General Electric: A Case For Another 36% Haircut

Summary

GE shares are trading at 2.36 times book value, an unjustified premium above its peers.

GE has too much debt and is paying out more in dividends than it earns.

GE's 28 P/E ratio is too high compared to peers' 21 P/E ratio.

GE stock may fall to $13 per share but probably will bounce back fairly quickly

+ add bullet

×

Summary:

• 3-5 summary bullets are mandatory and should present your key points.
• Each bullet cannot exceed 30 words and cannot contain any special formatting. Full sentences are most effective.
• Capitalize as you would a sentence.
• Use the company name or the ticker (e.g. "Google" or "GOOG"), but not both.

By Michael Hooper

General Electric (GE) shares have fallen 33% so far this year, but the stock is likely to get cheaper. GE stock could fall another 36% to $13.21 per share because it has too much debt and is trading at an unjustified premium above its book value.

GE at $20.79 per share is trading at 2.36 times book value, versus Berkshire Hathaway (BRK.B) (BRK.A) trading at 1.54 times book value. GE has a lot of energy assets. One the largest utilities, Consolidated Edison (ED), is trading at 1.8 times book value.

GE has traditionally traded at a premium over BRKA, partly because GE pays a dividend and BRKA does not. But at a Nov. 13 analyst meeting, we will find out the future of GE’s dividend. I believe the dividend may be cut because the company is not making enough profit to cover both the dividend and its debt obligations. GE’s dividend payout ratio is 109%, which is unsustainable.

GE's long-term debt of $136 billion equates to $15.71 per share, according to an SA article by Travis Brown. Debt is 75% of GE’s capital structure, only 25% is equity.

Berkshire Hathaway has $102 billion in debt, which is about 25% of its capital structure and the other 75% is equity, according to Morningstar.

Book value of GE is somewhere around $8.80 per share. At 1.5 times book value -- the same multiple that the market has applied to BRKA -- GE stock would be valued at $13.21.

With a peer level P/E ratio around 21, GE’s stock would be around $17 per share, but currently its P/E is 28. Honeywell's P/E is 22, Berkshire Hathaway's P/E is 21.32

GE has some valuable assets but its margins have declined due to high expenses. The new CEO John L. Flannery has vowed to turn around the company.

The Wall Street Journal reported that GE used a two-jet flight system for flying its former CEO Jeff Immelt. That is a complete waste of money. The new CEO has grounded the two plane system. GE executives did not notify the board about the practice of trailing the former CEO with a spare jet anytime he traveled. Management for years also withheld from directors an internal complaint it received about the empty plane.

Morgan Stanley and UBS reduced their ratings for General Electric shares due to concerns about dividend cuts at its Nov. 13 analyst meeting, CNBC reported. Morgan Stanley believes the dividend cut is not priced in. “We believe investors need to take action to protect against the possibility of near term under performance in the event of a dividend cut in November and this is clearly an additional factor in our rating change," Morgan Stanley's analyst writes.

During the financial crisis in 2008-09, GE stock fell from $25 per share to $7 per share. Warren Buffett agreed to lend GE some money. I bought the stock around $22, but later sold it at $9 per share for a big loss. I know some vulture-like investors who bought GE at $7 and $9 per share and held on until the stock got back into the 20s again.

GE has some great assets but will need a massive restructuring in order to pay down debt and improve its capital structure. Asset sales are likely.

Conclusion

Investors looking to buy GE shares may want to wait for the price to fall below $20 per share. I think the company is worth about $13 per share. Because GE is such a well loved company with over a 100-year history, it is likely GE shares won’t remain down for long. We may see a massive downswing and a massive upswing, perhaps back up to $20 within a short time period.

Disclosure: I do not own GE shares but may consider buying GE if the stock falls below $17 per share.

The Crypto Currency Job Market Is Booming

The crypto currency market is booming with jobs around the world. These are jobs for engineers, programmers, customer support specialists, technology experts, analysts and accountants and marketing personnel.

Many of these jobs pay excellent wages, benefits and even stock options, and many of these jobs are remote, meaning you can work from home!

Hundreds of millions of dollars of investment are going into the crypto currency space.

Crypto is hot for entrepreneurial startups. There are over 1,000 crypto currencies, and many others slated for Initial Coin Offerings.

Developers are using the Blockchain technology to develop new platforms for users in this growing space.

AngelList says there is high demand for experienced engineers who’ve worked on cryptocurrency projects. There is also demand for talented engineers with an interest in blockchain technologies.

AngelList says there are also open positions needing to be filled in marketing, business development, operations, customer support, and other job functions that don’t require a technical background. Similar to any other high-growth startups, cryptocurrency companies need to hire at job functions across the entire organization, and fast.

Here is an example of a job opening, this is a Customer Support Specialist at Xapo, a leading wallet provider for Bitcoin users. Here are the responsibilities: :

• Respond to remote customer inquiries related to our mobile iOS and Android applications reviews by going into Google Play Store and App Store
• Address customers in a professional and respectful manner, educate users on exploring services within our mobile apps.

• Take ownership of different issues and direct our customers' problems, bugs etc. through to completion from beginning to end. Escalation when needed.

Requirements:

• 2 - 4 years of work experience in remote customer support role related with mobile applications tools.
• Current knowledge and practical experience with Apple & Android system functionality
• High attention to detail and problem-solving skills
• Excellent communication skills, both written and verbal. Upbeat friendly personality!
• Strong computer skills and ability to learn software quickly and with ease
• Bilingual in English. Additional languages skills such as Spanish, Portuguese, German, is a great plus!

From Middle Class To No Class -- A Topeka Resident's Crash & Story

David, the narrator of the video, tells us a compelling story about his struggle. Through a series of events, including a failed marriage and a broken business, David suffered some big losses. His children became involved with social service agencies and his ex-wife suffered from a mental illness; they lost their house. As he says, it's getting harder to live in the Middle Class. The narrator takes us on a tour of Topeka, where he moved from Boston in 2001, to escape the high cost of living there. He shows us his former house, former employer and the location of his former business in Topeka.

David's video has 215,675 views. That's quite a lot for a locally produced video.

Bitcoin Miners Face Rising Difficulty

Bitcoin Miners face a huge challenge in making profits if more people get involved with mining. As difficulty increases, there is an increased likelihood for less revenue. As more mining hardware comes online, the mining difficulty will automatically adjust to ensure the time between blocks remains roughly 10 minutes apart.


See this chart here

The chart from Blockchain.info just how much difficulty has increased. Difficulty is up 4 times in one year from November 2016. When mining difficulty jumped sharply -- about 16% on Sept. 15, 2017, mining revenue declined. Mining revenue recently fell off 40% in this chart:

Bitcoin price, number of transactions also contribute to revenue to miners.

Disclosure: The author owns and mines Bitcoin.

Bitcoin Boom: Coinbase Adds 35,000 Customers Per Day

By Michael Hooper

The laws of supply and demand govern the price of things in a free market. At least in theory that is how free market economics work. Vast quantities of demand with limited supply will push up the price of anything. Well, that is what is happening with Bitcoin, which is up about 500 percent this year.

Laura Shin of Forbes recently reported that new money is coming into Bitcoin.  "Every day on Coinbase alone, about 35,000 new accounts open -- a figure that sometimes reaches 50,000 -- and thousands of people in South Korea and Japan, two countries where Bitcoin has taken off, are also bringing new fiat money into the system."

With the trend happening at Coinbase, it is likely to sign up 3.1 million new customers in 90 days (90*35,000 new accounts per day). And that doesn't count the thousands of accounts opening daily around the world.

This reminds me of when 1 million customers per month were signing up for America Online in the 1990s. After reading that fact in 1997, I bought shares of AOL, which shot up 36% in one month for me, before I sold it for a quick profit.

Today Bitcoin is all the rage. And the forces behind it are unshakable. China has cracked down on exchanges of crypto currency and introduced new laws to stop fraud in the ICO market in China. But that doesn't stop the price of Bitcoin. Fears of a proposed fork in Bitcoin over the summer caused Bitcoin's price to fall 30 percent ahead of the Bitcoin Cash split. Bitcoin's price quickly recovered and went onto to set new records.

A new fork is facing Bitcoin, I believe this is affecting the price. The Bitcoin Segwit2x fork is projected to take place on November 16th and will result in two bitcoin blockchains. Following the fork, Coinbase will continue referring to the current bitcoin blockchain as Bitcoin and the forked blockchain as Bitcoin2x, according to a letter from Coinbase to me.

Any customer with a Bitcoin balance on Coinbase at the time of the fork will be credited with an equal amount of the Bitcoin2x asset on the Bitcoin2x blockchain. No action is required—Coinbase will automatically credit your account. So, if you have 5 Bitcoin stored on Coinbase before the fork; you will have 5 Bitcoin and 5 Bitcoin2x following the event.

Coinbase said the Bitcoin Gold fork occurred on October 23rd. Information about this fork has been limited and there are concerns about its security and stability. As a result, Coinbase does not believe it is safe to allow support for Bitcoin Gold at this time. If the blockchain proves to be secure and valuable, Coinbase may choose to support it.

Meanwhile Bitcoin has fallen 7% from its high of $6145.38. I bought a little more BTC at $5600 and $5300. I think worldwide demand is going to outstrip supply and continue to drive up price. The economics are there.

Based on the current trends, I expect Bitcoin price to be extremely volatile with big run-ups of 10% to 20% but big falloffs too of 10% to 30%.

Bitcoin's price may fall off a bit ahead of the Nov. 16 fork from Bitcoin.

That's probably why we are seeing today some divergence away from Bitcoin, as other currencies like Ethereum and Litecoin are climbing.

Source: Coinmarketcap.

The 2017 momentum for cryptocurrency feels like 1998 when tech stock valuations were high but they went even higher in 1999 before crashing in 2000-01. Out of all that tech run-up of the 1990s we gained transformative technology like Google search engine and Amazon online shopping.

With Bitcoin, we will see a run-up and a crash, probably multiple times, but over the long term, BTC is here to stay. And Bitcoin will be transformative, just like the Internet was. Out of Bitcoin, we have a blockchain technology that is secure and reliable. These technologies for securing data and contracts will have far reaching effects on every person some day.

Why Bitcoin Is Better Than Gold

By Michael Hooper

For thousands of years, the world's inhabitants have had a currency for exchanging value between vendor and buyer. That currency was gold. No matter what country you were from or where you were brought up, gold was always welcome.

And in some ways, gold is still a store of value today. But gold has limitations. It is hard to exchange the value of gold into tiny fractions of an ounce. You don't buy a $2.60 candy bar with $2.60 worth of gold. It is impracticable.

Bitcoin is better than gold because one Bitcoin is broken down into 100 million parts. One Satoshi is equal to one/100 millionth of a Bitcoin. Another way to look at Bitcoin is in MiliBit = 1/1000th of a Bitcoin. So one MiliBit is equal to $5.96 with Bitcoin at $5960.

Bitcoin is a ledger of Bitcoin sales/buys since its inception. This ledger is maintained by noids or miners around the world. The code for Bitcoin was written by Satoshi Nakamoto and the first transactions of Bitcoin were in 2008. You can read Satoshi's White Paper here. He basically solved the double-spending problem for digital currency. That is why the ledger for Bitcoin is so widely trusted. You can't cheat the ledger, many hackers have tried, but failed. One rich man even paid hackers $100,000 to try and hack the system but they failed.

Like Gold, Bitcoin is outside of banking. You can trade gold or Bitcoin for goods or services without any connection to a bank or government currency.

The decentralized network of miners running the ledger of Bitcoin operate outside of government. People who mine gold get paid in gold. Same is true for Bitcoin. Bitcoin miners get paid in Bitcoin for processing transactions on the network.

The circulating supply of Bitcoin is 16.6 million, but there is a maximum supply of 21 million Bitcoin. After that no new bitcoin will be created. Miners will only be paid in transaction fees. If demand for Bitcoin remains strong, Bitcoin is likely to become more scarce after that last Bitcoin is minted. And that condition could drive Bitcoin's price even higher.

Steve Wozniak, co-founder of Apple, also believes Bitcoin is better than gold. In an interview here, he says he was drawn to Bitcoin for its mathematics, its finite number of 21 million. US government can always print more dollars and is kind of "phony" that way, Wozniak said.

With 100 million parts, Bitcoin can be purchased by anyone with a computer or smart phone with a connection to the Internet.

With Bitcoin's inflation economics (strong demand, limited supply), many people around the world see Bitcoin as a store of value, a place to hide their money. Look at Argentina, which has suffered high inflation for years, its peso has fallen dramatically against the U.S. dollar. The country worked to stop people from moving their pesos to dollars by imposing high fees on such transactions. Well there is no government connected to Bitcoin, it is run by computers. And the price of Bitcoin has a history of going up compared to the declining history of the peso. So many people, including high net worth Argentina natives like Wences Casares bought Bitcoin.

Because Bitcoin is trading 24 hours per day, seven days per week, the coin is becoming the world currency. Last April, Japan said it was OK for vendors to accept Bitcoin. Many vendors are now accepting Bitcoin.

Chinese investors like Bitcoin, but the government has been cracking down on digital currencies. But the government can't stop Bitcoin.

Bitcoin is gaining popularity all over the world. Every day on Coinbase alone, about 35,000 new accounts open -- a figure that sometimes reaches 50,000 -- and thousands of people in South Korea and Japan, two countries where Bitcoin has taken off, are also bringing new money into the system, Forbes reported.

No stock or mutual fund can provide what Bitcoin provides, and that is universal appeal, acceptability, use and store of value, in every country. At 100 million parts, you can break it down to pennies. You can send Bitcoin peer to peer so your fees on the transaction are minimal. Bitcoin started in the underground with cyber punks and geeks distrustful of government, launched during the height of the financial crisis in 2008-09. But since then, many people in Japan, Europe, South America and the United States have became attracted to the currency. As a result, institutional investors like Fidelity are looking into it. When more institutional investors get into Bitcoin, the price could go even higher. But Bitcoin has a history of huge volatility. There have been about 10 corrections of 10% or more in Bitcoin this year, but each time it declined, it always came back and went on to reach new highs. I'm holding onto my Bitcoin, and probably will be adding to my position with small purchases after 10% declines in price.

Disclosure: The author owns and mines Bitcoin.

Due Diligence: How to Evaluate an ICO Investment

The altcoin space is booming with more than 200 Initial Coin Offerings listed here. These ICOs are looking for financial support from investors. Investors face the daunting task of trying to figure out which ICOs will be winners. (If you are new to ICOs, read our Beginner’s Guide to Initial Coin Offerings.)

This article provides tips on doing due diligence to find a legitimate ICO with a solid business plan and a market that is hungry to adopt and support its coin. With any ICO, the worst case scenario is losing 100 percent of your investment. The best case scenario is that the coin doubles, triples, or even climbs 60,000 percent like Ethereum.

To Read more, click here