Buffet Strikes Again - this time into General Electric (GE)

Submitted By Trader Mark
The Bank of Buffet is on fire. I am surprised at the target but then again he has 10,15,20 year time frames and General Electric (GE) will be around then.

General Electric Co (GE) said on Wednesday it would sell $3 billion of preferred shares to Warren Buffett's Berkshire Hathaway Inc (BRKa), with another $12 billion in common shares going to the public.
GE shares, which were down more than 9 percent earlier in the day, took back some of their losses, but still remained down 5 percent at $24.20 in afternoon trading on the New York Stock Exchange. The stock fell as low as $23.09 on Wednesday.
The U.S. conglomerate's current market capitalization stands at about $245 billion. Its stock has lost about 34 percent of its value so far this year as weakness at its GE Capital finance unit offset strong growth in its core industrial business, which makes heavy equipment like jet engines and electricity-producing turbines.
Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey, said that when you are looking for a "market bottom", "you want smart money to come in and say, 'I'm coming in there and putting my money down'."
Buffett's shares carry a 10 percent premium. He will also receive warrants to buy another $3 billion of common stock at a strike price of $22.25 per share over the next five years.
Credit default swaps for General Electric Capital Corp., the financing arm, tightened dramatically on the news. It now costs $500,000 to protect $10 million of bonds for five years, down from $650,000 prior to the announcement, according to Phoenix Partners Group. The debt-protection costs had hit as high as $740,000 earlier Wednesday as anxiety swirled over GE's ability to access commercial paper and other debt markets. (they really need to regulate the CDS market, and soon)
The near-term fate of GE Capital depends on two sensitive corners of the economy: commercial real estate and loans to midsize businesses. The weakening economic prospects of those sectors, amid the global financial crisis, are intensifying pressure on Mr. Immelt, who already is planning strategic changes in GE's portfolio. Among other things, the financial crisis will make it more difficult for GE to sell some divisions and could hurt its earnings in coming quarters.

It will be interesting to see where Bank of Buffet strikes next.

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