C, AIG, GM, GE, BAC: Oh, How The Mighty Have Fallen

General Motors (GM) in bankrupcy talks, AIG (AIG) bailed out 3 times by the Fed, General Electric (GE) trading at $6, Bank of America at $3 and change, and the once mighty Citigroup (C) is now trading below one dollar. Who would have thought that this would be happening 1 1/2 years ago.

As I write this, I noticed that the Dow Jones Industrial Average (^DJI) is trading at an appropriate 6666 level.

Here are some of the bleak headlines from Reuters:

Citigroup shares tumble below $1

Shares of Citigroup, once the world’s most valuable bank, tumbled below $1 on Thursday, taking its year-to-date drop to 85 percent.

Citigroup, a Dow component, fell more than 13 percent to an intraday low of $0.98, hammered by continued fears over the bank’s health and ability to avert nationalization.

About two years ago, Citi’s market value was above $270 billion. Today its market cap is a little over $5.4 billion.

U.S. stocks dropped sharply at Thursday’s open, weighed down by General Motors’ warning about its viability and caution about the outlook for major conglomerate General Electric.

General Electric fell 1.7 percent to $6.67 before the bell as investors fretted about fallout from its embattled finance arm and worried about a possible downgrade of GE’s credit rating. On Wednesday, GE hit lows not seen since 1991.

What is GE going to do?

A few possibilities:

GE muddles through. It shrinks its asset base gradually, uses cash flow from its industrial and finance businesses to cover write-downs and losses, and eventually emerges from the crisis a shadow of its former self. Of course, while it’s doing this, it won’t be snapping up cheap businesses, building its industrial operations, and pumping hundreds of billions of dollars of new credit into the economy the way a robust GE would. At least it will control its destiny, though, and not become a national embarrassment like Citi and Bank of America.

GE raises tens of billions of new equity from the private market. Possible, but unlikely. And getting tougher and more expensive all the time. Having vaporized their capital by falling for the “just trust us” assurances of the collapsing banks, global investors are understandably skeptical of any company that claims its capital position is strong.

Taxpayers bail GE out. Tim Geithner and Jeff Immelt meet in some secret back room and hash out a plan whereby the taxpayer backstops GE Capital’s losses and the western world is saved. Something tells us that this one won’t go over too well. The public has already had it with bailouts and Geithner, and the idea of bailing out a company that still throws of tens of billions of dollars of cash a year from an industrial business might be the last straw.

GM - No Longer an American Icon

Shares of embattled automaker GM dropped more than 17 percent before the bell to $1.81 after it said there were substantial doubts about its ability to continue as a going concern.

GM said if it was unable to successfully reorganize and if debtor-in-possession financing was unavailable, it would be forced to liquidate under Chapter 7 of the U.S. bankruptcy code. For details see.
“When you hear the names GM and GE, the companies that built America, that they have problems, that does not give the confidence one would want to reverse the recent trend. That’s what it boils down to,” said Andre Bakhos, president of Princeton Financial Group in New Brunswick, New Jersey.

How much Worse Can it get?

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