General Electric Corp. (GE) - Is GE Okay?

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SouthAmerica

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October 18, 2008

SouthAmerica: On June 23, 2005 I had posted the following to this forum. But I can't find that posting. It is a good thing that I keep all my posting on a back up file in case they get lost for any reason.

Here is what I had posted here in this website and also at the website of CNBC.

By the way, I had misspelled Harold Geneen's name when I made the original posting to The Charlie Rose Show.


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June 23, 2005

SouthAmerica: Last night by chance I found an excellent program about Brazil.

I was surprised because usually when I see anything about Brazil it is about some problem – killing kids, burning the Amazon jungle, gang drug wars, corruption, something bad about the Brazilian economy including currency crisis, poverty and the Favelas, etc…

This program broadcasted by CNBC with anchor Sue Herera about Brazil – did show Brazil as a up coming economic power and the program showed many of the good developments that has been happening in Brazil for many years.

That program made think what am I doing here in the United States when the action and opportunities for growth and development is in Brazil.

I enjoyed that program it did make me proud of my country and my people. The program did not have to mention soccer, which is the number one sport in the world, and Brazil has been number one in that sport for many years.

After watching that program on CNBC I decided to send a note of congratulations for a job well done to the anchor of the show Ms. Sue Herera.

When I went to the CNBC website to post a message on the message board of the CNBC show that she participates – Power Lunch - I had to create an account in that message board – which I did.

After I posted my little note of congratulations to Ms. Herera on the Power Lunch message board I did notice that someone had posted something asking a question regarding the GE stock on that message board.

I have not checked the GE stock for over a year but I decided to post as a reply to that posting something that I had posted on the Charlie Rose Show message board on March 8, 2004 after Jack Welch had been interviewed by Charlie Rose on that show.

“Power Lunch” - Hosted by CNBC TV Bill Griffeth and Michelle Caruso-Cabrera take an up-close and personal look at the companies, people, and hot trends driving the markets and influencing Wall Street. Sue Herera another TV anchor-person also participates on this show with Bill Griffeth.

Power Lunch Message Board:
Posting about the GE stock: 1) What is wrong with the GE stock?? It has done nothing but go down in value. Is it time to dump it?


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The reply that I posted to that posting on the Power Lunch message board:

SouthAmerica: On March 8, 2004 after watching Jack Welch being interviewed by Charlie Rose on the Charlie Rose Show I posted the following on that show’s message board as follows:

Jack Welch reminds me of Harold Genine the first super star manager in American business. He bought everything in sight in the 1960’s and 1970’s and IT&T became a glamorous company in Wall Street, and Harold Genine became a legend in American business.

In the last twenty years, Jack Welch built General Electric to be one of the largest American corporations in the world. And today, General Electric is one of the major outsourcers of American jobs to countries such as India.

I will not be surprised to see General Electric following the same path as IT&T did since Mr. Genine’s retirement in the 1970’s, when we look back twenty years from now.

Twenty years later, Genine’s performance didn’t look so hot, and IT&T became just a shadow of what the company used to be.

A friend of mine just bought some General Electric stock recently, and he asked my opinion about that company, and the above was my answer to his question.


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The above information is also posted at:

The Charlie Rose Show: Interview with Jack Welch on March 8, 2004
http://www.charlierose.com/shows/2004/3/8/1/an-hour-with-jack-and-suzy-welch


General Electric Corp. (GE) - Is GE Okay?
http://discussions.pbs.org/viewtopic.pbs?p=674551#674551

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October 18, 2008

SouthAmerica: Today October 18, 2008, I bought a copy Fortune Magazine and the cover story is about General Electric asking: Is GE Okay?

I saw this coming at the time when Jack Welch retired from that company and I was trying to convince a very good friend of mine that he should not add thousands of new shares of GE stock to his portfolio. He already had enough shares of that company, but he did not listen to me and in January of 2004 he bought some more GE stock at around $ 34 per share.

About 2 months latter when I saw The Charlie Rose Show and Jack Welch was being interviewed, since that experience with my friend was so fresh on my mind then I decided to post on the Charlie Rose Show Message Board the conversation that I had had with my friend about GE stock at the time when he bought a new batch of GE stock.

Right now GE stock is trading around $ 19 dollars per share, and most likely that stock is going to follow the same steps that ITT stock did after Harold Geneen left that company.

That was my opinion in January 2004, and still is my opinion today.

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October 19, 2008

SouthAmerica: Reply to Margin Called

First, I would like to suggest to you that you should change your screen name. That is a very bad name for any investor.

That name might give you bad luck regarding your investments.

Brazil as a country, and the Brazilian people are doing very well.

Most people here in the United States – people who just invest in the Brazilian market from far away and never visited Brazil – these people don’t understand the difference between what is happening inside Brazil, and what is happening in the Brazilian stock market.

I was reading yesterday in one of the Brazilians newspapers that I receive on a regular basis that new real estate sells in the month of July 2008 had got up 9.4 percent in the city of Sao Paulo when compared with the month of July of 2007. The new real estate sells for the 7 months of 2008 are up 30 percent. The article also said that the majority of the properties being sold have 2 bedrooms.

Since May 2008 the Brazilian stock market went down by 56 percent, but that was not because of the prospects for the Brazilian economy have changed much. The Brazilian GDP has been revised from an early estimate of 5.5 percent growth to the current 2.5 to 3 percent range because of the new economic conditions around the world.

But the Brazilian banks and the Brazilian population in general are in very decent shape since they are not full of debt coming out from their eyeballs like here in the US.

I wrote many times explaining why Brazilians are not deep in debt as their counterparts in the United States. In Brazil credit always have been very expensive and keep people from borrowing and going over their heads.

Credit card companies – Visa, Master Card, American Express, and others – they all charge an average interest rate of around 14 percent per month on the outstanding balance. That means credit card interest rate is around 230 percent per year. That keep most people from borrowing on their credit cards, and if they need to charge anything then they have a big incentive to pay it back as soon as they can.

Don’t forget that Brazil is powered by ethanol, and the Brazilian economy is more or less insulated from the latest international oil shock. Keep in mind also that oil is priced in US dollars and the Brazilian real had appreciated by 50 percent against the US dollar in recent years, and that translated in declining prices for a lot of things in local currency.

In recent years the Brazilian government paid most of its international debt – and the Brazilian government debt in local currency is very low when compared with the Brazilian GDP.

Brazil is not going to stop selling all kinds of commodities to China any time soon since they need all these resources from Brazil to keep building the new China.

The Brazilian banks are in very good shape as well.

The only thing that has gone sour in Brazil it is the stock market that has declined by 56 percent since May 2008, but that decline was made in the USA. And the decline of the real versus the US dollar also it is temporary and related to the American hedge funds, banks, insurance companies, and all kinds of US investors being forced to raise money because of a collapsing financial market in the United States. These people had to raise money any way they could to pay for the redemptions of their companies and they had no choice other than sell all kinds of investments in Brazil including Petrobras, Vale do Rio Doce, and other great Brazilian companies.

The decline of the Brazilian stock market was a direct result of all the Panic selling in the United States financial markets.

For all practical purposes Brazil is in terrific shape and everything is looking great for the future.

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********SouthAmerica: On June 23, 2005 I had posted the following to this forum. But I can't find that posting. It is a good thing that I keep all my posting on a back up file in case they get lost for any reason.*********

HI southamerica,

Can you please tell me how you make a back up file of postings? Step-by-step- instructions please? I am using windows xp.

Other thing is when I grow up i always wanted to work in stock market here in new york but now I don't know if there will even be a stock market anymore in new york when i get old enough to work there. Can you list some companies in Brazil that I could buy stock in when I get money from working next summer vacation from school?

Thank you and I liked reading this post of yours.
 
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October 20, 2008

SouthAmerica: Reply to little Joey

Since you are a young boy I am surprised that you need this kind information from someone like myself.

The young people that I know, they know a lot more about computers and about everything that is going on in the web than the old generation.

You should be teaching me how to do things on the web, and not the other way around.

But if you really need someone to teach anything about the web then just go to the message board of any major university and ask your question. The college kids will teach you anything you want. If you can’t get your help in one message board then try another in another university.

By the way, the web is full of message boards of computer experts who can help you as well. I hope you know how to use at least a search engine.

If you want to ask your father to buy just one Brazilian stocks then you need only one name and most likely you will get some very nice returns for many years to come. But before your father places an order about buying any stock he should check first with his financial advisor. But if I was as young as you claim to be I would consider asking my father to buy for me a few shares of Petrobras.

I am not recommending that you buy it since I don’t have a license to advise people about buying stock, all I am saying is that if I was a kid and my father was thinking about buying some stock for my college fund then Petrobras would be the stock that I would give a lot of consideration to add to that college fund.

Please don’t buy anything based only on this posting this is only a suggestion for you to check with some professional financial advisor.

As matter of fact, never trust the stock tips that you see on the web, the web is full of people who prey on people who are naïve. And they would give you bad advice.

Please don’t take my word for about Petrobras stock, do your homework and learn as much as you can about that stock. It easy to get a report about that company on the web.

Good luck

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Quote from southamerica:


The decline of the Brazilian stock market was a direct result of all the Panic selling in the United States financial markets.

For all practical purposes Brazil is in terrific shape and everything is looking great for the future.

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More...
Ricardo, do you believe in the Efficient Market Hypothesis? It would suggest that the market has already priced in the present value of the future free cash flows of the companies in question. The Brazilian economy is particularly sensitive to fluctuations in oil prices, and here's why. Brazil exports ethanol and oil. With less global demand for oil, the value of Brazil's ethanol exports fall through the floor and the oil exports will also decrease appropriately. Brazil is also commodity dependent in other ways, such as mining and logging. Finally, the manufacturing base of Brazil is also at stake during a global economic slowdown, which will poise Brazil at a unique disadvantage relative to the United States.

Looking forward, perhaps you should change your name to northamerica as well ;)
 
1) I won't "needle" you in this thread.
2) There's an article about GE in the current or previous issue of Forbes. GE is very close to losing its AAA-rating and may have to engage in "aggressive accounting" to create the appearance of a healthy balance sheet in order to preserve confidence among its investors.
3) Harold Geneen and Jack Welch were "bull market heroes". They got in and got out at a good time before things fell apart at their respective companies.
4) Companies merge during bull markets. Conglomerates divest during bear markets. Using that hisory as a guide, odds favor GE splitting up into its different operating units in order to "preserve" shareholder value. Otherwise, the finance-side of GE is likely to sink the entire company. We'll see. :cool:
 
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Margin Called: Ricardo, do you believe in the Efficient Market Hypothesis?


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October 20, 2008

SouthAmerica: No. That is a bunch of bullshit.


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Margin Called: It would suggest that the market has already priced in the present value of the future free cash flows of the companies in question. The Brazilian economy is particularly sensitive to fluctuations in oil prices, and here's why. Brazil exports ethanol and oil. With less global demand for oil, the value of Brazil's ethanol exports fall through the floor and the oil exports will also decrease appropriately. Brazil is also commodity dependent in other ways, such as mining and logging. Finally, the manufacturing base of Brazil is also at stake during a global economic slowdown, which will poise Brazil at a unique disadvantage relative to the United States.

Looking forward, perhaps you should change your name to northamerica as well ;)


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SouthAmerica: As I mentioned on my postings here on this forum, a little over a year ago I went to a seminar in New York City sponsored by the Saudi Arabian government, and one of the information that I got from that seminar was that the Saudi’s estimated that there was a floor regarding the price of oil and they were talking about that when oil was trading at $ 65 per barrel. They could not see oil going below $ 50 per barrel, and that was the floor that they were estimating for many years to come.

The Saudi’s probably have the power to keep that floor level since they can cut oil production to keep that floor price above the $ 50 per barrel.

If you have been reading my articles then you know that I am against Brazil exporting ethanol. As a matter of fact I have been suggesting that the Brazilian government put a tax on ethanol for the export market according to the price of oil to discourage the ethanol production in Brazil for the export market.

I am not worried about the commodities market in Brazil, since the main customer of Brazil is China, and China can’t stop its economic development just because the world is having a financial crisis. If you have been reading my articles about the connection of Brazil with China then you would understand that China has no choice other than continue building new mega cities as fast as they can to accommodate the hundreds of millions of Chinese that are moving to the new cities.

If the Chinese don’t do that they would end up with a nasty civil war inside China. It does not matter what happens in the global financial markets China has to move forward with their massive economic development plan. It is a matter of survival.

And the Brazilian economy is going to be one of the beneficiaries of this continued growth and prosperity that is going on in China.

Regarding the US economy – the US economy is collapsing under the weight of so much leverage and mismanagement. The US economy is toast, and it does not matter who is elected president in 2 weeks, since we can consider either candidate to be at best second-rate if not even worse.

Today the people running the US government is extremely incompetent and they have people better than that in many “Banana Republics” from around the world. I never imagined even in my wildest dreams that some day the United States would end up with such a poor choice of leaders running this country. In my opinion, it is a total disgrace.

You have to take in consideration that Brazil will not be competing with the United States, since the United States economy is becoming a basket case.

In Brazil the banking system and financial system is in private hands in contrast with the United States a country that has nationalized its major financial institutions, and in the coming years these institutions are going to be influenced by the politicians and God knows what they are going to do, since every politician will request that these banks give loans to some pet project and starve other companies of credit for one reason or another.

If you think the US economy is screwed up now just wait and see when the lobbyists started playing their games with the politicians and before you know the economy of the Soviet Union is going to start looking good when compared with what is in store for the US economy in the coming years.

Only a fool would invest in the United States under the new investment environment and the uncertainty about the future of the US economy.

It will take some time but eventually people from around the world are going to realize that the United States that they used to know is long gone – gone forever. And on its place just God knows what kind of new economic system Americans have adopted today here in the United States.

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October 20, 2008

SouthAmerica: Reply to Nazzdack

There is a big difference between Harold Geneen’s IT&T and Jack Welch’s GE.

The stock analysts were better able to evaluate GE stock in the last 25 years, and the people who invested in that stock did very well over the years.

In the case of Geneen’s IT&T the stock analysts in Wall Street had a hard time figuring out the real worth of that company and the stock of IT&T under performed and never reached its full potential based in the amount of companies that they had under management in the 1960’s and early 1970’s.

I had a friend who used to work for IT&T when Harold Geneen was running that company, and sometimes he would receive a telephone call from Geneen at 2 AM in the middle of the night asking a question about regular business. The people who worked for Geneen had to be ready to answer questions at any time since they could receive a call from him 24/7 – and he was a real workaholic.

Harold Geneen became a legend during the years that he did run IT&T.

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