11/19/09 Pittsburgh, Pennsylvania – We’ve had GE in the OI portfolio for almost four years, predating my tenure as editor… Frankly, I don’t think GE is going to give us much more from here. It’s time to sell General Electric.
Deep down, it pains me to part from GE. This is an iconic old American firm, now grown into a world technology powerhouse (no pun intended). I honestly LOVE the GE business divisions that deal with ‘real’ things, like jet engines and locomotives and power generators and windmills and subsea equipment. I get misty-eyed thinking of all the wonderful GE people who work in those metal-bending divisions, toiling at their workbenches and making the world a better place.
Then there’s GE management, which apparently has not learned its lessons from the world monetary crash of the past couple years. The money side of GE still has too much bad commercial paper. A lot of borrowers owe GE more than they’ll ever repay. And GE owes a lot of lenders more than the company can afford. There’s a looming crash in commercial real estate, and it’s set to kick in during the winter of 2010. It’ll shred GE’s capital position and rip a big hole in the bottom line.
I’ve often asked whether the GE industrial side can earn profits for the company faster than GE Capital can lose money. I’m not going to wait around to find out.
Byron King
Byron King is the managing editor of Outstanding Investments and Energy & Scarcity Investor. He is a Harvard-trained geologist who has traveled to every U.S. state and territory and six of the seven continents. He has conducted site visits to mineral deposits in 26 countries and deep-water oil fields in five oceans. This provides him with a unique perspective on the myriad of investment opportunities in energy and mineral exploration. He has been interviewed by dozens of major print and broadcast media outlets including The Financial Times, The Guardian, The Washington Post, MSN Money, MarketWatch, Fox Business News, and PBS Newshour.
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GE is the modern IG Farben. It exists SOLELY due to a fascist government that subsidizes its losses. Not only does uncle sam allow any gains to stay private, it cooks up wars and initiatives to ensure those profits keep flowing.
I have learned much in this economic times about American superior business practice. So the following is the perfect solution to GE considerable problems:
1. The ‘hard’ side of GE – engines, nuclear power and all those high tech stuffs – should be split out and sold to China. China will pay a most handsome sum for these boring businesses. They have thousands of scientists and engineers, designers and innovators, just dying to work on these boring stuffs. GE shareholders will win big. This is a wonderful outsource strategy and I am sure Wall Street will approve.
2) Take the financial side and announce imminent bankruptcy. This will shock the government into bailing out this obvious TBTF. Once the bailout money arrives to fix up the balance sheet, sell the division to Goldman Sachs. They know how to make money from government bailout firms. GE shareholders win again.
3) Finally, the above two winning deals should deliver a most welcome bonus payments to GE amazing executive team. They all can resign from the GE shell and write winning business books. Just like Jack.
PS: The GE name should be worth something when used as a brand. Just like RCA. It can be sold to India emerging companies for good money.
better late than never…