Thursday, March 12, 2009

GE's AAA: The End of an Era

Its the end of an era for bond investors as General Electric finally loses its AAA rating with S&P. Moody's will follow suit in a matter of days, I'd expect.

I have little to say other than to claim GE is currently a "AA" risk is just as crazy as to say they are "AAA" for all the reasons I've discussed before.

Anyway, I thought I'd dispell a myth. I keep hearing claims that GE isn't "trading like a AAA."

First of all, GE is the AAA corporate bond market. So I don't know what "trading like a AAA" means if it doesn't mean GE. Below is a pie chart of all bonds in the Merrill Lynch AAA corporate bond index.

Even given that, GE never did trade like a AAA, if you define it as trading better than a AA. Look at the chart below. GE has traded above AA-rated industrials for years.

Just more proof that the media doesn't know what they are talking about.

1 comment:

inchirieri apartamente cluj said...

When you own 80% of market share you definetely trade like an AAA. It doesn't matters what a rating agency says.