What’s the Chance of Iconic GE Going Bankrupt?

When all is said and sold off, GE’s debt burden – much of it attributable to GE Capital – looks enormous versus the size of the remaining assets and cash flow.

By Leonard Hyman and Bill Tilles:

Three titans of invention dominated the dawn of the electric age: Thomas Edison, the founder of General Electric, Werner von Siemens, whose industrial conglomerate still bears his name, and George Westinghouse, inventor of compressed-air railroad brakes, and more importantly, the man who made alternating current the electric industry standard.

Toshiba-owned Westinghouse already filed chapter 11 bankruptcy. In less dramatic fashion, Berlin-based Siemens Corp. has been struggling mightily with downturns in its major business lines, particularly power generation. Meanwhile Boston-based GE not only has to deal with declining profits at a number of its businesses but also with largely self-inflicted financial missteps.

Of these three corporate entities, GE’s fate seems the most uncertain. Siemens may have already “turned the corner” so to speak, even talking smack about its Boston-based trans-Atlantic rival on its last conference call with financial analysts. And Westinghouse recently exited financial reorganization with a new, large private equity parent, Brookfield Energy Partners, and presumably more modest expectations.

GE’s shares are down almost 75% from their all-time highs in Sept. 2000 despite a raging bull market over the last 8 years.

GE’s underlying problem is the immutability of debt. That is, corporate managements have a relatively free accounting hand with respect to writing down asset values when things go “pear-shaped.” However, all the debt from these financially ill-fated ventures typically remains. In GE’s case the assets of GE Capital were approximately $157 billion at the end of 3Q 2017, and we suspect much of this is supported by debt rather than equity.

If we subtract GE’s “goodwill” – goodwill is an accounting entry that parks expenses temporarily on the balance sheet as an asset to be expensed on a later date – from equity (like Buffett says to do),  we get a negative $40 billion. Back up and think about it. An almost $400 billion conglomerate with $40 billion in negative equity.

GE Capital’s assets of $157 billion are large in connection with the company’s total assets of $378 billion, many of which are in the process of disposition.

There is a lot of coming and going here from the perspective of corporate reorganization. The oil and gas business, Baker Hughes/GE, lighting, as well as the transportation businesses are all in various stages of disposition. The good news is that rising commodity prices and inflation expectations should boost BHGE’s value.

The rating agencies appear mollified that GE’s balance sheet will eventually self-improve. The firm carries an investment grade debt rating of single A.

But the question what is GE and why should it exist we believe requires an answer. GE’s management stated GE will remain in three core businesses: power, aviation, and healthcare along with a still-large residual finance portfolio with multiple components, some good some not.

The aircraft leasing segment of the finance portfolio looks solid, but we view the other finance components with some suspicion. Mere precaution. Why? Last quarter, one of these supposedly innocuous business units, Genworth Financial, an insurance entity totally in a run-off mode, punched an almost $8 billion hole in the conglomerate’s balance sheet.

The company has negative equity, is wildly overestimating the contributions from the power business, and has this enormous debt burden from their “capital verticals,” which is a fancy name for “discontinued ops that we pray don’t hurt us again like Genworth Financial did last quarter.”

With interest rates rising and markets increasingly in turmoil, we would look for more surprises from the finance unit ex-aircraft leasing. None of them good. The reason for this derives from an arcane adage of finance that begins “fool me once….”

The second leg of our bear thesis here is this. The heyday of the large gas-fired power turbine, while far from over, is indisputably in decline. We checked with competitor Siemens which reported that large turbine sales peaked around 2008-2009 at 134 units sold worldwide vs about 100 units sold last year – a rather steep rate of decline.

But the problem goes deeper. The competitive pressures on these large industrial manufacturers may force them to cut prices further on new business. This is a declining industry with considerable global excess capacity. Furthermore, margins on once lucrative service and maintenance contracts may be similarly under pressure. It’s a double whammy.

This to us is the key flaw in management’s strategy. We don’t think it’s likely that the power business can “pull its weight.” Management has already cautioned investor’s with respect to meagre results for this unit for 2018. The management at Siemens does not see a gas turbine business pick-up in 2019 either.

This leaves us with two remaining core businesses, aviation and healthcare, which contributed the lion’s share of operating profit of the total Industrial segment. These will provide the operating profit core of GE in the future, plus the contribution from the so called “capital verticals” – assuming the company remains in its present corporate configuration that is.

From an operating perspective, when all is said and sold off, this will not be a particularly large industrial conglomerate. But even after expected asset sales and debt paydowns, the debt burden, much of it attributable to GE Capital, looks enormous versus the size of the remaining assets and cash flow. And in a now rising interest rate environment, that debt burden becomes increasingly costly.

Private-equity investors have already assumed a seat on GE’s board. Ed Garden of Trian along with his father-in law-Nelson Peltz have a considerable track record in turning around underperforming, poorly managed conglomerates. They have their work cut out for them. Frankly this is the one we’d walk away from. By Leonard Hyman and Bill Tilles

In corporate bond la-la-land, it’s only a question of how disruptive the adjustment will be, whether it will be just a painful sell-off or junk-bond mayhem. Read… Corporate Bond Market in Worst Denial since 2007

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  74 comments for “What’s the Chance of Iconic GE Going Bankrupt?

  1. Rob says:

    Wage inflation and the zombie apocalype, the corp zombie apocalypse

  2. mvojy says:

    Sounds like GE is having an Immelt-down due to poor management

    • Joan of Arc says:

      GE is no Enron. It is not curtains for GE. Let me repeat myself one more time for the sake of clarity for those who may dwell in the northern section of the East Coast of the United States .

      “It is not COITANS for GE.”

      • BTilles says:

        Hi Joan of Arc,

        We agree. GE is no Enron. The latter to us seemed like an enigma but turned out to be straight up accounting fraud. And as you may recall the top execs received prison sentences.
        GE’s problem is too much debt and too few successful businesses. There is nothing fraudulent about long term secular declines in the power business, for example.

    • Mike G says:

      The rot goes back to Jack Welch and his full quiver of BS accounting tricks. I remember how that guy was praised like Jesus in the insipid corporate business press.

      • Joan of Arc says:

        He seemed to be on CNBC weekly but I don’t remember him wearing white robes.

        • MASTER OF UNIVERSE says:

          Yeah but the press said he could walk on water so the analogy is apt enough for points.


    • BTilles says:

      Hi mvojy,

      We agree but much of the push into the financial sector came under Mr Immelt’s predecessor, Jack Welch.

  3. Block head says:

    What GE needs is to get Jack Welch out of retirement and have him perform his old magic,

    • BTilles says:

      Hi Block head,
      Your suggestion might work re bringing Mr Welch out of retirement. But first they have to finish repairing the damage he did.

  4. Kent says:

    “Private-equity investors have already assumed a seat on GE’s board.”


    • Joan of Arc says:

      No problem. They’ll simply borrow another $140 billion and buy it out…then fire and outsource as many workers as possible.

      • BTilles says:

        Hi Joan of Arc,

        It’s difficult to read sarcasm in a brief pithy comment. But our thesis is that as rates rise, the considerable debt they already have will become an increasing burden. Adding more and of that magnitude is possible but remote.
        Secondly you allude to downsizing, outsourcing and cost cutting measures. Fine. But can’t simply shrink your way to profitability. There has to be a viable business there.

        • Joan of Arc says:

          Sorry, I thought manufacturing replacement burners for GE stoves and replacement heating elements for GE ovens was a viable business. High volume too.

        • Joan of Arc says:

          Here’s the thing, Mario Gabelli, a very successful investor, reportedly bought $40 million worth of GE stock recently at around $16.00 per share. On the other hand, for a multi billionaire like him, $40 million is just chump change.

      • Gregg Armstrong says:

        A recession that causes a decline in the airline industry could also devastate GE’s aircraft leasing business due to two factors:

        1) drastically declining used aircraft valuations which typically occurs during airline recessions;
        2) airlines that take aircraft out of service, “parked aircraft”, and can no longer make their lease payments.

        Airline industry recessions are brutal on used aircraft valuations.

        • Mike G says:

          Not to mention GE’s major exposure through their jet engine business. They’re a big bet on the aviation industry.

      • Gammer says:

        They already outsource and h1b thousands. They are chipping away at the benefits and under funding the retirement. Not much left to do. Big corps are trained to manage risk, which means do nothing. So nothing gets done, no chance for innovation, then others innovate you out of the markets that have low access barriers. Only thing left standing in that situation is aircraft engines. Super high barrier to entry.

  5. Petunia says:

    The Godfather said “it’s just business, not personal” in GEs case it’s personal not business.

    I worked at Bear Stearns, GEs investment banker, when GE owned NBC. Bear Stearns failed when no one would trade with them. I never thought that was about money, they had 18B in collateral, yet no takers.

    Don’t underestimate the amount of animosity that the BS/GE/NBC triad generated in the financial markets. Ace and Jack pissed off a lot of people with long memories. GE is going the way of Xerox, in my opinion.

    • BTilles says:

      Hi Petunia,
      I believe we might resort to the old phrase “full faith and credit”. If they don’t have faith, you don’t get the credit.

    • d says:

      The same reason the US and china will get theirs, at the first viable opportunity.

      China is already staring to cry what did we do wrong as they experience the first of the mounting pushback over their predatory trade, OBOR, and general Resource Exploitation Actions.

      Ecuador, Sri lanka, Venezuela, Pakistan Etc, all victims of predatory chinese resource or OBOR activities, and other predatory action’s.

      The US is a bad Actor, but at least they are not Predatory lenders at a National level.

    • Lune says:

      I’ve heard why Wall St. hated Bear Stearns (they refused to participate in the LTCM bailout, and overall didn’t play the scratch-my-back, I’ll scratch yours game of the Wall St. club).

      But can you elaborate on why Wall St. hates GE? It seemed to me they lionized Jack Welsh regardless of how GE was doing.

      • Petunia says:

        There was a general feeling, in some quarters, that NBC had been weaponized to help BS/GE and to hurt their enemies. Eventually the casualties grew large enough and strong enough to fight back.

        As far as Welch is concerned, it’s easy to look good on TV when you own the network. And as far as BS is concerned, this is why you never heard anything bad about them.

  6. Lars says:

    I thought GE ran a large segment of the US nuclear weapons industry, or the background thereof. If so, I would not be surprised that the Government would do a ‘Chrysler’ or ‘GM’ style ‘rescue’. If so, what would be the ‘low’ in the stock price ? $3, $8 ?

    • MC01 says:

      GE’s stocks in the US military nuclear program have been going down for a while, as Babcock & Wilcox’s, as they have been replaced by Bechtel.
      Bechtel won contracts to design and build the nuclear reactors that will power the Ford class aircraft carriers and the Columbia class boomers. In 2014 they replaced B&W as the leading contractor in running (under Sandia’s supervision) the Pantex Plant in Texas, the only place where US nuclear weapons can be serviced, dismantled, upgraded and built (albeit the last one was assembled in 1991).

      GE won’t starve: the whole present US submarine fleet (bar the two oddball Seawolf attack subs and the USS Jimmy Carter spy ship) runs on GE reactors.
      But the moment is very definetely against them and in Bechtel’s favor.

    • BTilles says:

      Hi Lars,

      “GE does not manufacture, assemble, sell or service cluster bombs, land mines or nuclear weapons….” (from their website) .
      However they are a large supplier of aviation equipment to the military and their S8G and S9G “natural circulation” reactor designs were used in Ohio-class and advanced Virginia-class submarines respectively.

  7. Enrique says:

    Title of this article reminds me of something. I can remember a friend of mine dumping about $20k into General Motors circa late 2008 at some point when it was trading in the low single-digits. His rationale of course was “no way General Motors ever goes bankrupt.”

    And then about 8 months later…….

    To be fair, I agreed with him at the time. But I also did not make any financial moves behind that. Never move money on spec. Take everything week to week and with stop discipline and you will never go too far wrong.

  8. Eastwind says:

    Don’t forget about GE’s off-balance-sheet unfunded pension obligations.
    They were 23B a couple years ago.

    If pension obligations are transferred along with the units they pertain to when those units are sold they should reduce the amount GE will get for those units. Are analysts estimating the value of the units for sale including the unfunded pensions in their estimates? It’s hard to tease out which obligations go with which units from public information.

    If the unfunded liabilities stay with the parent they will significantly increase the likelihood the parent goes bankrupt and dumps the obligations on the PBGC.

    • BTilles says:

      Hi Eastwind,

      Bloomberg had a recent story on GE’s pension woes and I believe $31 billion is the current pension deficit figure. But to my mind more staggering is the fact that former CEO Immelt inherited a pension surplus of almost $15 billion.

  9. robt says:

    If I remember correctly, Yellow Pages Canada had 6 billion dollars of goodwill in a 7 billion dollar balance sheet, and touters pointed to it as a rationalisation for the stock being underpriced.
    The goodwill vanished in about 2 quarters.

    • Nick Kelly says:

      Since we live in a era of the disrupters, and the mantra ‘is what can you do foe me tomorrow’ maybe ‘goodwill’ shouldn’t even be a term in GAAP.

      ‘Goodwill’ should be a physical store where you drop off unneeded stuff, not a balance sheet store of imaginary value.

      • robt says:

        Sadly, even all the Goodwill stores in Ontario suddenly closed the doors, locked out their employees that showed up to work, and said there wasn’t enough cash to pay them their last paycheque, but management would get bonuses. Fortunately there was enough outrage in the media that somehow GW found the money to pay the unfortunates, who were usually members of the community that could least afford it.
        Funny how you can go broke even selling stuff you get for free.

    • BTilles says:

      Goodwill can vanish with a simple change in assumption. That’s one keystroke.

    • Justme says:

      The various characterizations of Goodwill in this thread confused me, so I decided to do a little reading. From wikipedia:

      >>Goodwill in accounting is an intangible asset that arises when a buyer acquires an existing business. Goodwill represents assets that are not separately identifiable. Goodwill does not include identifiable assets

      >>In order to calculate goodwill, the fair market value of identifiable assets and liabilities of the company acquired is deducted from the purchase price.

      >>When the business is threatened with insolvency, investors will deduct the goodwill from any calculation of residual equity because it has no resale value.

      >>Instead of deducting the value of goodwill annually over a period of maximal 40 years, companies are now required to determine the fair value of the reporting units, using present value of future cash flow, and compare it to their carrying value (book value of assets plus goodwill minus liabilities.) If the fair value is less than carrying value (impaired), the goodwill value needs to be reduced so the carrying value is equal to the fair value. The impairment loss is reported as a separate line item on the income statement, and new adjusted value of goodwill is reported in the balance sheet.[6]

      Wolf says:

      >>If we subtract GE’s “goodwill” – goodwill is an accounting entry that parks expenses temporarily on the balance sheet as an asset to be expensed on a later date – from equity (like Buffett says to do),

      But not just any expense. Only the overpayment inherent in the previous acquisition of another company. Also, the “Buffet rule” applies only when a company is insolvent (which GE may be. so that the rule does indeed apply).

      That a company has a large goodwill entry on its balance sheet does not necessarily mean anything one way or the other. It could mean that they bought a highly profitable business and paid accordingly for future cashflow and earnings/profits. It could also mean that they bought a dud and overpaid for it. But if a company is insolvent, then having a large amount of goodwill on the balance sheet means it is even more insolvent than you might otherwise think. With the Wall St general propensity to overpay and inflate everything, I suppose it is always smart to keep an eye on the developments of the Goodwill entry on the balance sheet.

      I hope this was informative. At least I learned something and got to put it down in writing for reference.

      • Wolf Richter says:

        You just show one of the ways – not the only way – in which goodwill ends up on the balance sheet (overpayment for an asset). But you didn’t show what happens next.

        Goodwill is eventually written off — at which time it becomes an expense against income. That’s the fate of Goodwill. It’s an expense that is temporarily parked as an asset on the balance sheet. That’s how GAAP allows companies to deal with certain issues.

        Real money was paid for whatever became goodwill. But when this goodwill is written off as an expense, analysts call it “non-cash” charge against earnings and tell people to ignore it. This is part of the scheme. True, it is “non-cash” at the time of the charge-off. But it was very much cash spent at the time goodwill was triggered.

        Goodwill gets written off and becomes an expense. It doesn’t go anywhere else. That’s why it should be deducted when evaluating a company’s book value. The result is “tangible net equity.”

        • Justme says:

          Please feel free to edit/correct my mis-attribbution to Wolf in my comment. It was Hyman and Tilles that wrote the the thread.

          >>analysts call it “non-cash” charge against earnings and tell people to ignore it.

          Yes, indeed, analysts wiull tell people to ignore these “one-time-charges”. But when goodwill gets written down it is vbery bad news.

        • Frank says:

          I wish my San Jose State business finance teacher in 1981 had described Goodwill as well as you have. It was clear, concise,and completely comprehensible.

          Thank you

  10. Steve clayton says:

    Totally agree Nick ref goodwill, examples I’m aware of carillion had 5 billion goodwill and went under, RBS has 5 billion goodwill yet were bailed out. Goodwill should have a life say 5 years, by that point at least the benefit from buying a company should be evident to offset any goodwill charge to the p&l. Wolf see if you can find who has the biggest goodwill figure on their balance sheets.

  11. Stan Sexton says:

    I initially had GE Long Term Care Insurance and then it became Genworth. After Genworth played dirty tricks on earlier subscribers, I bailed out in 2010 and never looked back. The executives in this company are way overpaid.

  12. gorbachov says:

    GE was a winner for me.Sold ~28 ,bought ~15.

    I sold when I read that they were 30 billion underfunded in

    their workers pension plan.Meanwhile they were- are- borrowing

    for divvys and buybacks. If you don’t have your workers backs

    they won’t have yours.

    • Ed says:

      I am still a bit shocked that the government allows dividends and buybacks when the pension is acknowledged to be underfunded.

      • d says:

        In America. The land of Legalised Corporate Fraud. Why does this shock you?????????

        The only pension fund’s in America, that are not underfunded, are the Congressional one’s.

  13. JB says:

    GE faltered when it deviated from its core businesses. That coupled with increased foreign competition, addition of non profitable subsidiaries and mergers to boost top line revenues, and then placed on life support with cheap debt issuance’s courtesy of the fed was a recipe for insolvency. Sound familiar?

    • BTilles says:

      Hi JB,

      Agree competely.

    • Drango says:

      Good summary. The Fed has kept rates low for so long, stock buybacks have negated the need for companies to serve the real economy. GE shareholders may be in for a nasty surprise when they realize they picked the wrong guys to put in charge.

    • kam says:

      On a retail basis, the solid GE brand, turned to crap as soon as they moved production to China.

      • d says:

        And the profit in retail electronics was the ICING.

        When times are bad, you can turn icing into cake, as long as you have the icing.

        By moving its production to china they gave the whole business to the chinese, for nothing.

        GE was one of thefirst in china to experience, another factory round the corner. Making exactly the same products, with out the GE badges, at better quality, and a lower price. Which just happen to be owned by, the CCP.

        And the chinese are still using those methods, to steal and destroy foreign investors businesses, today.

        • Joan of Arc says:

          That sounds like a terrible cake recipe, icing or no icing. And here I thought that GE was going to take over the world with windmills. After they mar the earth aesthetically with turning windmill blades, and cause the world’s bird populations to plummet, they could hold everyone hostage, especially bird lovers, and charge exorbitant fees to turn the turnstiles off. Anyhow, I put everything I had into GE on September 04, 2000 right at it’s zenith bull market top at $60.00 per share on a hot tip from a street cleaner and a buy recommendation put out by a now diseased analyst at Lehman Brothers. He talked me into leveraging out on full margin of 2 -1. Over the next six weeks the stock corrected to $48 per share and the broker sold all my stock because of a margin call and I lost everything. Over the next 16 years a saved some more money and put it all on GE again at $30 per share at the end of 2016, figuring that I was buying it at a 50% discount. That was on the advice of a pet store temporary worker who explained to me how GE would get rich through bird blackmail. I didn’t margin out this last time and still hold the stock while sitting on a 50% loss. LOL

        • d says:

          We have some of the most diverse, unique, and in some case Highly Endangered Bird Species on the planet.

          Our wind farms hurt them, not 1 little bit.

          GE Just like GM is a global predator that only does well when the deck is heavily stacked in its favour. look for it to do what GM did and effectively become a chinese based company after the US taxpayer bailed it out

          The first time GM paid tax in the US after the bailout they paid the US 5 m and china 90 M.

    • John says:

      GE faltered when Jack Welch, in his final years at the helm, instituted 2 foundational, cultural MO’s.

      One was a culture of human capital development (Session C) that strongly encouraged executives to move on every 18 – 24 months, to gain exposure to different businesses and build their portfolio. Well, they accomplished that, but the practical reality was that as the executive breezes in, makes sweeping changes (usually favorably impacting the bottom line in the short term), and breezes out, the business is left measurably weaker, though the consequences usually take years to materialize.

      Second, the CFO’s in each business don’t really report to the CEO of that business, which means that as each quarter ends, and the call comes from corporate to meet the ‘task’ for that quarter, the CFO does anything/everything necessary to meet that task, and contribute the $xxMM necessary to make sure they don’t miss their numbers. This too contributes to the ongoing hollowing-out of the core business, with less on an impact in the short-term, but a devastating impact in the mid to long term.

      I was there when we sat in the board room and made the decision – at the end of one quarter where our ‘task’ was more challenging than normal – to off-shore x developers. It took a 5 minute conversation to eliminate 100 sw developers’ jobs here in the US.

      This is why GE businesses tend to struggle with organic growth. Any acquisitions they make can mask this dynamic (GE is masterful at this), but several decades of this broken culture can’t go unaccounted for much longer.


    Hyman & Tilles have submitted very astute synthesis here, and I tip my hat to them, and their overall assessment of GE going forward. Politely, we can state that GE might have a chance if Flannery really cleans house after that slob Immelt messed & stunk the joint up immeasurably. Unfortunately, my prognosis is not so favourable on the long term view. GE Capital is the real stinker here for sure, but Immelt bet long on all the GE sectors, and then failed miserably to understand that he had to consolidate after 08 irrational exuberance poked its head out of the Central Banking Black Box like it was Clerk Maxwell’s Demon orchestrating functional thermodynamics and the Second Law of Entropy.

    To me, GE Capital should have been liquidated pronto after 08 Stearns & Lehman. Fuld sunk Lehman because he bet & leveraged long on McAllister Ranch in Barkersfield Californication. Bear Stearns simply bet the farm on really bad accounting. GE, under Immelt, was an accident in slow motion, and now that Flannery must be able to see the writing on the wall it is best to bust the company up into 1000 pieces before the company busts up the last remnants of the Third World banana republic the Giant Vampire Squid dictator is running here on our dime.

    MOU Rating: Triple AAA %$#@ Sandwich


  15. Steve clayton says:

    Wolf, what’s your thoughts on the 1000 point stock drop?

    • BTilles says:

      Hi Steve,

      In case Wolf is busy two yhoughts.

      First, what’s that in percent, not points?

      Second, an old technician we knew had a simple response to your implied question, “Is this market move big deal?”
      He would say, “Look at a long term chart and take off your glasses. If you can still see it it’s meaningful.”

      • d says:

        In corrections, %ages, not points, are what matters.

        When we get over 10%. ITS REAL.

        That could be by Friday or it might take until after midterm’s.

        There is also a FED Head change.

        He is seen as a P 45 supporter, that generates a lot of FUD.

        Biggest factor in FUD is “Uncertanty” “Markets “HATE, LOATHE and DETEST” Uncertainty. With a huge passion.

        Which will come out with/Compound the slightest negative movements.

        • walter map says:

          Investors and speculators dislike risk, and uncertainty contributes to risk. A great deal of risk is hidden because people would otherwise be more cautious. Those who rig the markets, for obvious reasons, prefer people to be vulnerable, and not cautious, and to that end engineer contrivances to hide risk.

          My experience persuades me to believe that risk is very commonly underestimated, and often dangerously so, but I am not at all a trusting soul when it comes to the FIC, knowing that it is out to burn me if it can.

        • Joan of Arc says:

          The SP500 was down another 100 points and the Dow another 1000 points this evening, Monday, at about 10 pm ET. It would be very unusual for the stock market to crash at this time of year. Crashes are held over for Octobers. In fact, I don’t see it going back 133 years to 1885.

        • d says:

          “Crashes are held over for Octobers.”

          Historically in “Normal” Markets.

          Since 2008 this has been, and still is, a “QE” Market.

          That is why it does not “Behave” like a “Normal” Market.

          So October expectations of “Normality”, are “Dangerous” things to hold..

        • Joan of Arc says:

          What I meant was after looking over my Richard Russell stock charts going back to 1885.

          VIX futures at 49.79 this morning. SP500 futures had been down 118 points, now only down 76. Hard to believe a bear market starts here without A/D line divergence. Would be only time except for 1937 top. Strange time for bull market to peak at end of big up January. In early January 1973 bull market peak forms in first 8 trading days after over one year of diverging A/D line. Looking over charts going back to 1885 no example of bull market peak at the end of January after being up in January 8% with no A/D line divergence.

        • d says:

          As said before QE market since 2008.

          You are applying Normal Market rules to QE market.

          If you dont see QE market having different rule sets, and behaviors, after nearly 10 years of it, so be it.

        • Joan of Arc says:


          Excellent and logical argument. Come to think of it, I believe the bull market leading up to the 1937 top was a QE market and the customary divergence in the A/D line was missing. I guess we need to expect the unexpected during QE markets. Have a good day.

  16. walter map says:

    “What’s the Chance of Iconic GE Going Bankrupt?”

    It’s a done deal.

    The FIC is liquidating the US economy in favor of slave-labor countries, subsidized by the corporate-controlled US government at the expense of the general population.

    It will take a few years to complete the process, but the goal is not in doubt.

    • Tom T says:

      walter map Oh, how thoroughly I agree with you. All the astute commentary here, seems to be from a day traders perspective, ‘ how can a profit or preservation of wealth be gained from insight obtained herein. ‘

      One would think that it was part of some dark discipline, required, to block out any thought of the social consequences of such, with malice aforethought, corruption; just as long as wisdom acquired got another dollar in hand.

      • Joan of Arc says:

        “Malice aforethought”?

        That’s one of Reagan’s first Budget Director’s favorite expression.

    • BTilles says:

      Hi Joan of Arc,
      Sometimes Yom Kippur cones early.
      Old trader’s saying.

      • Joan of Arc says:


        The SP500 futures have been fluctuating wildly this morning. After having been down 118 points earlier, they are only down 47 now. Hooray, it appears the Global Plunge Protection Team (GPPT) is out and about early this morning supporting the futures markets during thin trading. The only problem is that due to margin debt, carry trades, re hypothecation, $1.3 quadrillion notional value in derivatives, and 75 to 1 leverage in some areas, if mom and pop along with the institutions panic here today, I don’t know if the GPPT will be able to put even a small counter dent in a 500 foot wall tsunami of selling.

        • BTilles says:

          Hi Joan of Arc,

          We agree. But I would point out that there are still circuit breakers fwiw.

  17. Off The Street says:

    When you’ve lost GE…

    I’d also look at any companies with that type of phony balance sheet, a lot of goodwill and off-sheet sketchy assets.

  18. Tom Stone says:

    This article leaves me with a tough decision, sell GE and buy Bitcoin, or sell Bitcoin and buy GE?
    Lottery tickets!

    • d says:

      Or sell Both and buy CHF.

      The $ is moving the right way to sit in CHF and watch for a while.

    • walter map says:

      Whatever makes for a good hedge strategy, but people should have been doing that anyway, along with planting potatoes, and tending them carefully.

      You’ll be glad you did.

      I have become increasingly concerned about financial markets for some years now, ever since I noticed that it was becoming difficult to actually invest because participation in the markets any more fairly compels one to speculate. They’re not the same thing.

      • Joan of Arc says:

        You can’t live on just potatoes. You need to plant a few turnips too, that is, if you can stand to eat them.

  19. Justme says:

    Here is a recent example of a Goodwill balance sheet item being created, as reported by Amazon as part of the purchase of Whole Foods in 2017/Q4.

    13176M Cash paid, net of cash acquired
    -9010M Goodwill
    (=4166M , but not listed explictly in the 10Q filing)

    This I think implies that only 4166M were expensed, but that over the next 10 years, Amazon will have to subtract -901M (9010M/10) from their earnings each year to write down the goodwill, unless there some other accounting rule that can be invoked to avoid that.

    But more interestingly, one could possibly argue that the Whole Foods acqusition was used as a ruse to raise 16.1B in debt, of which only 4.166B actually was spent on the WF acquisition, and the rest was used both to pay off old debts that were maturing (due November 2017), and for “general corporate purposes”, as indicated by the following quote from the 10Q quarterly report for 2017/Q4:

    “During 2017, cash inflows from financing activities consisted primarily of net proceeds from the issuance of $16.0 billion of senior unsecured notes in seven tranches maturing in 2020 through 2057. The proceeds from notes issued in August 2017 (the “August 2017 Notes”) were used to fund the consideration for the acquisition of Whole Foods Market, to repay the 1.200% Notes due November 2017, and for general corporate purposes.”


    • Justme says:

      >>This I think implies that only 4166M were expensed, but that over the next 10 years, Amazon will have to subtract -901M (9010M/10) from their earnings each year to write down the goodwill, unless there some other accounting rule that can be invoked to avoid that.

      The above is optional. Wikipedia says that

      >>Under US GAAP and IFRS, goodwill is never amortized. Instead, management is responsible for valuing goodwill every year and to determine if an impairment is required. If the fair market value goes below historical cost (what goodwill was purchased for), an impairment must be recorded to bring it down to its fair market value. However, an increase in the fair market value would not be accounted for in the financial statements.

      >>Private companies in the United States, however, MAY elect to amortize goodwill over a period of ten years or less under an accounting alternative from the Private Company Council of the FASB.

      Conclusion: Amazon may keep the 9010M of Goodwill on the books indefinitely. Who is going to challenge their Goodwill valuation of Whole Foods unless Amazon breaks out the revenue and earnings of WF separately? Which thy may never agree to do.

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