The U.S. financial markets have been on a sugar high over the past decade. I doubt dip buyers will want the ride to end. Just as GE (GE) reached a new 52-week low market chatter surfaced that Warren Buffett of Berkshire Hathaway (BRK.B), (BRK.A) was interested in acquiring a stake:
One trader after another passed it on, irrespective of whether there’s any truth to it: Warren Buffett, they said they had been told, was apparently interested in buying a stake in General Electric Co.
Hours later, there’s still zero indication that the speculation is anything beyond just that, but the market reaction was real: Shares of the struggling industrial powerhouse rose more than any others in the S&P 500 Index, climbing 4.3 percent on a day when most of the market tumbled …
Nicholas Heymann, an analyst at William Blair & Co., said investors reacted to the speculation today in part because it seems like “a plausible theory, given Buffett had recently spoken to the press that he might be interested in GE at the right price.”
GE has been searching for a new narrative since the Financial Crisis of 2008. The company shuttered GE Capital to focus on its industrial operations, removing a key anchor. Now Industrial is starting to crack and I do not thing it will be a quick fix. Buffett is barking up the wrong tree for the following reasons:
