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Author Topic: GE = Enron?  (Read 950 times)

Jon

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Re: GE = Enron?
« Reply #25 on: August 17, 2019, 10:36:09 AM »

Truth is, there are many reasons CEOs make large buys. Fairly often, it is done as a sign to show the market some confidence. Sometimes, it can be a desperate attempt to pop the stock price.

Two examples from the not-distant past were CEOs of Kinder Morgan and Seadrill buying millions of dollars in their companies' stock even though both faced huge problems. After the initial boost of excitement in the market, both companies got crushed not long after.

While KMI has hung in there and is still a viable company -- albeit one trading at half the price it did 4 years ago and one that had to cut its dividend 75% -- Seadrill ended up going into bankruptcy after its stock plunged from $40+ to 10 cents. The Seadrill CEO made his big buy during the decline (just as the GE CEO did), and what emerged is a shell of its former self.

I am NOT saying the GE CEO's purchase was a ruse or anything like that. I don't know what his motivation was ... and neither does anybody else. I also am not saying GE will meet the same fate as Seadrill, again because I don't know what its future holds ... and neither does anybody else.

I'm just throwing a little word of caution out there, using history as a guide.

Any stock investment is a "bet" on a company's future. To my fellow Scoopers who have decided to place this bet on GE, I wish you good fortune.

Mike

It is very rare that an individual buys such a large quantum in a desperate attempt to prop up the share value.

But I have some first hand insight on this matter. And GE has the ability to meet all obligations. Period. And that is the heart of the matter. As I said above, GE will leveraged securitized vehicles to see it through this situation.

It is terrible what has happened to the Meatball but the enterprise will survive.

As for Culp buying stock - he knew that the stupidity of the herd was an opportunity for the rational.


Jon

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Re: GE = Enron?
« Reply #26 on: August 17, 2019, 10:57:38 AM »
Seadrill got caught up in a rapid fundamental shift in offshore drilling. Same thing happened to Transocean (RIG). It recovered strongly after Deepwater Horizon but has just bled out for years to a sub $5 share price. SDRL happened too fast for that to be a desperate attempt to pump the stock, I really think the CEO and others truly felt it was an anomaly they could ride through and it was not. That industry has just changed precipitously in ways that many didn’t foresee.

I agree with the above points about the damage overly focused cost accountants can do. In many ways, I view it as a team that goes into a prevent defense or takes the air out of the basketball after generating a lead. A market leading position has been created, then they shift to far too acute a focus on stripping spend and keeping costs down.

Great example is Signet Jewelers. They became the largest jeweler in the US and the world by being a branding and marketing machine. They were skilled merchants, but put money behind brand vision. Sought to compete not with other mall stores, but the local family jewelers. And they were wildly successful. Zales, on the other hand, was the larger chain for a long time and had a very cost centric approach. They struggled most of the 2000s before Signet surpassed them and then swallowed them up. Signet subsequently was the unquestioned top dog and slowly their practices began to change. Beating suppliers down on costs, losing focus on creating and sustaining brands, focusing heavily on internal credit offerings to customers, etc... The management turned over and the result C-suite and adjacent had little marketing or retail experience or focus, and relied heavily on Excel jockeying. The Street recognized this and SIG has been a short seller fav for some time. Many of the retail jewellery struggles in the US recently, they ushered in themselves and thus will make it even harder to rebound

Wags

You are spot on re seismic shifts in offshore drilling. Technology, regulatory oversight, access, and consolidation culled the flock. I have friends from various points in my life who spent decades at Transocean, Nabors, Diamond, and Schlumberger and who witnessed that change; some are in early retirement while others are part of the executive team running much larger businesses.

It really does underscore the maxim that change is inevitable but the key lies in how we address it.

We are seeing fundamental shifts in intermittent renewable energy, especially in PV, the integration of stored energy systems, and the digital systems which optimize performance. Industries have inflection points where risk is magnified; for those who are willing to understand these dynamics there is incredible opportunity.

I know I have told you that the extent of my grasp of the jewelry biz is I go to Tiffany's at Bellevue Square when the Baby David's mother has some life event looming. What's interesting is that she has been telling me lately that Olson's Tack Shop has greater appeal for her than powder blue boxes.

How was the nasi goreng?

Jon

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Re: GE = Enron?
« Reply #27 on: August 17, 2019, 11:14:29 AM »


When the venture capital folks took over, the death spiral accelerates.  Pabst and Schlitz were the # 1 and 2 beers not too long ago.

For every Schlitz horror story there are dozens where an infusion of outside capital and expertise brought significant benefit.

If I recall from a business school case study, the profound mistake at Schlitz was messing with the product formula.

This was a lesson I used when in Indonesia we took over a large local kretek cigarette enterprise (our real client was Philip Morris). The brand went from dominance to a distant #4 over the course of a decade. The third generation of this family business had been robbing it blind and failed to mind the store, as it were.

Cigarettes is a huge cash business so priority one was to secure the cash. We ran market tests to understand what was wrong with the product and the focus results were staggering: tastes like sh1t, harsh, etc... An audit of the tobacco stocks confirmed that staff were buying grade D tobacco rather than the superior grades called for in the specs (and pocketing the difference).

Because there was still equity in the brand, it had been the market leader for 80 years, addressing product quality was enough to reinvigorate sales and get the cash flowing again.

Stabilizing the product is essential in branded FMCG. If you change the Schlitz formula to save pennies the consumer will not only notice but will feel betrayed and defect. Loyalty goes two ways in branding.

But, as I say, for every Schlitz horror story there are dozens more where the capital markets have topped up the balance sheet and brought in expertise to drive success.   

Fluffy Blue Monster

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Re: GE = Enron?
« Reply #28 on: August 17, 2019, 11:20:17 AM »
The basic problem with Schlitz and Pabst was that American beer at the time, as Mike Royko once put it, "was filtered through a horse."

Dr. Blackheart

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Re: GE = Enron?
« Reply #29 on: August 17, 2019, 12:02:39 PM »
The basic problem with Schlitz and Pabst was that American beer at the time, as Mike Royko once put it, "was filtered through a horse."

Yep. Cost cut to swill. 

Jon

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Re: GE = Enron?
« Reply #30 on: August 17, 2019, 07:26:38 PM »
The basic problem with Schlitz and Pabst was that American beer at the time, as Mike Royko once put it, "was filtered through a horse."

Mike Royko. I miss his sardonic take on the world as filtered through the prism of working class Chicago.

Reading Royko while sitting in various places around the world made me feel connected to home, albeit its gritty, unrepentant side.

Royko was accused of being a racist by rather dull witted sorts who failed to grasp the razor edge of his satire. Rather than give in to iniquitous, naive outrage, Royko turned up the volume on Slats Grobnik, much to the chagrin of the fools who were too dense to see Royko's actual message.

Royko's pen today would make this divided nation seem more comprehensible. Sumbitch died twenty years too soon, frankly.

ZiggysFryBoy

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Re: GE = Enron?
« Reply #31 on: August 17, 2019, 08:15:31 PM »
Mike Royko. I miss his sardonic take on the world as filtered through the prism of working class Chicago.

Reading Royko while sitting in various places around the world made me feel connected to home, albeit its gritty, unrepentant side.

Royko was accused of being a racist by rather dull witted sorts who failed to grasp the razor edge of his satire. Rather than give in to iniquitous, naive outrage, Royko turned up the volume on Slats Grobnik, much to the chagrin of the fools who were too dense to see Royko's actual message.

Royko's pen today would make this divided nation seem more comprehensible. Sumbitch died twenty years too soon, frankly.

Royko and mu82, both penning witticisms in Chicago at the same time.  what a world. 
Unless Sultan says differently that is, then we’d obviously have to go with that....

--Lighthouse 84, 9/16/18

MU82

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Re: GE = Enron?
« Reply #32 on: August 17, 2019, 11:02:19 PM »
Royko and mu82, both penning witticisms in Chicago at the same time.  what a world.

Unfortunately, Royko and I barely overlapped in Chicago, as he died about 2 years after I got there. And he died before I became a columnist who dispensed "witticisms." But thanks for mentioning me in the same sentence as one of the all-time greats.
"We need journalists who are on the side of victims, on the side of those who are persecuted, excluded, thrown away and discriminated against ... situations of suffering that often are in the dark, or have light shining for a moment only to return to the darkness of indifference."

-- Pope Francis

MU82

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Re: GE = Enron?
« Reply #33 on: August 17, 2019, 11:05:05 PM »
Mike

It is very rare that an individual buys such a large quantum in a desperate attempt to prop up the share value.

But I have some first hand insight on this matter. And GE has the ability to meet all obligations. Period. And that is the heart of the matter. As I said above, GE will leveraged securitized vehicles to see it through this situation.

It is terrible what has happened to the Meatball but the enterprise will survive.

As for Culp buying stock - he knew that the stupidity of the herd was an opportunity for the rational.

As I said in my post, I was not making any claims about this particular situation.

What I will say is that it happens more times than you might expect that a CEO, chairman or other high-ranking corporate officer makes a major buy for reasons other than believing he or she will make a big profit on the purchase.

I gave 2 examples from the last few years alone, and there have been plenty of others.

I was going to say something like, "To these guys $1 million or $2 million is like $100 or $200 to me or you," except you or I actually probably would miss  the $100 or $200 more than they would miss the $1M or $2M.
"We need journalists who are on the side of victims, on the side of those who are persecuted, excluded, thrown away and discriminated against ... situations of suffering that often are in the dark, or have light shining for a moment only to return to the darkness of indifference."

-- Pope Francis

JWags85

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Re: GE = Enron?
« Reply #34 on: Today at 02:44:29 AM »
I know I have told you that the extent of my grasp of the jewelry biz is I go to Tiffany's at Bellevue Square when the Baby David's mother has some life event looming. What's interesting is that she has been telling me lately that Olson's Tack Shop has greater appeal for her than powder blue boxes.

How was the nasi goreng?

Normally I’d encourage you to steer her back to the shiny baubles, but breaking out of the powder blue vortex, no matter what the alternative, is something I co-sign. Those guys are excellent at what they do but wholly insufferable from a business perspective, and with more snake oil than they’d care to admit.

I had an braised oxtail nasi goreng that knocked my socks off. Another variant with foie that was sublime. Between that and the dim sum fried rices I’ve had in Shanghai and Shenzhen, I’m ruined for the dish from any “Americanized” Chinese joint in the US.

Cheeks

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Re: GE = Enron?
« Reply #35 on: Today at 09:28:35 AM »
As I said in my post, I was not making any claims about this particular situation.

What I will say is that it happens more times than you might expect that a CEO, chairman or other high-ranking corporate officer makes a major buy for reasons other than believing he or she will make a big profit on the purchase.

I gave 2 examples from the last few years alone, and there have been plenty of others.

I was going to say something like, "To these guys $1 million or $2 million is like $100 or $200 to me or you," except you or I actually probably would miss  the $100 or $200 more than they would miss the $1M or $2M.

That’s a large exaggeration, but we get it.  Using $500k net worth for you ( I know it is much higher, but just bare with me), his stock purchase is like $7400 equivalent based on Culp’s estimated net worth.  If you are worth $1M, then it’s like $14k impact to you.  That’s real money.  You would be fine without, but a lot more than just $100 or $200.

"To win a national championship or go deep into the tournament, it's sometimes a crapshoot. You've got to be good enough, you've got to be lucky, you've got to be a lot of things."
Michigan State Head Coach Tom Izzo

tower912

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Re: GE = Enron?
« Reply #36 on: Today at 11:06:34 AM »
but just bare with me
I don't know of anybody here that wants to get just bare with you
Luke 6:45   ...A good man produces goodness from the good in his heart; an evil man produces evil out of his store of evil.   Each man speaks from his heart's abundance...

Cheeks

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Re: GE = Enron?
« Reply #37 on: Today at 12:17:23 PM »
I don't know of anybody here that wants to get just bare with you

Jockey, MU82, TSmith for sure....they are so attached to everything I say it's as if they are my underwear looking for the next step in our relationship.   ;D

My device sucks for autocorrect....bear with me. 
"To win a national championship or go deep into the tournament, it's sometimes a crapshoot. You've got to be good enough, you've got to be lucky, you've got to be a lot of things."
Michigan State Head Coach Tom Izzo

tower912

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Re: GE = Enron?
« Reply #38 on: Today at 12:32:13 PM »
Barely
Luke 6:45   ...A good man produces goodness from the good in his heart; an evil man produces evil out of his store of evil.   Each man speaks from his heart's abundance...