Surprise: Gee! No, G.E.
So much for the theory that because there weren't a lot of profit warnings, earnings will be hunky dory.
Obviously, this does not change our main thesis at all: The slowdown in Consumer spending caused by a weak economic recovery, and then by the Housing collapse, combined with increasing cautiousness on the side of Business spending and hiring is taking its toll on revenues and earnings. Markets are not cheap, and are not priced for a full blown earnings recession.
The stock market may be entering a mine field as earnings start
to flood the tape next week. We shall soon see if investors are getting real about earnings. GE proves that the economic slowdown is directly impacting corporate America. Again, there's that word "Surprise!" We know that financial services
contribute about 35% -- down from 40% Q1 07 -- of GE's operating profit. So who is it that is truly surprised that they missed? Quite bluntly, the bigger shock would have been if they hit their numbers. ~~~ How many CEO's get to miss their quarterly numbers, and then get such a kid glove treatment from a major business news channel? I can tell you, not many.
"Hi Jeff! Hi Joe!"
click thru for softball interview
>
A few highlights:
- GE CEO Jeff Immelt blames the financial shortfall to a large degree on Bear Stearns;
- Immelt takes responsibility for the earnings miss;
-Immelt also confirmed GE's triple AA rating (something that id din't know you could do yourself);
- If we are not in a recession now, we are very very close
One point that needs to be made: There is an obvious conflict of interest for any journalistic entity to interview their own CEO. Its an interview that most journalists would shy away from. Its impossibly conflicted.
My friend Herb notes that this is a thankless task, and "CNBC would get criticized for not covering their parent. If I were interviewing my boss on tv I'd probably be careful -- at least if I valued my job." Given all that, this interview was stunningly gentle -- the only thing missing was a group hug at the end. I don't know what sex acts Spitzer paid for, but I suspect the interview above was not dissimilar to them.
~~~
Here's an alternative to this sort of nuzzling interview: If I were GE's CEO, I would say to my reporting staff:
"I expect you to maintain our reputation as the pre-eminent business news channel, and if you are too soft on me, it costs the company its reputation.
Ask me tough questions. Raise difficult issues. Challenge me as if this were 60 Minutes.
Anyone who pulls their punches or throws me a softball question is fired."
But that's just me . . .
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» Kryptonite Caused GE's Miss from The Big Picture
The sub-prime problem is Kryptonite to GE. I'll get to that in a minute, but before I do, a brief review. Last week, I questioned CNBC's embarrassingly softball interview of GE CEO Jeff Immelt. As noted, it would have behooved Immelt to demand his repo... [Read More]
Tracked on Apr 17, 2008 7:28:06 AM
Comments
"But that's just me."
It sure the heck is....
Posted by: Uncle Jeffy | Apr 11, 2008 10:19:35 AM
Kiernan is a brainless Babbitt who has been loudly and consistently wrong throughout the credit crisis. And Caruso-Cabrera? David Spade with t*ts.
Posted by: MitchN | Apr 11, 2008 10:23:40 AM
Good morning. This is your copy editor.
In your first sentence, it's "a lot."
It's never "alot."
Carry on. Thank you.
Posted by: bad home cook | Apr 11, 2008 10:25:48 AM
the amount of financial engineering is staggering...but look at where it was birthed and you see why we are "here". I remember how some of my colleagues used to hold up Welch as if he were some "change management god" when in reality all he did was obfuscate the real issues at GE by financial trickery. It was obvious in the mid 90's as it is today.
The real problem is that engineering made it's way to so many other sectors it had the affect of destroying what little moral capacity to actually be responsible that was left. All in the name of manufacturing earnings, profits and the most important aspect of all of it: bonus'
Ciao
MS
Posted by: michael schumacher | Apr 11, 2008 10:25:57 AM
A little clue in Immelt's speech...forget the CEO babble such as "we are looking for opportunistic opportunities"...he mentioned their real estate holdings. All major companies, even ones without major financial arms like GE, are going to take hits on real estate. Look what happened to SHLD, which at one point was soaring strictly as a RE play.
Posted by: Dee Leverage | Apr 11, 2008 10:30:55 AM
Speaking of media economic coverage, I predict over the coming months we will be treated to the following headlines on Rupert's FoxNews courtesy of Karl Rove, Neil Cavuto and others:
"Housing Foreclosures: A Sign of a Healthy Economy"
"Using your Credit Card: A Patriotic Duty?"
"Bear Stearns Bailout: A Blow to Al-Queda"
"Experts: Recession Talk from Permabears Aids Terrorists"
and when reality can no longer be avoided:
"The 2001-2008 Clinton Recession"
Posted by: bluestatedon | Apr 11, 2008 10:31:00 AM
Man, you guys just don't it---it's a Goldilocks Economy 24-7. What is wrong with you people? If you were a Kudlowdian you would not have to deal with real world, you could live in Goldiland.
When will CNBC fire this clown?
Posted by: gunthestops | Apr 11, 2008 10:33:04 AM
I love SURPRISE. Don't you?
Posted by: Ben | Apr 11, 2008 10:38:23 AM
Then here's a "tough question" Barry. Why did you say that your recommendation to buy VIX calls in 2006 was a "an even better trade than I hoped", when buying VIX calls in 2006, 2007 and 2008 has been a disaster? Yeah volatility went up. You did get that right. But that's not the same as making money in VIX calls.
Don't mean to be picking on you. Just trying to make the distinction that guessing volatility's direction and making money on volatility options are two completely different things.
~~~
BR: The macro call on increased volatility -- when no one else on the street was calling for it -- was a home run.
Buying calls on the VIX made money, but not nearly as much one would have expected giving the vol increase. The way they traded was a disappointment, but we made did make money on the VIX call . . .
Posted by: Anonymous | Apr 11, 2008 10:39:57 AM
Barry, obviously I don't expect you to cover every inane thing that happens on the GE business channel - but the interview with Sen. Schumer which followed was a classic - with all the biases of the hacks that staff Squawk Box hanging out. The highlight was a quotation that they insisted on reading from the WSJ editorial page - there are not enough news outlets out there...
I know commentary is not reporting, but sheesh this was ridiculous..
Posted by: DesiPanchi | Apr 11, 2008 10:51:54 AM
What is the deal with Dennis Neal on CNBC? He is like the creepy guy that hangs around in the background at a strip club---lol
Posted by: gunthestops | Apr 11, 2008 10:52:24 AM
GE is the 2nd multi-national in as many weeks to miss thier numbers allthough analysts have been steering investors towards these companies for months now due to their exposure to foreign markets, the weak dollar and because of "our" slowing economy. Which only goes to prove that you can run but you can't hide in equities.
GE took a hit in four of its six components so it wasn't all about "financial services".
Posted by: Pat G. | Apr 11, 2008 10:58:23 AM
I'm surprised that nobody is talking about the odd wording of this mornings release.
From paragraph 9...
"In light of what we have seen in the first quarter, we have revised our earnings outlook for the full year to protect investors by reflecting a slower economy and assuming capital markets remain challenging,” Immelt said. “We are lowering our full-year EPS guidance to $2.20-2.30 from continuing operations reflecting growth of 0-5%...
To protect investors? WTF?
Posted by: Vermont Trader | Apr 11, 2008 11:05:03 AM
"But that's just me . . . "
Yeah.......but you aren't a sycophantic douche bag.
Posted by: Portland Refugee | Apr 11, 2008 11:16:01 AM
As far as it being a surprise...
The clue was in the deal with AXP credit card deal in early March. It was a typical GE make the quarter type deal but then things got worse, fast.
All readers here should consider the GE said things got much worse the last couple weeks of MArch and remain bad.
Posted by: Vermont Trader | Apr 11, 2008 11:23:03 AM
IM-MELTDOWN
GE has dropped over 10% today, after missing quarterly estimates. GE, a beacon of consistency, is now being looked at a bit differently.
The problem for analysts: WHAT IS GE?
Is it a media company? Is it an industrial company? Is it a health-care technology company? Is it a financial company?
Until simplified, GE remains a hard to value conglomerate, and in tough economic times, conglomerates are hard to value.
Posted by: IBH | Apr 11, 2008 11:23:31 AM
the serious question re the interview is who does Kiernan have dirty pictures on. He is the shallowest person on CNBC and that is quite an accomplishment.
Posted by: larster | Apr 11, 2008 11:26:48 AM
Dear old Dad would never buy a G.E appliance. His reason was in their advertising. G.E. "Progress is our most important product." So then they got onto financing their most important product and became shylocks.
They do make some really good industrial products. Immelt inherited a bad hand but G.E is an elephant in a boxcar.
Posted by: Ross | Apr 11, 2008 11:33:54 AM
Barry, you want a GEE moment then look no further than Bill Gross committing possible securities fraud by not stating his mortgage positions on the boob tube, and he's had plenty of ops to do so. Has anyone heard or seen the f***er state anything about his mortgage positions before yesterday? Mandated disclosure is a real be-atch when you are cheerleading for a bailout. No frigging wonder the POS is a bear on Treasuries. Not a word for the boob tube either. We wouldn't even know this but for Bloomberg.
Hell, GE just had a shitty quarter and probably a shitty year, but at least they aren't lying their asses off while claiming baseball and American Pie.
Posted by: SPECTRE of Deflation | Apr 11, 2008 11:37:30 AM
Barry,
That Spitzer allusion is your best quote YTD. If the mainstream media doesn't pick that one up, I'll be sorely disappointed. Hilarious.
dgov
Posted by: dgoverde | Apr 11, 2008 11:40:44 AM
Barry,
Thats why you are a 'guest commentator' and have your own blog.
Michel de Nostredame,
waaaahhhh! Whether or not Barry deleted your post or if you confused the cancel button with the submit button is still up for debate. With respect to question of bearish propaganda its seems Barry is still in the minority...or didn't your read the post you commented on? I guess I'm confused...Is silencing dissent your proposal?
You bet long...deal with it. That's capitalism.
Posted by: wtf | Apr 11, 2008 11:47:29 AM
"He is like the creepy guy that hangs around in the background at a strip club---lol"
Reading from bottom to top, at first I thought you were talking about Kudlow.
Posted by: Bob A | Apr 11, 2008 11:47:48 AM
JK: "At GE... aren't you focused on Bringing Good Things to Life."
JI: "That's right Joe think of us as Imagination at Work"
JK: "And so Jeff, isn’t Progress is your most important Product?"
JI: "Green is green"
JK: "Thanks Jeff, time for a commercial..."
Posted by: VennData | Apr 11, 2008 11:54:54 AM
Maybe Cinefoz got a new IP address.
Posted by: Mind | Apr 11, 2008 11:56:50 AM
Immelt is a good guy. But, let's be real. A company the size of GE cannot be managed by a single person. He has little impact on the company and really has no idea what is going on from a level being able to impact the corporation. GE should be split up. GE is a bank with industrial holdings.
And, his positive perspective on capital spending is a fool's game. GE is massively exposed to risk. Massively. By not taking appropriate risk into account in their strategy. Just like Wall Street.
Posted by: BDG123 | Apr 11, 2008 11:59:46 AM
