Macro Economics
GE and Bernie Madoff

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March 13, 2009

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When I first started coming here 10 years ago The Fool's investment strategy was clear and unequivocal; find under-valued companies (preferably early-stage) with above-average prospects for profitable growth and hold them for the long term. This strategy worked well until it didn't. While lives on to mock the LTBH skeptics, most of us know what happened to shooting stars like Iomega and AOL, two early Fool favorites. Even CSCO, another Fool favorite which continues to thrive, has been dead money for the past 7 years.

Today there is no consensus on what works except, perhaps, the negative motivators of fear, uncertainty and doubt. Don't get me wrong. I believe in capital preservation, too, but if you've decided that there is no future worth waiting for, what are you doing here? IMO, this board has drifted far from management's hope for a place "To Educate, Amuse & Enrich." It seems more like a place to anonymously vent personal anger and frustration. When did education become a process where only one side of an issue is discussed? When was the last time you found yourself amused by the daily deluge of bad news regularly posted here? And if the board's stock picking skills indicate anything it's that few have been enriched by the sharing of our collective wisdom.

I am guided by the belief that this is a market of stocks, not a stock market. I believe you can make money in any market by owning certain stocks for the long term. I believe that those who trade stocks (as distinct from owning them) are asking for trouble. I also believe that General Electric represents a once-in-a-lifetime opportunity to make a bundle. Let me explain why.

- GE makes things people need, especially in health care, transportation, and power generation.
- In good times and bad the company has proven it is a money-making machine.
- The company has outstanding management depth and experience.
- Its operations are global.
- It's one of the few companies with a AAA credit rating.
- It has paid a dividend every quarter for over 100 years.
- Even at 10 cents a quarter the yield at current prices is close to 6%.
- Despite growing concern for the quality of GE's "investment" assets I believe the FUD surrounding this issue will be put to bed within 2 weeks.
- I'm not into forensic accounting but if Warren Buffet, the world's richest man, thought that GE was a good deal at $23 five months ago, who am I to doubt his wisdom now that the company can be bought for $7.
- When market sentiment turns positive, as it inevitably will, GE will ride the rising tide.
- And unlike those who invested with Bernie Madoff, when/if I decide to sell my GE shares there'll be buyers waiting to accommodate me.