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I worked for a GE manufacturing division for some years until retirement. GE under Jeff Immelt was doing all sorts of things wrong... from taking money from the pension fund to help finance the latest acquisition or other hare-brained project, to alienating our suppliers by not paying bills in a timely manner. Also ironic was when Immelt was appointed "Manufacturing Czar" and advisor on American manufacturing by Obama, and shortly thereafter proceeded to close, downsize, or move overseas many GE operations.
I used to hate seeing GE acquire one of our customers. It was always only a matter of time where some ******* would start saying...look, the best we can do is Net 120 or we need a discount. Luckily they were never a key customer. Sometimes we'd hike prices on them (we made custom product) and then agree. One time we knocked a division down to Cash in Advance only because they were buying mostly non-custom product with set pricing. I truly felt bad for the purchasing groups that had been taken over. Some relationships had been multi-decade relationships.
Your first sentence is false and secondly the reports for Enron’s irregularities started hitting sep 2000+/- and the stock price was still around 80.00 nearly through the first quarter of 2001 and I’m glad you are now adding a caveat “widely accepted” well the warning signs were being signaled well in advance of the decline and the market, this leading indicator missed it for a considerable period of time half a year or so. So as Enron clearly supports the market isn’t a leading indicator for company specific risk
Lets say in theory what you posted was true. That one example doesn't represent every case. GE has rallied back to where it was. If it is determined that there was no fraud, I can just as easily say my example proves my case.
Lets say in theory what you posted was true. That one example doesn't represent every case. GE has rallied back to where it was. If it is determined that there was no fraud, I can just as easily say my example proves my case.
Actually one instance can be purely coincidental. The truth is many many times in history the market has been caught off guard by a particular company’s situation. The market is not a leading indicator for a specific company and that is one of the reasons investing in individual companies come with specific increased risks
The line between fraud and poor estimation is very thin.
When your company is teetering on the brink and the only thing that can save it is to extend estimates on future liabilities so you don't run out of reserves or destroy your balance sheet trying to maintain reserves then those lines get even thinner.
GAAP can be played and GE has played it aggressively for a long time. They are toast, people are just in denial.
Well said. I got out long ago at about $55/sh and never looked back. Not sure why anyone would be interested in owning this company.
Did anybody else read through Markopolos's report? I got through reading/skimming it today (I admit the LTC reserves discussion is incomprehensible to me as I don't have an insurance background).
What I read boiled down to a couple of things:
1. GE is not early adopting a GAAP rule that requires them to sync up their GAAP reserves with their statutory accounting reserves no later than Q1 2001. No fraud involved, just choosing an acceptable accounting method that Markopolos didn't like.
2. GE needs more reserves for LTC claims. As I said, I don't have an insurance background, but one of the metrics mentioned by Markopolos was from a trade group presentation from 5 years ago saying the industry is 50% under reserved. I suspect things may have changed in the last 5 years, but that's just me.
3. GE's accounting for BHGE. Markopolos seems to have a problem with GE consolidating BHGE LLC as BHGE already consolidates BHGE LLC. From what I read in GE's 10-K, they consolidate BHGE (which happens to consolide BHGE LLC) because they own > 50% and control it, which is what the accounting rules tell you to do. Since GE happens to have a direct interest in BHGE LLC as well, that requires consolidation along with the rest of it. I completely disagree with Markopolos on this one.
GE is definitely aggressive on their accounting and I'm sure they are trying to figure out ways to mitigate hits that they know are coming, but unless there is something truly substantive in the LTC reserve arena, I don't see fraud and I don't see GE having debt/equity or current ratio issues right now.
Markoplos truly wrote this as a sales pitch. There is so much repetition of claims (because you know the more you say something the truer it becomes) along with a lot of catchy phrases that detract from it being a document with serious allegations and make it look more like what I think it is, a hatchet job.
We shall see how it unfolds ..there is more to this story for sure ...there’s a entire part that was not in the report turned over to law enforcement so I bet that the devil is in those details
Did anybody else read through Markopolos's report? I got through reading/skimming it today (I admit the LTC reserves discussion is incomprehensible to me as I don't have an insurance background).
What I read boiled down to a couple of things:
1. GE is not early adopting a GAAP rule that requires them to sync up their GAAP reserves with their statutory accounting reserves no later than Q1 2001. No fraud involved, just choosing an acceptable accounting method that Markopolos didn't like.
2. GE needs more reserves for LTC claims. As I said, I don't have an insurance background, but one of the metrics mentioned by Markopolos was from a trade group presentation from 5 years ago saying the industry is 50% under reserved. I suspect things may have changed in the last 5 years, but that's just me.
3. GE's accounting for BHGE. Markopolos seems to have a problem with GE consolidating BHGE LLC as BHGE already consolidates BHGE LLC. From what I read in GE's 10-K, they consolidate BHGE (which happens to consolide BHGE LLC) because they own > 50% and control it, which is what the accounting rules tell you to do. Since GE happens to have a direct interest in BHGE LLC as well, that requires consolidation along with the rest of it. I completely disagree with Markopolos on this one.
GE is definitely aggressive on their accounting and I'm sure they are trying to figure out ways to mitigate hits that they know are coming, but unless there is something truly substantive in the LTC reserve arena, I don't see fraud and I don't see GE having debt/equity or current ratio issues right now.
Markoplos truly wrote this as a sales pitch. There is so much repetition of claims (because you know the more you say something the truer it becomes) along with a lot of catchy phrases that detract from it being a document with serious allegations and make it look more like what I think it is, a hatchet job.
GE has no controlling interest even owning 50.4% of it and they themselves have stated that. BH reports the assets/revenue as they are the ones controlling and making the decision, both entities can’t count the same thing
GE has no controlling interest even owning 50.4% of it and they themselves have stated that. BH reports the assets/revenue as they are the ones controlling and making the decision, both entities can’t count the same thing
I believe they said that about BHGE LLC, not BHGE. So BHGE consolidates BHGE LLC and GE consolidates BHGE (which includes BHGE LLC).
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