JAMIE AND JEFFREY

Diamon and Immelt, that is, the respective CEOs of J.P. Morgan and General Electric.  They were the big story of the last two days...note I said story because they said one in the same thing.

In a letter to shareholder of Thursday, Jamie rightfully pointed out that as a result primarily of Dodd/Frank, the banking business was stinko with even more to come in the future.  Whole business lines had been greatly curtailed and as a result the net result of the legislation may have been to make the business even more risky in some respects; i.e. the dramatic reduction in liquidity in capital markets which in case you missed it, it was our capital markets, unmatched by any in the world, that has allowed for the recovery that we have experienced...such as it is.  Problem is Jamie runs a bank and when you are regularly blackmailed, over regulated, threatened with criminal prosecution unless you pay up (funny, there has NEVER been a successful prosecution), confronted with conflicting rule and nut cases (Crazy Lizzy) at every turn makes doing your job rather difficult.  Now I have taken Jamie to task in the past but this time I have to give him high marks for, well, telling the truth and having the guts to do so.  We should have more like him and we should have had them earlier both within and without the government.  As is well known, Jamie faced his biggest foe a year ago in the Big C and seems to have come out on top inn that battle.  Hope he does as well in this one.  Good on ye, mate.

And then there is Jeffrey.  Jeffrey has tried desperately for ten years to convince people that he is the CEO of a manufacturing company.  No one bought it.  He ran a bank...and a pretty good one as a matter of fact.  GE Capital still contributes about 40% to the bottom line if I am not mistaken, but running a bank and remaining a good friend of Il Duce (he signed up as AK #1 at the beginning along with Buffet) is a really hard thing to do.  So today, Jeff called it quits.  He announced that for all intents and purposes, GE Capital will be sold.  Stock market loved it; GE was up almost 10%.  Now it's going to cost a touch.  To begin, he's bringing money back home on which he will pay Il Duce's button men in the IRS about $6 Billion.  Then he's on one side of the market so you know he's going to get low-balled.  Then he's promising to buy back $50 Billion worth of shares of a company that just sold 40% of its earnings undoubtedly a discount in order to keep his EPS up there and which benefits...to the greatest extent, Jeffrey Immelt et Cie.   But Duce will be happy.  Betcha Jeff gets a shout-out on Twitter and maybe that is good for the shareholders.  Of course they could use some love; in ten years the stock hasn't moved an inch.  You know, maybe he should have kept GE Capital and sold GE.  Buying Citigroup or JP Morgan a few years back might have been a better trade, but it just goes to show one the effect of regulation, stupidly enacted and stupidly applied.  To wit, stupid results.

Back to The Masters.


Our regular reader, Denny, dropped a line to ask whether yesterday's effort confirmed his thoughts that Russia was a buy (he's long the RFK).  Having thought about it, the answer is probably yes if you can put stops in (I haven't a clue) because the volatility of the situation--not the market--is such that everything can move in gigantic leaps...and if you can afford the loss.  I cannot.  However, keep in mind that the Greek populous does not wish to leave the EZ, a situation which we have not discussed.  One can bet one's boots that any interim measures to keep Greece alive will surely include an agreement that Greece will join in a common policy towards Russia.  Leave the Zone and Alexis has big time trouble with the voter.