hundred if we start to see firms like GE go down the toilet.

Ladies and Gentlemen, Legislators and President Obama, your time is running out to change direction.

The number of people who have told me that I am wasting my time continues to grow.

You folks who are sending me those emails are missing the point of my activities in this regard.

It is my intention to guarantee that these actions and intentional and willful blindness is documented so that when these failures occur, which I have predicted and provided a path by which they can be prevented, occur due to the intentional and willful malfeasance of our lawmakers and policy "wonks", the people can correctly hold to account the people responsible for their unemployment, homelessness and hunger.

When firms like GE come under attack like this what I am talking about here is coming - imminently.

Either behavior changes RIGHT NOW or the outcome will become inevitable.

[malaise]

1. What is 'The Bezzle'?

I can't listen on this computer.

[seemslikeadream]

5. John Kenneth Galbraith came up with an ingenious concept he called 'the bezzle.'

http://blog.dralexgoodall.com/2008/10/bezzle.html

The Bezzle

In his classic text on the origins of the great depression, The Great Crash, John Kenneth Galbraith came up with an ingenious concept he called 'the bezzle.' Basically, he argued that at any one point a certain number of people are filtering money out of the system through illicit means of embezzlement and fraud. In a time of easy money supply, rapid economic growth and widespread prosperity, people are much less likely to watch where every one of their pennies is going, and much more willing to lend money to people who may be less than scrupulous, meaning there's more scope for fraudulent activities. In Galbraith's terms, the size of the bezzle - the total amount of capital available to be defrauded from the system - grows. By contrast, in a time of economic contraction society seeks to account for itself, understand its finances, repay debts, and watch those pennies. The size of bezzle thus shrinks massively, and people who are busy committing frauds suddenly find themselves high and dry.

[malaise]

36. Thanks

as in embezzle. :D

[peacetalksforall]

2. Is there any site to go to for a plain english translation?

[Dreamer Tatum]

17. It's bullshit scare tactics...ignore it

And it's also pump and dump.

[NightWatcher]

3. is GE going to be the next to blackmail us for some bailout?

too big to fail so gimmie money or else......

[peacetalksforall]

22. The idea of helping a war mongering company that controls our news, views, and fills the world and

country with propaganda of the right wing if really digusting. GE is right up there with Halliburton, Monzanto, Bechtel, KBR, Murdoch - there are way too many repulsive corporations in this country.

[seemslikeadream]

29. Thank you

[NewJeffCT]

4. 5.2 million shares is only 0.05% of GE's outstanding # of shares

They have over 10 billion shares of stock, somebody controlling 5.2 million of them is nothing. GE likely has far more than that under it's own control. Warren Buffet also has far more as well.

Even though GE had a bad year in 2008, they still had a net profit of $17 billion. That's billion.

[slackmaster]

6. I bought some last week

:hi:

[tibbiit]

15. me too

because i had bought it so high a few years ago, i bought some now to offset.
tib

[seemslikeadream]

28. so your concence in clear then?

http://www.corpwatch.org/article.php?id=14989


To settle the dispute, the National Cancer Institute started in 2002 the $200 million National Lung Screening Trial comparing death rates among 55,000 people randomly assigned to have CT scans or chest X-rays. Results are not expected until 2010. Dr. Henschke has asserted that allowing hundreds of thousands of people to die in the meantime is unethical.

The Cancer Letter, a newsletter, recently reported that Drs. Henschke and Yankelevitz had failed to disclose in articles and educational lectures a patent and 10 pending patents related to CT screening and follow-up. General Electric Company">General Electric, a maker of CT scanners, licensed the issued patent beginning in 2001.

Jonathan Weil, a Weill Cornell spokesman, said Dr. Henschke did not disclose the patents in some articles and lectures because she did not deem them relevant.

On Monday, The Journal of the American Medical Association published corrections about unreported financial disclosures from Drs. Henschke and Yankelevitz. The patent and pending patents reported by The Cancer Letter “are relevant to these publications,” an editors’ note stated. Editors at the journal were not aware of Dr. Henschke’s association with Liggett, said Dr. Catherine D. DeAngelis, the journal’s editor in chief.

“I would never publish a paper dealing with lung cancer from a person who had taken money from a tobacco company,” Dr. DeAngelis said.

[seemslikeadream]

26. Defense Contracting Fraud- Thanks for supporting GE

http://www.corpwatch.org/section.php?id=16

Corporate accountability
Accountability overview:
Enronomics

In their 2002 report, ""Titans of the Enron Economy: The 10 Habits of Highly Defective Corporations," United for a Fair Economy gave a "special Lifetime Achievement Award" to General Electric "for scoring the highest average rank across all 10 bad habits, the only company to outrank second-place Enron. GE exceeds Enron’s score by an astonishing 45%."

Defense Contracting Fraud

On July 23, 1992, GE pled guilty in federal court to civil and criminal charges of defrauding the Pentagon and agreed to pay $69 million to the U.S. government in fines — one of the largest defense contracting fines ever. The company said in a statement that it took responsibility for the actions of a former marketing employee who, along with an Israeli Air Force General, diverted Pentagon funds to their own bank accounts and to fund Israeli military programs not authorized by the United States. Under the settlement with the Justice Department over violations of the Foreign Corrupt Practices Act, GE paid $59.5 million in civil fraud claims and $9.5 million in criminal fines.

GE’s civil and criminal transgressions stemming from the Israeli military program are by no means isolated. GE is a repeat offender when it comes to Defense Department fraud. The company has repeatedly violated the False Claims Act — a measure originally proposed by Lincoln to protect federal coffers. When the Project on Government Oversight surveyed defense contractors, it found that General Electric was responsible for 15 instances of fraudulent activity in just a four year period (1990-1994) — more than any other defense contractor.

On August 10, 1995 the U.S. Department of Justice announced (# 95-438) that GE would pay $7.1 million to settle a contract fraud suit initiated by Ian Johnson, an engineer at GE's Aircraft Engines plant in Evendale, Ohio in 1993. Johnson had alleged that GE "sold several thousand jet engines to the military that did not comply with military electrical bonding and electromagnetic interference testing requirements," according to DoJ. (Subsequently, the Air Force tested the engines and found them to be safe.) Johnson filed the suit on behalf of the United States under the qui tam provisions of the False Claims Act.

On January 10, 1997, the U.S. Department of Justice announced (# 97-012) that GE would pay $950,000 to settle allegations that it fraudulently misrepresented that it had conducted certain test procedures on circuit boards for hundreds of aircraft engine controls when in fact the tests were not conducted.
GE paid $5.87 million (along with Martin Marietta) to settle a qui tam suit associated with improper sales of radar systems to Egypt.

[wartrace]

33. I'm paper trading the options.

I sold ten put contracts for .73 cents a share with a nine dollar strike price. It should be a credit of 800 dollars if they stay above nine dollars. If not I buy the shares at nine minus the credit in the account.

[Lisa0825]

43. me too! nt

[marketcrazy1]

10. the cost of credit default swaps on GE

are just stupidly high! two weeks ago it cost 1.6 million dollars UP FRONT to insure 10 million dollars of GE`s debt PLUS 500,000 a year!! 16 percent UP FRONT???? these spreads were ludicrous..... this kind of manipulation can bring a strong company to it`s knees!!! it increases their borrowing costs and makes it difficult to finance their operations....... the CDS market is a tool of price manipulation and it must be regulated...... SOON!!!!!

[Waiting For Everyman]

20. It's no different than charging a legitimate homebuyer double the going rate

for "risk". It's BULLSHIT. Until this system has logical limits on all sides, it's going to fail. Why? Because EVERYONE can't be robbed without something bad happening. We have reached that point. Lives can't be built as fast as they are being devoured.

Now it's happening to commercial paper. It's the same thing that was done to individuals. It needs to be ILLEGAL. Passing laws is relatively cheap, as solutions go. So where is the legal reform of all transactions, top to bottom, from Wall Street practices to credit reports to preposterous wage scales (both too low and too high)?

Why are these "complex derivatives" not banned outright by now? THAT'S the Ponzi scheme in the first place. Why let it continue? Void or limit payment on them and make them illegal in the future. Then prosecute the frauds that created them in the past.

Some of these "instruments" have no reason to exist (other than fraud). Then, we wouldn't need the rarified "experience" of the overpaid traders who monitor them (such as AIG execs). THEY need to go out of business, not everybody else on the planet. It'll be one, or the other. They are a Black Hole. And it won't improve, it is what it is.

[Phred42]

7. Good. Maybe they will have to divest themselves from their MEdia outlets

And just maybe some independent or - dare I say it - LEFTy organizations buy a few. The LEft (and this country) will get no where until they own at least one complete National TV network.


Media

* NBC Universal (NBC merged with non-music entertainment assets of Vivendi Universal - GE has 80% controlling share)
o NBC - National Broadcasting Company
+ NBC Network Television stations
# WNBC 4 - New York
# KNBC 4 - Los Angeles
# WMAQ 5 - Chicago
# WCAU 10 - Philadelphia
# KNTV 11 - San Jose/San Francisco
# KXAS 5 - Dallas/Fort Worth²
# WRC 4 - Washington
# WTVJ 6 - Miami
# KNSD 39 (cable 7) - San Diego²
# WVIT 30 - Hartford
+ NBC Entertainment
+ NBC News
+ NBC Sports
+ NBC Studios
o NBC Universal Sports & Olympics
o NBC Universal Television
+ Universal Media Studios
+ NBC Universal Television Distribution
+ NBC Universal International Television
o EMKA, Ltd.
o NBC Universal Digital Media
o NBC Universal Cable
+ A&E Television Networks¹:
# A&E
# The Biography Channel
# The History Channel
# History Channel International
# The History Channel en Español
# Military History Channel
# Crime & Investigation Network
+ Bravo
+ Chiller (horror-themed cable channel launching March 1, 2007) <1>
+ CNBC (co-owned with Dow Jones)
+ CNBC World (co-owned with Dow Jones)
+ MSNBC (co-owned with Microsoft)
+ NBC WeatherPlus
+ mun2
+ Sci Fi Channel¹
+ ShopNBC
+ The Sundance Channel¹
+ Sleuth
+ USA Network
+ Universal HD
+ The Weather Channel
+ WeatherPlus
+ NBC Universal Global Networks
# NBC Universal Global Networks
# LAPTV (Latin America) - co-owned with Paramount Pictures (Viacom), Metro-Goldwyn-Mayer (owned by MGM Holdings) and 20th Century Fox (News Corporation);
# Telecine (Brazil) - co-owned with Globosat Canais, Paramount Pictures, DreamWorks (Viacom), MGM and 20th Century Fox Film Corporation;
# Universal Channel Latin America (except Brazil
# Universal Channel Brazil (co-owned with Globosat Canais);
# Sci Fi Channel Latin America
# NBC Universal Global Networks España.
o Telemundo
+ KVEA/KWHY - Los Angeles
+ WNJU - New York
+ WSCV - Miami
+ KTMD - Houston
+ WSNS - Chicago
+ KXTX - Dallas/Fort Worth
+ KVDA - San Antonio
+ KSTS - San Jose/San Francisco
+ KTAZ - Phoenix
+ KBLR - Las Vegas
+ KNSO - Fresno
+ KDEN - Longmont, Colorado
+ WNEU - Boston/Merrimack
+ KHRR - Tucson
+ WKAQ - Puerto Rico
o TiVo¹
* Universal Studios (co-owned with Vivendi)
o Universal Pictures
o Focus Features
+ Rogue Pictures
o Working Title Films
o Universal Studios Licensing
o Universal Animation Studios
o Universal Interactive
o Universal Pictures International
o Universal Home Entertainment
+ Universal Home Entertainment Productions
o United International Pictures (co-owned with Paramount Pictures/Viacom);
o Universal Operations Group
+ Universal Production Studios
+ Universal Parks & Resorts
* qubo - Qubo Venture,LLC¹

http://en.wikipedia.org/wiki/List_of_assets_owned_by_General_Electric

[NewJeffCT]

8. That would be one of the last places they give up

What better place to promote GE products?

[Frustratedlady]

9. Aren't they one of the corporations that doesn't pay taxes...most of the time?

Maybe I just hit the years they didn't, but it sure seems to me like they have it whittled down so they don't have to pay.

[NewJeffCT]

11. They've paid income taxes each of the last 3 years

According to their 10-K filing, it was about $1 billion in US taxes paid in 2008, and about $4 billion for each of the previous two years. They also make money with overseas subsidiaries, so would need to look up taxes paid in other countries as well.

[Frustratedlady]

13. Thanks. I've always growled when I heard GE didn't pay...thanks for the update.

I realize the aim of a company is to reduce taxes as much as possible, but when they come down to zero, I burn. I'm also livid about the overseas portions, as they should be supporting the US and not working so hard to avoid labor costs in the US. Our local plant is supposedly leaving in a year or so. That will be one of the last major manufacturing sites left and will be devastating.

[Dreamer Tatum]

12. Maybe you should actually read their public filings

They pay taxes. Sheesh.

[Egalitariat]

16. Facts are generally a buzzkill when the lynch mob gets mobilized

It's more fun when you're armed only with ignorance.

[seemslikeadream]

27. GE has a lengthy record of criminal, civil, political and ethical transgressions, some of them shock

http://www.corpwatch.org/article.php?id=7846

US: The Case Against General Electric

Multinational Monitor
August 1st, 2001







GE has a lengthy record of criminal, civil, political and ethical transgressions, some of them shocking in disregard for the integrity of human beings. Here are a few examples:

In 1995, with the establishment of a Presidential Advisory Commission, the full extent of GE’s human experiments with nuclear radiation were revealed. General Electric ran the Hanford Nuclear Reservation in Richland, Washington as part of the U.S. weapons program. Beginning in 1949, General Electric deliberately released radioactive material to see how far downwind it would travel. One cloud drifted 400 miles, all the way down to the California-Oregon border, carrying perhaps thousands of times more radiation than that emitted at Three Mile Island.

In 1986, Representative Edward Markey, D-Massachusetts, held hearings in which it was disclosed that the United States and General Electric had conducted experiments on hundreds of United States citizens who became “nuclear calibration devices for experimenters run amok.” According to Markey: “Too many of these experiments used human subjects that were captive audiences or populations ... considered ‘expendable’ ... the elderly, prisoners and hospital patients who might not have retained their full faculties for informed consent.”

One of GE’s most gruesome experiments — disclosed in the Markey hearings — was performed on inmates at a prison in Walla Walla, Washington, near Hanford. Starting in 1963, 64 prisoners had their scrotums and testes irradiated to determine the effects of radiation on human reproductive organs. Although the inmates were warned about the possibility of sterility and radiation burns, the forms said nothing about the risk of testicular cancer. Markey’s committee heard allegations that, at the time of the experiments, General Electric violated both civil and criminal laws.

GE’s nuclear testing is merely one example of a lengthy corporate history of malfeasance that includes conviction of criminal price-fixing in the 1960s and many equivalent deeds. This article highlights only General Electric’s recently adjudicated or settled criminal or civil violations.
Environment

+ GE is wholly or partially liable for at least 78 federal Superfund sites.

[Egalitariat]

45. Therefore, you think they'll be bankrupt by the third week in June??

Are you sure your posted in the correct thread?

[Dreamer Tatum]

14. This is the most ignorant article to appear in a long time

5.2MM shares are involved, at 30 cents a share.

That means that for that link in the option chain, all of the investors in the world have put up 5.2MM * .3 = $1.56MM that the stock will fall under $2.20.

If that still seems like a lot, look at GE's market cap. It's just a TAD greater than $1.56MM. Give me a freaking break.

Articles like this are utterly and completely irresponsible, and reflect nothing more than complete ignorance on the part of the author. THESE AUTHORS MAKE POOR PEOPLE POORER because they induce people with small amounts of wealth to do stupid things, like dump their GE stock because of a tiny scattering of open interest in low-valued puts.

I really hope no one falls for this shit.

[seemslikeadream]

24. How about dumping the stock because they GE is a war machine?

[Dreamer Tatum]

35. Investors don't give a shit about that

Wake up.

[seemslikeadream]

37. I'm speaking to YOU

PERSONAL RESPONSIBILITY

[Dreamer Tatum]

40. when did I say I owned GE?

[Dreamer Tatum]

18. Irresponsible pump and dump strategy...author is playing people for fools

I wonder how many puts that author bought, and at what price.

Here's how it works: he buys puts for a price that COULD happen, and then tries to scare people to sell by warning of what WON'T happen. If he can induce enough morons to sell, his puts are more likely to be in the money.

It's pump and dump in reverse, and he's looking for suckers.

[Waiting For Everyman]

21. Just like Cramer did. More of the same.

Ironic that it's being done to GE now. This is getting to be so "through the looking glass".

[marketcrazy1]

23. you missed the whole point of the peice Dreamer Tatum,

Denninger is not trying to "scare people to sell" he is trying to point out that the price is being manipulated by others... he made other comments on GE, RE: the enormous CDS premiums against this VERY STRONG companies debt.. even warren buffets companies CDS spreads have been "blown out" by manipulators! THATS what he is talking about.... this kind of blatant manipulation can destroy even strong companies and it MUST be stopped.. if you read his other comments you would understand.... and FYI this guy has ALWAYS made clear HIS position in any company he comments on.... full disclosure is his rule and he lives by that rule......

[seemslikeadream]

25. Thanks

[Dreamer Tatum]

34. I can show you open interest in ANY option chain that would raise flags

It's a non-story. Go look at the option chain of any company. Psst: people who sold those puts...um...DISAGREE with
the buyers. Ever consider that?

[SidDithers]

19. Bookmarking for revisting the 3rd week of June...

and we'll see just how accurate the OP's "prediction" is.

Sid

[seemslikeadream]

38. Either behavior changes RIGHT NOW or the outcome will become inevitable.

[SidDithers]

41. Well, we'll see in about 12 weeks, won't we...nt

Sid

[seemslikeadream]

30. Cashing in on Crime

http://www.corpwatch.org/article.php?id=867

In addition to the companies that directly manage America's prisons, many other firms are getting a piece of the private prison action. American Express has invested millions of dollars in private prison construction in Oklahoma and General Electric has helped finance construction in Tennessee. Goldman Sachs & Co., Merrill Lynch, Smith Barney, among other Wall Street firms, have made huge sums by underwriting prison construction with the sale of tax exempt bonds, this now a thriving $2.3 billion industry.

Weapons manufacturers see both public and private prisons as a new outlet for "defense" technology, such as electronic bracelets and stun guns. Private transport companies have lucrative contracts to move prisoners within and across state lines; health care companies supply jails with doctors and nurses; food service firms provide prisoners with meals. High-tech firms are also moving into the field; the Que-Tel Corp. hopes for vigorous sales of its new system whereby prisoners are bar coded and guards carry scanners to monitor their movements. Phone companies such as AT&T chase after the enormously lucrative prison business.

[seemslikeadream]

31. 20-reign of General Electric's CEO has been a golden era for shareholders

http://www.googlesyndicatedsearch.com/u/corpwatch?hl=en&ie=UTF-8&q=general+electric&start=200&sa=N

[wartrace]

32. Now those options are worth .08 cents each.

The financial genius behind that trade has lost over a million dollars in value so far.
http://www.marketwatch.com/tools/quotes/options1.asp?source=&symb=GE&sid=2148&time=&bars=3

[marketcrazy1]

47. with the proper hedge

he should be able to minimize any potential losses............

[wartrace]

48. She will also reduce potential gains.

I am sure she didn't just go out and buy that one contract but the losses will offset any gains.

[Vidar]

39. Couldn't happen to a nicer company.

[seemslikeadream]

42. GE's biggest asset has turned into a liability that puts the future of the entire company at risk.

http://money.cnn.com/2008/10/09/news/companies/colvin_ge.fortune/index.htm

GE under siege
For years GE Capital's profits powered its parent's earnings and helped finance its vast array of businesses. Now GE's biggest asset has turned into a liability that puts the future of the entire company at risk.
By Geoffrey Colvin, senior editor at large, and Katie Benner, writer



(Fortune Magazine) -- When Warren Buffett went to bed at his Omaha home on the evening of Tuesday, Sept. 30, he asked his wife, Astrid, to wake him in the morning at 6:55 a.m. He had an important call coming in. By 7:30 the call was over. Buffett walked into the kitchen, still wearing an old robe he likes, and announced to a breakfast visitor that he had agreed to send General Electric $3 billion of Berkshire Hathaway money in return for a new issue of preferred stock and warrants allowing Berkshire to buy an equal amount of common stock over the next five years.

It was the beginning of one of the more dramatic days in GE's 130-year history.

The deal was done, but the news wasn't yet out, and in the meantime GE's world was deteriorating fast. By 9:14 Eastern time, a GE spokesman had e-mailed the media with a message that Congress must act "urgently" on the pending financial bailout package. By 11 an analyst at Deutsche Bank had announced that he was sharply cutting his forecast for GE's 2008 profits - though only three months remained in 2008 - and the stock dropped 9% almost immediately. By 11:23 the price of credit default swaps - lenders' insurance - on the bonds of GE Capital had rocketed: The market was saying that the bonds of this great and storied company, one of only six corporations on planet Earth with a triple-A credit rating, were junk.

Finally, at 1:44 p.m., GE (GE, Fortune 500) announced its deal with Buffett and said it would sell $12 billion of common stock to the public the following day. The statement contained an important sentence from Buffett: "I am confident that GE will continue to be successful in the years to come." GE stock edged up - though by day's end it was still way down since the start of the year.

So here's what had just happened: General Electric had arranged to raise $15 billion on a few days' notice. For perspective, remember that in March, Visa had culminated months of preparation by staging the largest stock offering ever, raising $18 billion. In other words, GE needed a sudden, huge, and utterly unexpected emergency infusion of cash. Only six days before, when a Wall Street analyst had asked GE chief Jeff Immelt about the possibility of the company's selling new equity, Immelt had answered unequivocally: "We just don't see it right now.




http://i.l.cnn.net/money/2008/10/09/news/companies/colvin_ge.fortune/mag_GEN29(profit)_graphic.gif

[jmowreader]

44. Uhh...they go in the money at $2.45, not $2.20

In automated options trading, a put exercises if the stock price drops a nickel below the strike price.

[SidDithers]

46. Kick for the night crew...nt

Sid