GE: Master arbitrageur
“Give a man a fish: feed him for a day. Teach a man arbitrage: feed him for a lifetime.”
General Electric CEO Jeff Immelt learned his lesson well. Rocky reckons that GE shareholders just made a cool $250 million because of Immelt’s arbitrage prowess.
On Friday, GE announced a $1.45 Billion debt buyback. That debt was yielding around 9%.
Today, GE sold $8 Billion of FDIC-backed notes. The new debt (courtesy of the US Government TLGP guarantee) costs around 2%.
Fannie Mae and Freddie Mac used to be called GSE’s (government sponsored enterprises). Now that Fannie and Freddie are kaput, Rocky suggests that we drop the “S” from “GSE.”
[Disclosure: Rocky continues to nibble at shares of GE. And he thanks Mr. Immelt for his entrepreneurial efforts.]