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View Diary: "Competitiveness," Just Another Word For Nothing Left To Lose (288 comments)

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  •  Started Long Ago (10+ / 0-)

    GE only literally became a bank in 2008 because that guaranteed access to that cheap, sweet Fed money during the banking crisis.  Immelt has actually been trying to redress the imbalance between the GE Capital side of the business and the real manufacturing arm he inherited from Jack Welch.  GE's reliance on GE Capital for revenue and earnings was actually more tilted in 2001.  Immelt just hasn't done a very good job in advancing it far enough and fast enough.  

    Worse, he really has not done very much in changing the GE policy of investing virtually nowhere but off-shore.  GE's biggest problem is that, as an infrastructure provider, you can't compete if your major competitor plays games with its currency.  We saw this happen back in the 1970s and 1980s when Japan used ever trick in the book to keep the yen cheap against the dollar until just before they went bust.

    The reason the manufacturing arm is touted is because the Street gives higher Price-to-Earnings ratios on stock valuations to real manufacturing businesses than they do banks and financial stocks.  If manufacturing firms are being given P2Es of, say 12:1 while banks are getting 8:1, then a firm which is actually a bank but is advertised as a manufacturer would get a stock price 50% listed on the market boards.  It's essentially a form of fraud if you think about it.  That's the "American System" these days.

    "Love the Truth, defend the Truth, speak the Truth, and hear the Truth" - Jan Hus, d.1415 CE

    by PrahaPartizan on Sun Jan 23, 2011 at 06:15:08 AM PST

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