lorddarley

Why You Should Pay No Attention to Consensus Estimates

Set the bar low enough, and anyone can jump over it. Implicit in any of the current optimism, as companies lose less than projected, is that there are better days on the near horizon.

The US is an economy with asset "values" that still grossly dwarf GDP. Unfortunately, we have tough sledding until our labor costs are reasonably in line with those of foreign competitors. Until we resume status as an exporter without major imbalance in trade, the long term trend will not be good.

It's total fiction to think we can prosper with a "service-based" economy, importing all this oil and overseas junk.

Friedman: The U.S. Needs to Stimulate Innovation and Invention

Why is history a dusty pastime that we never learn from? I don't think there has been an economist since Adam Smith who really understood what makes a country prosperous, and what improves the lot of the great mass of its citizens. From his Wealth of Nations (coincidentally 1776):

1. Make something that people in other countries want to buy (i.e. nurture exports).

2. concentrate on making and selling high value products.

3. import the raw materials and produce from other countries made by cheaper labor.

4. don't be embarrassed by success.

Smith knew that not everyone becomes "middle class" overnight, and it didn't trouble him. He recognized that there are divsions of labor.

We have deluded ourselves in the US into thinking that Adam Smith is wrong headed, and that running a positive balance of trade, or recognizing that divisions of labor are natural, is sinful.

Smith's economic principles are unavoidably correct. I wouldn't be surprised if there is a dog-eared copy or two in Peking.

GE's Michigan R&D Investment Is a Great Idea

Sounds like politics, rather than common sense.

The Threat Of GECC's Disappearing Tangible Common Equity Value to the Financial System

One of my law partners has a very smart son who retired from Goldman at a tender age. He shares Tyler's view about GE, and was smart enough to get his old man out of the market before the carnage.

Without question, people who own GE do not have a clue that they have made a hugely leveraged bet. Light bulbs and jet engines won't pay for the hocus-pocus of GE Credit.

Will GE go broke? Not in a million years. There is no way that the Obama Administration is going to sacrifice this pearl of American industry. I can't forecast the way in which GE will get favorable aid from the Administration, but I would bet my financial future on it happening. GE is scary for all the reasons which Tyler notes, but it will survive and richly reward those who put common sense on the sidelines, and read the political tea leaves.

LordD

So, in spite of the clear negatives, politics will

General Electric: Sorry Mr. Immelt, You Missed!

www.bloomberg.com/apps...

A balanced report on GE and Immelt appeared on Bloomberg after my post. It's articulate, and makes many of the same points. I would encourage you to read it.

LD


On Mar 02 11:08 AM lorddarley wrote:

> I agree that the GE dividend cut should have been immediate. However,
> I am still not as critical of Immelt as many.
>
> First, St. Jack made the decision to overconcentrate in the financial
> sector. Immelt has been on record for quite a while that GE needed
> to cut back on financial businesses.
>
> Next, dumping 32 million shares of Swiss RE in June, 2007 (shares
> are down about 90% since then) shows that there have been some right
> decisions. On the negative side, they did not move fast enough to
> dump WMC after the June, 2007 announcement that they would.
>
> Immelt is not an A+, but he is better than many. GE is an ocean liner,
> and Immelt has done reasonably well to get the Board to buy into
> his vision to change the diversification mix. He is not in a strong
> enough position to make decisons without Board buy-in, however. That's
> why he had to listen to the constituency of shareholders who "need"
> dividends. Although he is a substantial owner, I don't consider the
> delay in implementing the policy to be motivated by self-interest.
> He is getting pressure from the board.
>
> My main criticism of Immelt is that he hates to speak "bad news,"
> so it seems as if he is dissembling. Still, I would not replace him.
> I'm sick of petty tyrants running our great companies.
>
> LordD

General Electric: Sorry Mr. Immelt, You Missed!

I agree that the GE dividend cut should have been immediate. However, I am still not as critical of Immelt as many.

First, St. Jack made the decision to overconcentrate in the financial sector. Immelt has been on record for quite a while that GE needed to cut back on financial businesses.

Next, dumping 32 million shares of Swiss RE in June, 2007 (shares are down about 90% since then) shows that there have been some right decisions. On the negative side, they did not move fast enough to dump WMC after the June, 2007 announcement that they would.

Immelt is not an A+, but he is better than many. GE is an ocean liner, and Immelt has done reasonably well to get the Board to buy into his vision to change the diversification mix. He is not in a strong enough position to make decisons without Board buy-in, however. That's why he had to listen to the constituency of shareholders who "need" dividends. Although he is a substantial owner, I don't consider the delay in implementing the policy to be motivated by self-interest. He is getting pressure from the board.

My main criticism of Immelt is that he hates to speak "bad news," so it seems as if he is dissembling. Still, I would not replace him. I'm sick of petty tyrants running our great companies.

LordD

Note to Jack Welch: Lay Off Your Successor

I could not agree more. A buyer of stock has to decide if he is the owner of a business or a speculator. I feel sorry for people who have lost years of "appreciation" when the inevitable happened. i.e. the accounting magic unwound.

I'm not an apologist for Immelt. I do not think "big is better." GE should be a smaller company. when Immelt, or a successor, wakes up to that, GE shareholders will profit well.