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Author Topic: GE = Enron?  (Read 7686 times)

Benny B

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GE = Enron?
« on: August 16, 2019, 09:38:58 AM »
Stealing bias's thunder from HK.

Full disclosure: I am long both GE and various GE calls and puts ranging from October 2019 to January 2021, i.e. I benefit from large swings either way (although upside is more on the call side).  GE is my largest single holding/underlying (but still well under 10% of my portfolio).


What I don't get here is how the Markopolos report can be considered legal.  At its very core, either a) he acted on inside information [illegal], b) he is participating in a massive dump-and-pump [the opposite of a pump-and-dump, also illegal] or c) both.

If this is truly a whistleblower job, it's got to be the first whistleblower who's sold the info to a hedge fund. 

Or perhaps he's found a loophole in the whistleblower laws that's extends the immunity to illegal trading.
« Last Edit: August 16, 2019, 10:15:38 AM by Benny B »
Wow, I'm very concerned for Benny.  Being able to mimic Myron Medcalf's writing so closely implies an oncoming case of dementia.

tower912

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Re: GE = Enron?
« Reply #1 on: August 16, 2019, 09:50:08 AM »
Which is why in the HK thread, I said I was going to wait and see on this.    It could very well be legit, but right now it smells funny.   
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...

It is better to be fearless and cheerful than cheerless and fearful.

Hards Alumni

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Re: GE = Enron?
« Reply #2 on: August 16, 2019, 11:26:01 AM »
Stealing bias's thunder from HK.

Full disclosure: I am long both GE and various GE calls and puts ranging from October 2019 to January 2021, i.e. I benefit from large swings either way (although upside is more on the call side).  GE is my largest single holding/underlying (but still well under 10% of my portfolio).


What I don't get here is how the Markopolos report can be considered legal.  At its very core, either a) he acted on inside information [illegal], b) he is participating in a massive dump-and-pump [the opposite of a pump-and-dump, also illegal] or c) both.

If this is truly a whistleblower job, it's got to be the first whistleblower who's sold the info to a hedge fund. 

Or perhaps he's found a loophole in the whistleblower laws that's extends the immunity to illegal trading.

Agreed.  No matter what, its messed up and is breaking new ground.

SERocks

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Re: GE = Enron?
« Reply #3 on: August 16, 2019, 11:42:57 AM »
Porter Stansberry has been saying the same about GE for the last couple/few years.

TinyTimsLittleBrother

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Re: GE = Enron?
« Reply #4 on: August 16, 2019, 11:43:49 AM »
Gee, wonder why I discount the economic opinions of those who worked for GE Capital?  This type of stuff doesn’t surprise me. History will show that Welsh is a fraud and used Capital to cover up for how poor the company was actually performing.

TSmith34, Inc.

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Re: GE = Enron?
« Reply #5 on: August 16, 2019, 11:55:19 AM »
It appeared to me for years that Welch was cooking the books, or rather I should say using manipulative accounting to show the desired result.  I don't claim to know the truth of the latest rumor, but GE results seemed pretty suspicious under his leadership.
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Jon

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Re: GE = Enron?
« Reply #6 on: August 16, 2019, 02:44:56 PM »
The reports of GE's death are greatly exaggerated.

GE has access to significant amounts of liquidity. The whistle blower references about $18 B in exposure but GE right now could tap into more than  $70 B.

If necessary, and it's a big step, they could sell assets but that isn't required from what I am hearing.

I was an E Band at GE Cap under Gary Wendt during the Welch era. There was no "cooking of the books" - we had access to tens of billions of dollars in cash generated by the industrial businesses and we put that capital to work in ingenious ways.

For those who have the technical ability the key to GE understanding the issue lies in leveraging securitized vehicles. You either get that or you don't.

A lot of us bought GE yesterday because the ignorance of the masses creates opportunities for the clear-headed. 

Dr. Blackheart

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Re: GE = Enron?
« Reply #7 on: August 16, 2019, 02:55:34 PM »
It's no coincidence that once great brands/companies like GE, Kraft Heinz, and Sears are on the death spiral. While all have access to cash, all implemented strict zero based budgeting which put the focus on the short-term as they are being bled of assets as they call down the values of their assets/brands.

Marketers grow companies and cost accountants kill them. It's no surprise all are facing government scrutiny.

Benny B

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Re: GE = Enron?
« Reply #8 on: August 16, 2019, 03:09:37 PM »
It appeared to me for years that Welch was cooking the books, or rather I should say using manipulative accounting to show the desired result.  I don't claim to know the truth of the latest rumor, but GE results seemed pretty suspicious under his leadership.

/\ /\ True.  But all this is already known.  According to the experts (who’ve read the entire report) CNBC spoke to today, there are no new allegations.   


Although I’m up 34-38% on the various calls I bought yesterday afternoon, I can’t help but feel bad for those who (or whose advisors) panicked.
« Last Edit: August 16, 2019, 03:13:31 PM by Benny B »
Wow, I'm very concerned for Benny.  Being able to mimic Myron Medcalf's writing so closely implies an oncoming case of dementia.

Cheeks

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Re: GE = Enron?
« Reply #9 on: August 16, 2019, 06:17:32 PM »
It's no coincidence that once great brands/companies like GE, Kraft Heinz, and Sears are on the death spiral. While all have access to cash, all implemented strict zero based budgeting which put the focus on the short-term as they are being bled of assets as they call down the values of their assets/brands.

Marketers grow companies and cost accountants kill them. It's no surprise all are facing government scrutiny.

Accountants definitely kill companies....it is painful and miserable to live on a daily basis.
"I hate everything about this job except the games, Everything. I don't even get affected anymore by the winning, by the ratings, those things. The trouble is, it will sound like an excuse because we've never won the national championship, but winning just isn't all that important to me.” Al McGuire

Frenns Liquor Depot

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Re: GE = Enron?
« Reply #10 on: August 16, 2019, 07:00:49 PM »
The reports of GE's death are greatly exaggerated.

GE has access to significant amounts of liquidity. The whistle blower references about $18 B in exposure but GE right now could tap into more than  $70 B.

If necessary, and it's a big step, they could sell assets but that isn't required from what I am hearing.

I was an E Band at GE Cap under Gary Wendt during the Welch era. There was no "cooking of the books" - we had access to tens of billions of dollars in cash generated by the industrial businesses and we put that capital to work in ingenious ways.

For those who have the technical ability the key to GE understanding the issue lies in leveraging securitized vehicles. You either get that or you don't.

A lot of us bought GE yesterday because the ignorance of the masses creates opportunities for the clear-headed.

I think your first sentence is correct and your last paragraph may in fact be a good bet.  However the key issue with the stock is in fact liquidity.  The obligations to the pension plan and insurance are large. Second Industrial cash is negative.  GE has put O&G, digital and healthcare on sale paths to recap the company.  The stuff this week seems like a hyperbolic fanning of these flames, but it’s not as sanguine as you are stating.

warriorchick

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Re: GE = Enron?
« Reply #11 on: August 16, 2019, 07:22:01 PM »
It's no coincidence that once great brands/companies like GE, Kraft Heinz, and Sears are on the death spiral. While all have access to cash, all implemented strict zero based budgeting which put the focus on the short-term as they are being bled of assets as they call down the values of their assets/brands.

Marketers grow companies and cost accountants kill them. It's no surprise all are facing government scrutiny.

Blackie, the accountants only accumulate data.  It's the upper management and ownership who make the decisions based on that data.

Have some patience, FFS.

Cheeks

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Re: GE = Enron?
« Reply #12 on: August 16, 2019, 10:14:44 PM »
Blackie, the accountants only accumulate data.  It's the upper management and ownership who make the decisions based on that data.

True, but if you are in an org that Finance has major influence that POV can dominate.  Basically, how strong the upper management is in what discipline can dictate if the bean counters win, marketing, legal, etc.
"I hate everything about this job except the games, Everything. I don't even get affected anymore by the winning, by the ratings, those things. The trouble is, it will sound like an excuse because we've never won the national championship, but winning just isn't all that important to me.” Al McGuire

warriorchick

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Re: GE = Enron?
« Reply #13 on: August 16, 2019, 10:24:11 PM »
True, but if you are in an org that Finance has major influence that POV can dominate.  Basically, how strong the upper management is in what discipline can dictate if the bean counters win, marketing, legal, etc.

Well, what do I know?  I have been an accountant for 35 years, in nearly every position up to and including CFO.  But I know better than to get into an argument with you.

Have some patience, FFS.

Jon

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Re: GE = Enron?
« Reply #14 on: August 17, 2019, 12:41:00 AM »
I think your first sentence is correct and your last paragraph may in fact be a good bet.  However the key issue with the stock is in fact liquidity.  The obligations to the pension plan and insurance are large. Second Industrial cash is negative.  GE has put O&G, digital and healthcare on sale paths to recap the company.  The stuff this week seems like a hyperbolic fanning of these flames, but it’s not as sanguine as you are stating.

I agree that Culp has his work cut out for him and let me say that I am not trying to understate the magnitude of the task he has in front of him.

You are correct that part of the restructuring, which is aimed at sorting out the balance sheet, will require the divestiture of some/a core business(es).

Our fund works with GE Power and Renewables and I am fairly certain Renewables will be spun off in the near term.

Perhaps the truest indication for us is that in the past 6 months we have begun using ABB gear for projects we are backing in AK and Sri Lanka; a year ago that would have been unthinkable (most of us are GE Cap alums and our fund chair is a former GE Corporate officer.)

We need to manage the risk associated with the uncertainty surrounding GE and if our chair, who has walk-in access to Culp, directs us to work with ABB there is more to the story.

Having said which, every single one of us bought GE yesterday and continue to spec GE Power gear for infrastructure projects. 

GE will emerge from this. The question is how much will be left.

Back in the day, Cap generated more than 70% of the earnings which were massive. The tear down of Cap required GE Industrial to deliver the financial returns the Street had come to expect; of course, the margins in making something are nowhere near as robust as in deploying capital.

As for accountants, they give a history lesson. Corporate finance guides decision-making through Strategic Planning which is designed to do one thing: deliver shareholder value.

Dr. Blackheart

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Re: GE = Enron?
« Reply #15 on: August 17, 2019, 02:58:34 AM »
Blackie, the accountants only accumulate data.  It's the upper management and ownership who make the decisions based on that data.

I said “cost accountants”.

Cheeks

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Re: GE = Enron?
« Reply #16 on: August 17, 2019, 03:25:48 AM »
Well, what do I know?  I have been an accountant for 35 years, in nearly every position up to and including CFO.  But I know better than to get into an argument with you.



I think we actually agree on the topic WC.   :). And yes, I am aware of your background.  My point is each of the disciplines view input differently.  We are going through it right now with an internal war on this stuff, the last few years the Finance people have won the battles, they are driving the decision making and we are in a perpetual cycle of short term thinking not long term opportunity in my opinion.  Ultimately all disciplines serve as a check and balance I think you would agree.  It’s just that some orgs one disc can have more power than another which can lead to some problems of over spending, under spending, over conservatism, under, etc.

Peace
"I hate everything about this job except the games, Everything. I don't even get affected anymore by the winning, by the ratings, those things. The trouble is, it will sound like an excuse because we've never won the national championship, but winning just isn't all that important to me.” Al McGuire

Cheeks

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Re: GE = Enron?
« Reply #17 on: August 17, 2019, 03:30:33 AM »
Other side of the story, does whistleblower have to gain financially on this?

https://www.cnbc.com/2019/08/15/ge-ceo-culp-calls-markopolos-report-accusing-company-of-fraud-market-manipulation.html


GE CEO also personally bought $2M in GE stock yesterday...stock rose 9%.
"I hate everything about this job except the games, Everything. I don't even get affected anymore by the winning, by the ratings, those things. The trouble is, it will sound like an excuse because we've never won the national championship, but winning just isn't all that important to me.” Al McGuire

MU82

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Re: GE = Enron?
« Reply #18 on: August 17, 2019, 06:31:34 AM »
I sold my GE stock several years ago and I have no interest in owning the stock again, so I have not been following the company and I am not qualified to comment on it as an investment.

However, I would caution those who think that the GE CEO buying company stock signals that all is well.

The common perception is that nobody knows a company better than the CEO, and if he is putting $2M of his own money into the stock, he must be extremely confident in the company's future. In GE's case, the market certainly looked at it as a bullish sign yesterday.

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.
“It’s not how white men fight.” - Tucker Carlson

JWags85

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Re: GE = Enron?
« Reply #19 on: August 17, 2019, 08:11:59 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

Frenns Liquor Depot

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Re: GE = Enron?
« Reply #20 on: August 17, 2019, 08:21:57 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

I think you are taking a fundamental problem out on a function.  CEOs get paid for growth and when there are less market or consolidation revenue opportunities available, efficiency becomes the only way to grow.  The way out of course is innovation which remains difficult for large companies to produce.  The market isn’t happy with 2-3% market or market plus growth. So you are faced with a dilemma...

Cheeks

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Re: GE = Enron?
« Reply #21 on: August 17, 2019, 09:11:20 AM »
I sold my GE stock several years ago and I have no interest in owning the stock again, so I have not been following the company and I am not qualified to comment on it as an investment.

However, I would caution those who think that the GE CEO buying company stock signals that all is well.

The common perception is that nobody knows a company better than the CEO, and if he is putting $2M of his own money into the stock, he must be extremely confident in the company's future. In GE's case, the market certainly looked at it as a bullish sign yesterday.

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.

Agree completely, just presenting some new info
"I hate everything about this job except the games, Everything. I don't even get affected anymore by the winning, by the ratings, those things. The trouble is, it will sound like an excuse because we've never won the national championship, but winning just isn't all that important to me.” Al McGuire

Cheeks

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Re: GE = Enron?
« Reply #22 on: August 17, 2019, 09:12:12 AM »
I think you are taking a fundamental problem out on a function.  CEOs get paid for growth and when there are less market or consolidation revenue opportunities available, efficiency becomes the only way to grow.  The way out of course is innovation which remains difficult for large companies to produce.  The market isn’t happy with 2-3% market or market plus growth. So you are faced with a dilemma...

Agree also, and Jwag Signet example also good.  Dilemma for sure.
"I hate everything about this job except the games, Everything. I don't even get affected anymore by the winning, by the ratings, those things. The trouble is, it will sound like an excuse because we've never won the national championship, but winning just isn't all that important to me.” Al McGuire

Pakuni

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Re: GE = Enron?
« Reply #23 on: August 17, 2019, 09:18:57 AM »
As a near illiterate on some of these matters (a fact I'm not proud to admit), this has been a fascinating read.
Thanks to all who've contributed.

Dr. Blackheart

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Re: GE = Enron?
« Reply #24 on: August 17, 2019, 10:30:16 AM »


I think I learned this in my first MU business management class.

Stage 1 is led by the entrepreneur.  Stage 2 is the marketer.  Stage 3 is sales. Stage 4 is accounting and finance.  The professor said when they name the CFO as CEO, leave.

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

 

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