General Electric's response is wrong and they need to be more aggressive: Joe Terranova

ge on track for its biggest one-day percentage loss in over a decade the most active stock traded today on the S&P 500 Madoff whistleblower Harry Markopolos out with a new report alleging accounting fraud bigger than quote Enron and world comm combined GE firing back in a statement saying quote we have never met spoken to or had contact with this person while we can't comment on the detailed content of a report that we haven't seen the allegations we have heard are entirely false and misleading GE stands by its financials we operate to the highest level of integrity and our financial reporting and we have clearly laid out our financial obligations in great detail okay so a couple days ago Stephanie link was here on the show said she had added to her GE position in the face of some of the weakness I wanted to get a comment from her so here's what what Stephanie link says and you know who knows if other investors in this in this stock feel the same way but here's from Stephanie link quote I think this is a gross exaggeration in terms of the stock move liquidity is fine with 46 billion dollars in bank lines 11 billion from the Baker Hughes GE sale and 21 billion from the biopharma sale so that's a shareholders perspective just one but an interesting one obviously one who runs a pretty good-sized portfolio at TIAA what do you think we've been diagnosing this thing under the option side of it for two years I went back Scott and you've gotten tired of me coming up hey Scott I got more unusual in G no you in single-digit from the get-go July 2017 is when a lot of this really started and when I say started I'm talking about 50,000 plus options being bought to the downside as much as into the six figures we've had as big as 300,000 options bought at a single time Scott over this time for you that started with the stock at 25 by the way and as we've gone lower they've accelerated and accelerated and accelerated we have to today so obviously some of that could be involved with the with this news of what we're hearing today but I just go back to July 31st they were buying the September 9 puts they're paying 17 cents for these things today I'm selling some of those out for over 80 plus cents Scott and now and what we did was roll into the October 8 puts they continue to get very very aggressive now one of the numbers that I saw from this report was potentially 38 billion dollars well if that's the case and they have a market cap of 70 billion we're talking about half well they're buying January for strike puts now as well on top of everything else that we see we're just continuing to see this flows that come into here I'm not saying they're right I'm not saying they're wrong but I will say this they have been right from 25 all the way down to 6 and here we are once again as it's gone from 9 10 pushing back down again the options volumes just continue to come in there and it's negative negative negative now this just puts the onus Joe even more so on you know Larry Cole poverty at GE who first had to you know convince the market that he could turn around the ship that they could deal with the problems at power and that it was in a good position for a long-term investor to take a look at now he has to counter a narrative about accounting fraud that's a lot to deal with so I would say G's response is wrong and I think potentially the gentleman who is bringing forth these accounting missteps could be potentially be wrong and for the investor that's sitting out there saying okay do I buy an 11 percent sell off and GE no I don't think you do Stephanie's done the forensics on it she's comfortable longing being along it I think we all have to be comfortable with that but I think the messaging first and foremost from Larry colt was weak Larry Culp his his company's under attack your stock is down 12% someone's using a term like off-balance sheet that's troubling you need to get out there you need to defend that you need to dismiss it immediately he needs to be more aggressive the other side of it is again if I'm sitting at home and saying do I buy GE here now I'm thinking to myself I can't rely on the analysts I have to go out and buy someone who does Joe Staton really well in terms of what his price target and how adamant he's been about we're healing he'd I'm not and it's coming from way up here I'm not talking he just said went negative today I'm not specifically talking though about price targets I'm talking about having to do the forensics on what this company's debt might or might not look like so no part of it now you know the next earnings call the barrage of questions from analysts is going to be you know Colts going to go through all of the fundamentals of the quarter and it's gonna like go in one ear and out the other of the analysts who are gonna say yeah but yeah but yeah but what about what this guy says about let's remember it's not a Larry colqhoun I mean it's it's a problem for him no I mean he's not gonna have to deal with it yes yes yes absolutely but it wasn't the government on them already about some accounting issues this isn't new and they're attacking you know Harry's motives on this don't attack his motives it is what it is right he should get paid to do this kind of work it's not an issue that aside this goes into the much too tough category it's unanalyzed well most Cubs are analyzable this one in particular particular all the risk/reward of these options the entire time I just want to point this out have been absolutely phenomenal I mean risk/reward you got a 17 cent option on something that has potential to blow up the way it has to the upside I mean that's risk reward that I love and I bring that up all the time he when it's an inexpensive option like that and you've got a little bit of time you've got a little bit of movement and you've got news stories that are catalysts around it's got that's a great opportunity those are what you want to take advantage of my positions been shorter long I'd rather be short still you

Channel: CNBC Television

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Id: eR2Dq3F3Fxo

Length: 5min 58sec (358 seconds)

Published: Thu Aug 15 2019