GE's Credit Downgrade Reflects Economy

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General Electric lost its AAA credit rating from Standard & Poor's Ratings Service, which said crumbling economic conditions could worsen credit losses at GE Capital. Still, the one-notch downgrade was less severe than many had feared, and that in turn, helped bolster the stock market.


NPR's business news starts with corporate titans demoted.

Credit rating agencies downgraded two big companies. The message is: your money is a little less safe with these pillars of corporate America. Warren Buffet's Berkshire Hathaway was downgraded from triple A to double A plus. General Electric was also taken down a notch, though as Chris Arnold reports, GE investors did not seem to care.

CHRIS ARNOLD: The rating agency Standard & Poor's lowered GE's credit rating from triple A to double A. Investors have been worried that the company's financial unit GE Capital is going to suffer huge losses like so many other big financial firms have.

Mr. DAVID KOTOK (Chairman and Chief Investment Officer, Cumberland Advisors): GE's credit downgrade from the majestic AAA was expected.

ARNOLD: David Kotok is chief investment officer of Cumberland Advisors. He says the news to him isn't the downgrade, it's the fact that the market shrugged it off. GE's stock after plummeting in recent months has started to rise in recent days and it kept rising as more investors seemed to believe that the company is on better financial footing than some analysts feared.

Mr. KOTOK: What's important today is to see that the stock has been recovering from a low under six to almost ten and it did that in a week.

ARNOLD: That's more than as 30 percent jump in the stock price.

Mr. KOTOK: And the interesting thing is the GE is viewed as a bellwether stock for the large companies in the stock market. And the large companies as a whole.

ARNOLD: Part of that is because GE makes such a vast range of products everything from jet engines to natural gas pumping equipment to dish washers. Kotok thinks it's a good sign for the whole stock market that investors seem to be willing to be a little more hopeful.

Chris Arnold, NPR News.

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