GE "Government Electric?"

"I read Porter's analysis of GE's financial status and after doing my own reseach came to the same conclusion. Yet to date, GE is neither dead nor in a coma. Immelt seems to be well connected to the current administration. Is the government proping up the company similar to what it did for GM?" – Paid-up subscriber Butch

Porter comment: Actually, in some ways, what the government did for GE was much more valuable than what it did for GM. The government guaranteed nearly $300 billion in GE's debts. Probably no other force in the world could have saved GE from bankruptcy in the fall of 2008. Stupidly, the government didn't demand any substantial payment for that guarantee. Dumb, dumb, dumb.

But in any case, GE's problems really have nothing to do with liquidity. The problem is solvency. And more debt (or more guarantees) won't help the situation. They only forestall the inevitable. How do I know GE's problems are really about solvency, not just liquidity? Well, ask yourself the obvious question: How much is GE able to earn from its asset base? The answer is around $30 billion a year before taxes and interest. Its asset base is nearly $800 billion. Thus, its return on assets is a bit more than 3.5%. How can it afford to leverage these assets, when it's not generating enough income to cover reasonable interest? This analysis, by the way, doesn't even consider the massive losses GE faces from its investment into European mortgages.
Porter Stansberry