GE's Results Are a Black Eye for Bulls

• Report this Comment On October 16, 2009, at 6:42 PM, KKS53 wrote:

  Alex -

  I think you are making a mistake by continuing to use GE (which as you point out has long been the granddaddy of bellwethers) as a current gauge of the strength of the US economy coming out of a deep recession. GE is a shadow of its former self and is also not the company that Jack Welch left in the earlier part of the decade. To say at this point that Immelt and his management team haven failed to execute and deliver the kind of perfomance GE was known for under Welch would not be too off the mark. I would argue today that a few other conglomerates - United Technologies being at the top of the list - are probably much better gauges of broad economic activity and their results will give us a much better read on the strength of the current recovery. UXT's results are not tainted by the uniquely complicated and specific issues/challenges being faced by GE. I would also put the technological bellweathers of our time - Cisco and Intel - ahead of GE as they are both leading indicators of economic activity and are so dominant in their respective areas that their experience and observations can be viewed as good proxy for economic activity and trend. We already know what INTC did and ther awesome results - top line and bottom - was very much in line with the beginnings of a pretty robust - albeit slowly developing - recovery starting to take hold. Now let's see what UTX has to say next week followed by CSCO and we'll have a much better sense for where we are headed ...

  More on GE though. The company has been underperforming for a few years now - not just the past several quarters - and is no where near the economic bellweather that it once was. GE Capital (Finance) accounts for almost 50% of the company's total revenue and the performance of this unit is likely to weigh down on the company for years. Anyone who is familiar with GE Capital - the businesses they have pursued and more importantly the assets they hold on balance sheet (particularly in terms of residential and commercial real estate exposure) can appreciate the pain that is currently being experienced in Fairfield, CT. And remember that GE isn't a regulated bank holding company which means that they were able to take risks that most regulated institutions would generally not have been able to take.

  GE's infrastructure/energy group along with its industrial businesses are top notch and best in class - once they are untangled from GE Capital's web, you will again have a true economic and GLOBAL bellwether that would make the premise of your article more palatable. At this point though, GE's results don't tell you that much about anything.

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