General Electric (GE) has long been a bellweather for the economic state of the US economy. So when they missed on their earnings it sent a shockwave through the financial markets. But the reason they missed was due to Bear Sterns meltdown in mid March.

GE always keeps some real estate in it’s pocket that has accrued gains to manage their earnings. When they get near the end of the quarter they sell of what needs to be sold off to keep investors happy and calm. This is perfectly legal and has been done for years.

Well, this quarter, just as they were set to sell of some assets for a profit of 100 million dollars to hit their number, Bear Sterns melted down. This crisis in the credit market cost GE the window to sell the property, and thus they reported lower earnings.

Not very complicated but it was far reaching.

In a conference call with analysts, CEO Jeffrey Immelt explained that the real estate business didn’t measure up because GE didn’t close as many deals as expected in the quarter. The reason? “We experienced an extraordinary disruption in our ability to complete asset sales and incurred impairments [on lower loan and asset values] and this was something we clearly didn’t see until the end of the quarter,” Mr. Immelt said.

The “disruption” referred to Bear Stearns’ announcement March 15 that it needed federal help in finding a buyer or else it would fail, which caused the credit markets to freeze and scuttled planned property sales.  via Financial Week.

Related posts:

1. Lowe’s and Home Depot Struggle in Tough Real Estate Market
2. Third Quarter Existing Homes Sales Increase 11.4 Percent, Prices Drop 11.2 Percent
3. Lennar Sees Improving Market As It Posts Wider Losses
4. NAR 1st Quarter 2009 Numbers Sobering But There Are Silver Linings In Them
5. Commercial Real Estate Meltdown Keeps Federal Reserve From Raising Interest Rates