Home > Stocks
General Electric (GE): Bellwether for a Global Bear Market
Worldwide infrastructure appears to be the next big investment magnet, and General Electric Co. is in the news today for having raised $5.64 billion with its partner, Credit Suisse Group, in a large private-equity venture called Global Infrastructure Partners.
According to a report in Bloomberg, GE and its partner will "invest in airports, waste-management companies and energy facilities." Global Infrastructure Partners has already used some of that $5.64 billion to purchase a U.K. landfill operator and trash collector, Biffa Plc.
This announcement of its successful global infrastructure deal is far happier than GE's announcement in mid-April that it had badly missed its expected earnings, resulting in the stock losing $47 billion in one day on April 11, 2008. As an article in The Economist (April 17, 2008) put it, "This is not what investors expect from one of the few remaining triple-A-rated companies, famed for hitting its targets."
Read the latest forecasts and see the labeled charts in
The Elliott Wave Financial Forecast's most recent issue, which adds more details to how the credit crisis will play out in the United States and around the world.
But while many investors and many in the financial press see global infrastructure investment as GE's savior, our analysts here at Elliott Wave International look at GE's price chart and see a different story – that the big bear is back for GE, making it a bellwether not for the emergence of infrastructure investment but rather for a global bear market. Here's what our analysts said in the most recent issue of
The Elliott Wave Financial Forecast, along with a monthly chart of GE's stock:
The General Casts Its Lot
Back in 2000, the first leg of the bear market didn’t really sink its teeth in until the fall months. One sure sign of a more serious bear market was a peak in the most venerable Dow stock, General Electric. In November 2000, The Elliott Wave Financial Forecast showed a long-term picture of an exquisite Fibonacci rise in “the only original member of the Dow Jones Industrial Average,” and stated, “GE is going to go way down.”
The chart shows the 65% decline that followed over the next 28 months. It also shows a corrective rally that had retraced 50% of the decline before an October 2, 2007 peak, which should be the end of GE’s b-wave advance. A c-wave decline should take GE well below its February 2003 low of $21.30, so another even more serious plunge has probably begun.
Once again, the weakness in GE probably heralds stormy weather ahead for the market as a whole; or should we say, “hole”? GE gapped over 11% lower on April 11 after it fell short of its own earnings estimates. The fall was attributed to its exposure to the financial sector, which is certainly substantial. But GE is also broadly diversified globally, and we suspect that the sell-off resulted at least as much from the first hint of shrinkage in GE’s global growth rates. As
Conquer the Crash says, “Make no mistake about it: It’s a global story.” And no firm is a better global bellwether than GE. And if the dollar has bottomed, revenues from overseas sales should decline as well. [From
The Elliott Wave Financial Forecast, April 25, 2008]
So, while the recent announcement of its Global Infrastructure Partners seems to put GE back in its own bright lights, our analysts see GE as a bellwether of darker days ahead in the form of a global bear market. This kind of analysis, based on wave patterns, outlines a view of the future contrary to the more common view that the worst is over for the 30 stocks that make up the Dow Jones Industrial Average, such as GE.
Read the latest forecasts and see the labeled charts in The Elliott Wave Financial Forecast's most recent issue, which adds more details to how the credit crisis will play out in the United States and around the world.