GE is hiding losses

We resume our discussions this week.

One way of buying time when things are very bad is to recognize losses later, rather than sooner. Normally when the market is down and a stock is highly undervalued the management discloses all the losses it has hidden from when the “good times” were rolling. But when the stocks are down the management typically unloads the hidden losses by writing down good will, delinquent/late receipts, off-book debts, and other losses as one time events hoping that investors are foolish enough to believe them that they were not instead the result of manipulating profits and manipulating their bonus payouts. Any company that does this each business cycle is almost certainly intentionally defrauding shareholders. But many do it.

GE is under pressure to separate its industrial unit from its GE Capital financial division, as the Obama administration made clear in a white paper on regulatory reform that it wants to "re-affirm and strengthen" existing policies of separating banking and commerce. GE/MSNBC/PRAVDA is the Obama propaganda machine and depends on its government contracts to survive at this point. China is killing GE's former money making machines. For instance GE is being forced out of the light bulb market and the appliance market.

The above is basically what Barclays Capital analyst Robert Cornell concluded "GE was up to, following the release of its second-quarter earnings on July 17. As a result, when GE Capital reported fewer write-downs than Cornell had in his 2009 estimates, he merely added those hidden losses to his 2010 loss estimates."

"GE has raised suspicions among investors and analysts as it has reported relatively small losses in areas like real estate and consumer lending that have stung banks like Citigroup (C Quote) Bank of America(BAC Quote) JPMorgan Chase (JPM Quote) and Wells Fargo (JPM Quote)."

While GE’s nearer term strategy appears to be to delay taking losses as long as possible, "Sterne Agee analyst Nick Heymann thinks GE will ultimately have to find a large deposit-taking institution to take a substantial stake in GE Capital. That will be an easier sell for GE if it has succeeded in its plan of shrinking the business. Otherwise, it may be too big for any institution to take on" – and GE could go the nationalization route of GM with a big Obama government buy-out. That would mean great pensions for the unions, and new government jobs or the corrupt GE managers. Socialist government politicians are historically highly adept in hiding the truth about national finances, losses, abominable public health, and their faked support from their impoverished masses. Just look at North Korea as the last stop in socialist tyranny. It is true that N Korea government officials own no property; they just live in the palaces paid for by their enslaved people. They don't need to own property themselves when they live like kings off their enslaved populations.

Socialist reverse racism is growing

Today poorer large American families are grateful and polite because they get care at clinics and hospitals with our current system. If they cannot pay the full price they don't. American hospital emergency wards cannot turn people away.

A new health care bill entitlement for 40 million Americans who today politely ask for medical assistance will very likely subject doctors, nurses and other Americans to the same racism and slander that the Boston police force received last week. We think President Obama's remarks and those of the Harvard professor were racist and distasteful. That professor believed he had a right (or entitlement) to slander a police officer. We don't believe anyone has a right to maliciously slander a fellow American much less an officer of the law. We believe the socialist health care bill in Congress will lead to many more false, malicious, and obnoxious assaults on health care providers as well as other Americans sitting in health care office waiting rooms. The President sets that bad example and encouraged it with his recent Freudian slip where he said that a highly respected Boston officer "behaved stupidly" for requesting photo identity of a Harvard professor who “stupidly” forgot his key and was reported breaking into his own house. How was the officer to know he was the owner? And if he was not the owner, the officer would have been accused of racism and dereliction of duty for not request photo identification. It was not the officer who behaved stupidly it was the black Harvard professor who behaved stupidly, obnoxiously, and with racism dripping off his lips.

We know America currently has the best health care system in the world. No socialist country provides the good care Americans receive. Their costs are lower because they provide a lot less and depend on America to pay for most of the world's advancements in treatments and pharmaceuticals. The bill in congress will entitle and unleash 40 million more people to abuse doctors and nurses because they think it entitles them to do what that racist Harvard professor and Obama did last week.


Market forces July 27
The market has hit an overbought condition over the past week. The buying opportunity is continuing on market pull-backs. Energy/oil, and precious metal commodities recently had buying opportunities and their pro-shares are now up substantially. We are seeing evidence that the housing market is nearing its bottom so it is much more attractive on pull backs. However the big RE companies running the shopping malls are being killed by vacancies. They are currently at highly inflated prices.

The high debt-to-income and loan-to-value ratios create a situation where job losses can lead to further economic weakness. Well over 22% of U.S. homes, condominiums and other residential properties have negative equity now. The situations in commercial buildings and shopping malls are worse. These are the reasons for the periodic sharp stock pull backs that become buying opportunities. But when they surge ahead 30% or more it become time to get out of them again, at least until unemployment stabilizes next year.

In effect we are in a compressed market where there are substantial price swings that can occur in six weeks when in the past they may have taken twelve months. So investors must now be more alert and almost traders for the next year.


Market Outlook

The recent rally has the market in a highly overbought position again. We expect U.S. stocks to continue with slides that represent buying opportunities and then wild optimistic appreciation (as we have just had) that can be times to take profits.

Last night Asian markets were down slightly: China up 0.1%, Japan down 0.1%, and India down 0.3%.

Today most European markets are down in a range of -0.2% to -1% half way through their session.

US futures indicate about a -0.4% USA market opening this morning.

We will continue cherry picking into and out of the market. We expect the decline will be the typical rotation with sharp drops in some individual stocks while other stocks flatten out or rise and then decline so the change in the market indices will be much more gradual. It will be as though time was compressed and hence investing will require more trading skill.

The new democrat-socialist administration destroys every free market sector they touch. Why is it that congress and federal employees still get better health care than what they give the rest of us? Isn't that just another socialist government entitlement for the master elitists of the world?