Following yesterday's decision freeing MetLife from their systemically important status, General Electric today asked the Federal Reserve to remove them from the same status give the halving of its once-powerful GE Capital financial arm. Don't hold your breath. Big Danny and his button men don't like this kind of cheek from the Scrotties out there that he finds better placed under his thumb. This is a fight that will not end easily although I suspect that GE has its arguments well in-place to see it through. They waited for and will be undoubtedly be aided by the MetLife decision and encouraged by the notion that there are some out there in the real world who are becomming a bit tired of dictatorial nature of this administration in the apparent avoidance and ignoring of all administrative niceties when ruling over organizations supposedly under its purview. The consequences of such action is also apparently attracted attention. It was reported that on of the arguments put forward by MetLife was that the cost of compliance with the governments demands was less than the fines collected by various governments in suits brought against financial institutions. You will all of course remember that this precise argument was made months ago in this column where it was pointed out that the almost $100 billion extorted from financial institution was of course a direct reduction of primary capital not to mention shareholders' interest. Way to make the financial sector more secure, guys. And by the by, what were the bonuses paid to the AGs for that little rip-off?
But the government remains undeterred. Crazy Lizzy was at it again in her little sub-committee howling at the heads of insurance companies for their actions in advising clients as to matters relating to personal investments. Lizzy is pushing for--and may well get--legislation imposing a fiduciary test on such activities which is a game changer in many respects.
I have no great love for what are essentially salesmen of financial products peddling sometimes sophisticated products to mom and pop that often are not
a. the right products for the individuals, or
b. a proprietary product that produce the highest return to the company...not to mention the highest commissions to said salesmen.
But, there are fixes that can be made without resorting to Lizzy's sell-out to the plaintiff Bar which, in effect, is precisely the definition of her solution. I find it hard to reconcile that on one hand the folks in D.C. proclaim that their aim is to reduce the risk inherent to financial institutions whilst on the other, they sponsor actions that will do precisely the opposite. A fiduciary risk is a nightmare given the vast number of individuals who would fall into this category. One can bet that any investment that doesn't perform in the manner expected--for whatever reason--will be the subject of a law suit--probably a class action one at that--by the well-known overseer of corporate morality, the firm of Sue Grabbit & Run. Such is the way of our system today.....
On a more standard note, markets were awaiting tomorrow's job report with the indications being that there will be another good number. One hopes so but I can't but notice that there appear to be dissenting views about on the real status of the economy...the Bond market for instance. Yield on the 10 year fell to 1.77% today. One would think that with the optimism recently being expressed as to the state of the economy, as direct result of which, if correct, would be higher inflation, yields would be going up, right? Nope. It wasn't too long ago the the 10 years stood well-north of 2.30%. So why the drop and who's right? If things are really going as well as some claim, there's going to be a lot of un-smiley faces among bond buyers..and a few more ticked off pensioners. I wonder if Crazy Lizzy would hold the Fed or the Treasury to a fiduciary standard? Boy wouldn't that be a law suit!
Showing posts with label General Electric. Show all posts
Showing posts with label General Electric. Show all posts
Thursday, March 31, 2016
Monday, August 24, 2015
WELL!
I actually got up early to watch this unfold because by the time I went to sleep last night Asia was a catastrophe and the writing was on the wall. It was something. It reminded me of 1987. Shares were being "paused" right and left (we didn't have that in '87) and no one had a handle on where this was going. At one point the DOW was down almost 1100 points but I'm not telling you anything you don't already know.
Nor can I tell you anything about what's going to happen except that I don't think it's over. One of the "optimists" on TV this morning predicted another bad day on Tuesday and then the "snap back" which always occurs. That makes sense in a single over-bought market but I don't think that's what we have here. I'm looking at a crisis of confidence that has become quite global in nature, The release of the Fed minutes started it as it was clear that mob had no agreement on anything and gave the distinct impression that they really didn't understand what was going on anyway. That was bad enough but the Chinese, who everyone thought ruled the nation with an iron fist proved that there was more iron in their brains in the matter in which they have handled their finances over the past few month and in the ineptness over the past week. The Euros haven't exactly covered themselves in glory for a while now and the administration in this country has been playing golf. When people world-wide start asking, "Is anyone in charge," that is never a good sign.
We have always said that in the financial world if one loses credibility one is lost. Today there is no credibility anywhere. There is also a growing sense of fear. In the midst of the morning's carnage I saw a print for GE that scared the hell out of me. 20. GE is a hell of a good company. Somebody (s) was selling the hell out of GE. You don't sell GE into a market like this to that extent unless you have to get liquid in a hurry. Oh no, thought I, we're going to lose somebody right now. Fortunately, we did not but if you think this liquidity issue on which I have been harping for months now is not real, think GE. And think debt markets. A couple of more days like this and there could be some real shocks among the hedgies and if there are shocks there how far behind will be the banks?
Look, I don't know what is going to happen so there is no point in continuing. However, it must once again be said that trying to deal with a global economy this complex with monetary policy alone while witnessing the absolute abdication of the fiscal and political forces is insane. I'm afraid we might find out just how insane this is.
More tomorrow.
Nor can I tell you anything about what's going to happen except that I don't think it's over. One of the "optimists" on TV this morning predicted another bad day on Tuesday and then the "snap back" which always occurs. That makes sense in a single over-bought market but I don't think that's what we have here. I'm looking at a crisis of confidence that has become quite global in nature, The release of the Fed minutes started it as it was clear that mob had no agreement on anything and gave the distinct impression that they really didn't understand what was going on anyway. That was bad enough but the Chinese, who everyone thought ruled the nation with an iron fist proved that there was more iron in their brains in the matter in which they have handled their finances over the past few month and in the ineptness over the past week. The Euros haven't exactly covered themselves in glory for a while now and the administration in this country has been playing golf. When people world-wide start asking, "Is anyone in charge," that is never a good sign.
We have always said that in the financial world if one loses credibility one is lost. Today there is no credibility anywhere. There is also a growing sense of fear. In the midst of the morning's carnage I saw a print for GE that scared the hell out of me. 20. GE is a hell of a good company. Somebody (s) was selling the hell out of GE. You don't sell GE into a market like this to that extent unless you have to get liquid in a hurry. Oh no, thought I, we're going to lose somebody right now. Fortunately, we did not but if you think this liquidity issue on which I have been harping for months now is not real, think GE. And think debt markets. A couple of more days like this and there could be some real shocks among the hedgies and if there are shocks there how far behind will be the banks?
Look, I don't know what is going to happen so there is no point in continuing. However, it must once again be said that trying to deal with a global economy this complex with monetary policy alone while witnessing the absolute abdication of the fiscal and political forces is insane. I'm afraid we might find out just how insane this is.
More tomorrow.
Friday, April 10, 2015
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.
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.
Tuesday, May 6, 2014
A GRIM FAIRY TALE
Once upon a time there was this Grrreat Biiiig Corporation that had subsidiaries all over the world. It was a very proud company and one that for the most part was held in very high esteem by peoples every where. It manufactured all kinds of things and it's products were of the highest class. It also employed over 200,000 people which is a lot of people and most in high paying jobs.
The company had been around for years and had subsidiaries that had been in many, many countries for many, many years as well. Some had been there for so long that they were considered to be local companies. The company had been founded and still had its headquarters in the United States but over the years more and more of its earnings came from those many, many subsidiaries in other countries.
Now America is a wonderful country--many Americans believe it to be the greatest nation the world has ever seen--but even those Americans know that in this modern world, America has the stupidest tax laws on the planet. Among other things, America is the only country that taxes its corporations on a world-wide basis which means that if you earn money in another country, have it taxed there, and bring the remaining profit back to America it is taxed once again at the highest tax rate in the world after a credit for the foreign taxes that had been paid.
Now our Great Big Corporation had been operating in many different countries and had made a real lot of money, but because of the tax laws it couldn't bring any of these profits back home. What to do? Oh, what a problem until a really smart guy called a lawyer said to them, "Why don't you use this money where it was earned? I bet you could expand your business and perhaps even buy a local company which would provide "synergies" as the B-School boys call it." What a wonderful idea! And the company looked and looked and behold! They found the perfect partner who quickly agreed to a very generous offer and the merger was on! Except…
"Mais NON" said the wicked M. Le Presidant of the country which had been an ally of America for about 250 years. "Zis would be breach in Le Securite Nacionale…" despite the fact that the technology of the American was just as good if not better. "Zis too would be an insult to out partners in ze EU (with whom we have never agreed on anything). I have a far better idea. We shall merge our company with a competitor from Allemagne, thereby reducing competition in ze EU and making our company Allemagne (who have kicked our ass in every war fought over the last 150 years)!" Then again, little children, everyone else has as well.
Will there be a happy ending? Remember, children this is a GRIM fairy tale. Maybe there will be one but we just don't know. You will have to keep reading to find out.
Nite, Nite.
The company had been around for years and had subsidiaries that had been in many, many countries for many, many years as well. Some had been there for so long that they were considered to be local companies. The company had been founded and still had its headquarters in the United States but over the years more and more of its earnings came from those many, many subsidiaries in other countries.
Now America is a wonderful country--many Americans believe it to be the greatest nation the world has ever seen--but even those Americans know that in this modern world, America has the stupidest tax laws on the planet. Among other things, America is the only country that taxes its corporations on a world-wide basis which means that if you earn money in another country, have it taxed there, and bring the remaining profit back to America it is taxed once again at the highest tax rate in the world after a credit for the foreign taxes that had been paid.
Now our Great Big Corporation had been operating in many different countries and had made a real lot of money, but because of the tax laws it couldn't bring any of these profits back home. What to do? Oh, what a problem until a really smart guy called a lawyer said to them, "Why don't you use this money where it was earned? I bet you could expand your business and perhaps even buy a local company which would provide "synergies" as the B-School boys call it." What a wonderful idea! And the company looked and looked and behold! They found the perfect partner who quickly agreed to a very generous offer and the merger was on! Except…
"Mais NON" said the wicked M. Le Presidant of the country which had been an ally of America for about 250 years. "Zis would be breach in Le Securite Nacionale…" despite the fact that the technology of the American was just as good if not better. "Zis too would be an insult to out partners in ze EU (with whom we have never agreed on anything). I have a far better idea. We shall merge our company with a competitor from Allemagne, thereby reducing competition in ze EU and making our company Allemagne (who have kicked our ass in every war fought over the last 150 years)!" Then again, little children, everyone else has as well.
Will there be a happy ending? Remember, children this is a GRIM fairy tale. Maybe there will be one but we just don't know. You will have to keep reading to find out.
Nite, Nite.
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