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On GE, Just Say "No"

Bruce Krasting's picture





 

 

Kansas City Southern (KSU) is a nice little railroad company. The stock is up 40% the past six months.

 

 

The company is well run and is profitable. Some highlights from the bosses on the 2011 results:

“KCS’s solid fourth quarter put the final touches on a successful 2011,” stated David L. Starling, president and chief executive officer.

For the full year 2011, revenue was a record $2.1 billion, up 16% over 2010. This is the first time that KCS generated annual revenue above $2 billion. Carloads for 2011 were 2 million, the first time annual volumes reached the 2 million threshold.
Full-year operating income was $612 million, a 26% increase over the prior year, and the Company’s 2011 operating ratio was 70.9% compared with 73.2% in 2010. Diluted earnings per share for full year 2011 were $3.00 compared to $1.67 for 2010.

 

Moody's likes KSU, they just upgraded it a notch to Ba1.

RATINGS RATIONALE
With a rapid restoration in freight volume and yield, Kansas City Southern's credit profile has improved materially.

 

If this company wanted to raise some cash they could do it in a week. Given their current market cap of $7.5 billion, it could do a secondary offering of stock and raise $100mm in the bat of an eye. If it wanted debt financing, that too would be available from yield hungry investors. Given the strength of the balance sheet, I think they could add another $200mm in debt without much of a problem at all.

But KSU is not going to the capital markets for the money they need to expand. Why should they? After all, Uncle Sam is willing to lend them cheap money: (Link)

 

Kansas City Southern Railway Company (KCSR) has taken out a $54.6 million Federal Railroad Administration-administered Railroad Rehabilitation and Improvement Financing (RRIF) Program loan to purchase 30 new General Electric diesel-electric locomotives.

 

I’m so sick of seeing this day after day. Washington is shelling out taxpayer money to support this successful company so they can buy locomotives from GE.

GE pays next to no taxes in the US, they haven’t for years. But when it comes to government money, they are on the top of the list for handouts.There is only one reason that GE keeps sucking on the country’s teat, the CEO is best buds with Obama. Not only are they pals, but GE’s top honcho, Jeff Immelt, is advising the President on what to do.

There are many segment of our economy and society that need a helping hand from the government. I would put the interests of GE (and KSU) at the very bottom of the list. They are doing fine, they don’t need these handouts.

This is not an industrial policy. It’s crony capitalism of the very worst kind.
.
 


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Wed, 03/14/2012 - 17:05 | Link to Comment oleander garch
oleander garch's picture

Oli Garch does not understand all the complaints about large corporations that pay little or no state or federal income tax. http://www.thenakedemperor.com/oligarch/accounting-principles

Fri, 02/24/2012 - 23:58 | Link to Comment Arthur
Arthur's picture

That is why I loaded up on GE Stock at $10.5.  Don't fight City Hall either.

Fri, 02/24/2012 - 17:41 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

If government is simply going to throw free money @ their favorites, then why would industry need my savings?  Why would industry be the least little bit interested in the market's guiding (invisible) hand?  The government will pick the 'winners' and the 'winners' will respond only to the government.  If you have some new technology that the political class deems too disruptive, then you'll get nothing.  Government doesn't want cars that lead to energy independence.  They would like new, cool ways to control crowds.

This is not capitalism.

Fri, 02/24/2012 - 17:26 | Link to Comment non_anon
non_anon's picture

harken back to the echoes of history

The Myth of the Great Railroad Meetup

"It was now apparent to my daughter, laughing out loud, that these two railroads had no intention of meeting. The purpose of grading and laying tracks was not to meet the demand for transcontinental passenger service, but simply to collect, risk-free of any market forces, the federal subsidies. Any doubt about this conclusion would be quickly erased up ahead at the tour stop overlooking Spring Creek Ravine.

The Central Pacific constructed a "big fill" of earth to span their portion of the ravine so track could be laid safely upon the ground. Below the "big fill" the Union Pacific spared neither time nor safety by constructing a rickety-wooden trestle across the gulch. The trestle, which was 85 feet high and 400 feet long, was so flimsily built that one reporter suggested, "It will shake the nerves of the stoutest hearts of railroad travelers when they see what a few feet of round timbers and seven-inch spikes are expected to uphold — a train in motion."

http://mises.org/daily/2522

Fri, 02/24/2012 - 16:42 | Link to Comment DonutBoy
DonutBoy's picture

Who is John Galt?

Fri, 02/24/2012 - 16:42 | Link to Comment miker
miker's picture

How about 3M?  They commissioned a study that concluded that street name signs needed to have capital first letters for easier read.  Then they lobbied Congress and got the Fed agency over this nonsense to change the standards.  Now every locality in the country is changing street name signs to this new standard. 

Guess who makes the reflective material that goes into street signs?

3M's earnings have been solid/great.  No wonder when they pull off shit like this.

But of course this is a top national priority.  I mean how else would aging boomers be able to read the street names!

Fri, 02/24/2012 - 16:08 | Link to Comment SmoothCoolSmoke
SmoothCoolSmoke's picture

OK.  This bites, but what are we talking about here?  Couple 100 million?  At least it keeps people employed making choo-choo trains.

OTOH, the crook banksters suck on the Govt (Fed) teat for BILLIONS...... and no one in MSM seems to know this is happening. Oh, and jobs created = O. 

Fri, 02/24/2012 - 15:52 | Link to Comment non_anon
non_anon's picture

neo-robber barons

Fri, 02/24/2012 - 15:44 | Link to Comment SAT 800
SAT 800's picture

Good reporting, Bruce. Absolutely sickening. Complete and perfect corruption and who knows; who's paying attention? No one.

Fri, 02/24/2012 - 15:29 | Link to Comment optimator
optimator's picture

How com Jeffy never talks about his stint on the N.Y. Federal Reserve Board from 2006 on?  He was there to "represent" the American people. 

http://www.foxbusiness.com/markets/2011/04/28/immelt-resigns-ny-fed-board/

Fri, 02/24/2012 - 17:24 | Link to Comment Reese Bobby
Reese Bobby's picture

He doesn't want to brag about his time, "representing the interests of the public."  What a giver!

Fri, 02/24/2012 - 13:39 | Link to Comment Mercury
Mercury's picture

Mmmm.....smell the Chavez...

That the GOP can't figure out how to throw this low hanging fruit at Obama just underscores how much they deserve to lose.

That they're probably just as guilty of similar crap just underscores how far gone the system is already and how little leverage the voter has.

Unless Ron Paul beats Romney, vote Obama in 2012 and help bring on inevitable collapse sooner rather than later. It's our best chance.

Fri, 02/24/2012 - 15:51 | Link to Comment SAT 800
SAT 800's picture

Notice what the actual problem is; "The Federal Railroad Administration". That's how the Federal Government gets its' nasty corrupt little paws into private business. All of these "Administrations", and Agencys"; need to go away. The improvement would be dramatic.

Fri, 02/24/2012 - 19:13 | Link to Comment blunderdog
blunderdog's picture

You should read some history about the railroads.  That administration didn't spring from nowhere.

Fri, 02/24/2012 - 13:33 | Link to Comment Everybodys All ...
Everybodys All American's picture

What you really want to know is how much money the "friends" feed Obama's re-elction.  You will be shocked. Well maybe not.

Fri, 02/24/2012 - 13:25 | Link to Comment ThirdCoastSurfer
ThirdCoastSurfer's picture

Check out the list of loans made:

http://www.fra.dot.gov/Pages/177.shtml

 

Fri, 02/24/2012 - 15:38 | Link to Comment NotApplicable
NotApplicable's picture

Amktrak, LOL. Yeah, they're "good" for it.

Fri, 02/24/2012 - 13:17 | Link to Comment The Alarmist
The Alarmist's picture

Big companies good ... Small companies bad!

Easy to shake big companies down for individual employee tax withholdings and to coerce them into meeting a host of other big-govt mandates ... Pain in the ass to ensure compliance from small companies.

Therefore big companies must be subsidized and small companies must be destroyed.

Fri, 02/24/2012 - 17:37 | Link to Comment Shizzmoney
Shizzmoney's picture

Great point....the thing is, there IS a place for big corporations.  If they actually were socially responsible, didn't short prices in the name of slavery and profit, and treated their workers like people and not commodities........they would be plenty to go around!

It's just the governments around the world, socalist AND conservative-leaning, are enabling them to rape the people of their hard earned wealth.  And of course, like a "free lunch"......corporations, who are hte only ones who actually get a free lunch, will glady take not only the buffet.....but also the silverware.

It's so short sighted.  Who in the future is going to have enough personal capital to buy their shit, in masse?  Unless they are going forward with the Illuminati plan to reducing the world population to 500 milly.

Like in poker, to get action, you have to GIVE action.  And big corporations aren't giving shit, and the governments of the world are left to pick up the pieces in the name of morality in the name of welfare programs, which drains us more in debt to bankers and technocrats each and every day.

I'd glady tell the big corporations today where to go......

Fri, 02/24/2012 - 13:23 | Link to Comment masterinchancery
masterinchancery's picture

No, corporate campaign contributors and cheerleaders GOOD, others worthless.

Fri, 02/24/2012 - 12:50 | Link to Comment blunderdog
blunderdog's picture

Corporations are the real constituents. 

Fri, 02/24/2012 - 13:24 | Link to Comment blu
blu's picture

We are all citizens united now.

Fri, 02/24/2012 - 21:37 | Link to Comment SillySalesmanQu...
SillySalesmanQuestion's picture

+1

Thanks for the links.

Fri, 02/24/2012 - 15:55 | Link to Comment SAT 800
SAT 800's picture

It's a lovely picture of a locomotive; made me feel optimistic right away; I love locomotives. But then I read the article. Uggh. God, I hate government. Electro-Motive actually makes better units than GE, but what friggin good is it going to do them?

Fri, 02/24/2012 - 12:38 | Link to Comment john39
john39's picture

this is how a fascist fun economy works, get used to it.

Fri, 02/24/2012 - 12:22 | Link to Comment dcb
dcb's picture

God Damn it bruce, being against corporate welfare and crony capitialsim is unamerican!!!

Fri, 02/24/2012 - 12:37 | Link to Comment robobbob
robobbob's picture

only un-American?

According to the last DHS hotsheet I saw, it borders on being an active al queda supporter.

Fri, 02/24/2012 - 11:46 | Link to Comment New_Meat
New_Meat's picture

"There is only one reason that GE keeps sucking on the country’s teat,..."

Well, that, and the fact that GE Capital "Bank Holding Company" is bankrupt :-0

- Ned

Fri, 02/24/2012 - 16:39 | Link to Comment misnomer
misnomer's picture

But how many teats does this mutant cow have???

Must be fed with Monsanto corn....

Fri, 02/24/2012 - 11:46 | Link to Comment riphowardkatz
riphowardkatz's picture

Can't be true this administration and CB is a friend of small business. Small business is the heart of our economy. They would never favor big business. 

Or is this a recapitulation of Bernanke's we must favor big business to save small business. 

Fri, 02/24/2012 - 11:32 | Link to Comment ietalon
ietalon's picture

Mafiacracy, gimme gimmie or I'll fix your face.

Fri, 02/24/2012 - 13:11 | Link to Comment flacorps
flacorps's picture

Plutocronyistikakistocracy: government by evil wealthy who stick together.

Fri, 02/24/2012 - 11:32 | Link to Comment pazmaker
pazmaker's picture

 probably be built in PA or TX or Mexico

Fri, 02/24/2012 - 11:37 | Link to Comment Widowmaker
Widowmaker's picture

In for a penny, in for a pound.

Krasting champions record fraud-bank bonuses paid by taxpayers, why not GE? 

You support the fraud cartel undermining literally everything in America -- GE is the same racket. 

Did you get dumped by an executive at GE?  Why the double-standard to oblivious readers?

Kill the fraud-banks, Bruce, and the rest will be right behind it -- it starts and ends with the end of the bullshit banks and financial racketeering.

Fri, 02/24/2012 - 11:30 | Link to Comment ietalon
ietalon's picture

Does this mean we will see kudlow begging on the street?

Fri, 02/24/2012 - 11:19 | Link to Comment The Andy
The Andy's picture

What are the alternatives for KCS to source these locomotives?  Is GE building them in the US?  If the US government is providing incentive for American companies to do business with American companies, keeping American workers working, I don't have much of a problem with it given that this sort of thing happens routinely around the globe.  However, if this subidy is taking place so GE can ship the work overseas, well that's another story.  The fact that GE pays no taxes is a separate issue all together.

Fri, 02/24/2012 - 17:41 | Link to Comment Shizzmoney
Shizzmoney's picture

 Is GE building them in the US? 

Today's LOL is brought to you by KY Jelly....because you are going to need something for lube when that fascist Red, White, and Blue Dildo is jammed up your ass!

Fri, 02/24/2012 - 13:33 | Link to Comment lamont cranston
lamont cranston's picture

Why the hell is the guvmint lending them $$$ when they should be accessing cap mkts is the problem. Pure unabashed crony capitalism. Jobs are not the crux of BK's argument. 

 

Fri, 02/24/2012 - 12:08 | Link to Comment wngoju
wngoju's picture

Agree

Fri, 02/24/2012 - 12:06 | Link to Comment HeadintheGame
HeadintheGame's picture

Robbing some Americans so you can pass the plunder along to other Americans?  Yeah, that makes sense.  What is the net effect of such foolishness?  *0*

Fri, 02/24/2012 - 13:42 | Link to Comment The Andy
The Andy's picture

So the alternative is to have KCS buy their locomotives from some Asian company that manufactures in an environment without regulation, pays it's workers about 10 bucks a week for 80 hours of work, and pollutes the environment with impunity?  In an ideal world with a level playing field, your point is well taken.  But that's not reality, is it.  Governments around the globe are doing this very thing - hell, the Japanese have it down to a science.  And if we're talking net effect, what do you suppose the net effect of having all that manufacturing done in PA (as opposed to say, China) is versus having them out on uemployment? 

Fri, 02/24/2012 - 15:36 | Link to Comment NotApplicable
NotApplicable's picture

Would you please go back and READ the article? Oh, never mind, here I'll do it for you.

The alternative is for KCS to raise cash to purchase the GE locomotives without getting a sweet-heart deal from Uncle Sugar. As Bruce states, there is no reason they couldn't raise it, other than it's cheaper to have politicians steal it for you (and of course, gets votes).

This has absolutely nothing to do with protecting US manufacturing, but rather campaign kick-backs and free press.

Fri, 02/24/2012 - 14:16 | Link to Comment azusgm
azusgm's picture

No, the alternative is for the government to stay out of commercial transactions. GE builds good locomotives. KCS has the wherewithal to purchase those locomotives. Government does not need to cloud the decision-making process or distort the purchase price negotiations. This looks more like a plan for GE to net more from a sale than it is a matter of providing essential financing. GE will capture a higher price than otherwise and Obama will crow about creating or defending good American manufacturing jobs.

Total BS.

Fri, 02/24/2012 - 13:17 | Link to Comment azusgm
azusgm's picture

This foolishness also robs the taxpayer of the money it takes to fund the administrative work of the government's side and the added administrative cost for the participants. Then we get to pay for the pensions of the useless tax eaters who slow down direct commerce.

Fri, 02/24/2012 - 12:15 | Link to Comment wngoju
wngoju's picture

I take back my agreement.  Kill Immelt!.  Kill Obama!  Kill ... Lemme see.  Harry Reid?  Kill Nancy!  Kill Kill Kill everything and everybody.

sigh

Fri, 02/24/2012 - 11:10 | Link to Comment lizzy36
lizzy36's picture

The other day i accidently answered a call where i was offered a "GE home alarm system".

I told the caller "that i would rather poke my eyes with pins than buy a GE product". 

What's worse is my 7 year old nephew told me about a "book" he was reading from his school library which teaches him about global warming, how it is going to KILL US, and the solution is to change light bulbs. Any guess at which company "sponsored" that commie POS book? If you guessed GE you are right.

Fri, 02/24/2012 - 11:28 | Link to Comment Seer
Seer's picture

Fascist, that's FASCIST book!

Speaking of light bulbs, how many here are aware that LEDs are NOT more efficient than CFLs?  Lumens per watt is lower.  Hm... why are we stepping backwards?  OK, I'll give it away:

CFLs contain mercury.  TPTB managed to shove them down our throats and will then have them subsidized out of existence in order to cover up this massive fuck-up.  Meanwhile I look forward to a future without incandescents (</sarc>): so much for nice lighting during the heating months, in which that "waste" heat also helps heat my home; and so much for using them in my brooder lamps- fuckers!

Fri, 02/24/2012 - 13:28 | Link to Comment Mercury
Mercury's picture

That's not true about LED vs. CFL today although it may have been at one time.  The big problem with LED is they want to run on lower voltage.  You'd probably need a second, low voltage feed into the house instead of the standard 120/220v to get max efficiency out of the things. Incandescents have their oun utility value and shouldn't be outlawed but LEDs are pretty cool (literally).

The government is run by a bunch of idiots. It is now illegal to sell/transfer pre-1985 toys and BOOKS intended for children under 12 because they might contain trace amounts of mercury/lead which might be injested.  BUT they're going to force you as much as they can to put these mercury containing lightbulbs all over your house which are toxic enough to be technically illegal to thrown away in most instances.

Fri, 02/24/2012 - 15:54 | Link to Comment Seer
Seer's picture

"That's not true about LED vs. CFL today although it may have been at one time."

I suppose... but, is was only a couple of months ago that I noted this (strolling through Costco, noting the info on both types of bulbs).

Interesting how complicated this all is.  Not thinking that this is going to hold up long-term:

http://spectrum.ieee.org/semiconductors/optoelectronics/the-leds-dark-se...

(Yeah, I know, why even bother with higher current?)

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