GE’s announcement that its getting out of the finance business should be a reminder of how crony capitalism is corrupting and debilitating the American economy. The ostensible reason the company is unceremoniously dumping its 25-year long build-up of the GE Capital mega-bank is that it doesn’t want to be regulated by Washington as a systematically important financial institution under Dodd-Frank. Oh, and that its core industrial businesses have better prospects. We will see soon enough about its oilfield equipment and wind turbine business, or indeed all of its capital goods oriented businesses in a radically deflationary world drowning in excess capacity. But at least you can say good riddance to GE Capital because it was based on a phony business model that was actually a menace to free market capitalism. Its deplorable raid on the public purse during the Lehman crisis had already demonstrated that in spades.
GE stock is down almost 13% over the last 7 years, and this is with record shares being taken off the market. However, Jeff Immelt thinks he has a solution for this problem after 15 years at the helm of GE.
GE Capital's 2014 loan portfolio was marked at $363 billion. It will take a lot of maneuvering to bring it down to the $90 billion target. With the market at all-time highs and with valuations stretched beyond all conceivable rationality, GE CEO Jeff Immelt said now is a "perfect time to be a seller. People are lining up at the starting line."
Back in April 2013, Apple shocked the world when in a dramatic U-turn to Steve Jobs beliefs, it announced what was "the largest single share repurchase authorization in history" when it boosted its share repurchase authorization to $60 billion from $10 billion. Today, GE did its best to match this number, when it reported that as part of a massive business restructuring, it announced a "new Board authorization of up to $50B buyback." This is how it will fund it.
- Nikkei tops 20,000, Europe hits 15-year high (Reuters)
- GE to sell real estate holdings, sets $50 billion share buyback (Reuters)
- Iran’s Middle Class Plans for Life After a Deal (BBG)
- Walgreens to Close 200 Stores as It Expands Cost Cuts (WSJ)
- Hillary Clinton expected to announce presidential run as soon as this weekend (Reuters)
- It will cost $1.5 billion to keep Deutsche Bank Libor Manipulators out of prison (USA Today)
- Police Cameras Bring Problems of Their Own (WSJ)
- Obama says concerned China bullying others in South China Sea (Reuters)
- Investors Revive Appetite for Asian Junk Bonds (WSJ)
GE Announces One Of Largest Buybacks In History, Will Repuchase $50 Bn In Shares After Selling Most Of GE CapitalSubmitted by Tyler Durden on 04/10/2015 07:16 -0400
Moments ago, General Electric showed why April is much more likley to be a rerun of February than January or March when it announceed that it would go ahead and repurchase half of the total record stock buybacks announced in February, or some $50 billion in what may be the largest stock buyback announcement in history! How will GE fund this massive distribution to its shareholders, of which the most concentrated one will once again be the biggest winners? Simple: by dumping the division that nearly caused its insolvency during the financial crisis, the hedge fund known as GE Capital. As part of the just announced mega transaction, GE announced an agreement to sell the bulk of the assets of GE Capital Real Estate to funds managed by Blackstone. Wells Fargo will acquire a portion of the performing loans at closing.
“If you’re unhappy with what you’ve had over the last 50 years, you have an unfortunate misappraisal of life... should all be prepared for adjusting to a world that is harder..."
- RBS to cut up to 14,000 jobs in investment banking unit (FT)
- Doctors, patients scramble ahead of high court Obamacare decision (Reuters)
- Rajan Cuts India Rates After Modi Agrees to Inflation Target (BBG)
- Russia’s Putin Makes First Public Comments on Killing of Boris Nemtsov (WSJ)
- House breaks impasse, passes security funding without provisions (Reuters)
- How a 25-Year-Old Investor Spurred Lumber Liquidators’ Plunge (BBG)
- Jeff Immelt’s Overhaul of GE Impeded by Falling Oil Prices (WSJ)
- Sahara India Defaults on Luxury Hotel Loans From Bank of China (BBG)
- Showtime for Apple: Big phones, smart watches and high expectations (Reuters)
- Bank of England Gov. Mark Carney Signals Spring Rate Rise (WSJ)
- Quebec Shows Scots Question Returns Even If Answer Is No (BBG)
- Hush money with a 9 year vesting period: Ex-SAC Fund Manager Martoma Sentenced to Nine Years in Prison (BBG)
- Dreams on hold, Brazil's 'new middle class' turns on Rousseff (Reuters)
- Fed to Hit Biggest U.S. Banks With Tougher Capital Surcharge (WSJ)
- Egypt court sentences Brotherhood leader, cleric to 20 years in jail (Reuters)
- Ukraine Says Malaysian Airliner Shot Down Near Russian Border (BBG)
- Downing of airliner seen as pivotal moment in Ukraine crisis (Reuters)
- Malaysian Air Flight Took Route Avoided by Qantas, Asiana (BBG)
- Russian-Made Missile Hit Malaysia Jet, U.S. Officials Say (BBG)
- Netanyahu Orders Military to Ready Wider Gaza Incursion (BBG)
- Silvio Berlusconi Underage Sex Conviction Overturned (WSJ)
- But... but... "economic patriotism" - AbbVie to Buy Shire for $54.8 Billion as Drug Deals Surge (BBG)
- SEC targets 10 firms in high frequency trading probe - SEC document (Reuters)
- Art bubble pop: Sotheby's to Lay Off 'Modest' Number of Employees (WSJ)
- Moar Abenomics: Hermes Sales Trail Estimates as Japanese Revenue Declines (BBG)
The overpowering and incessant statist economic management of the American economy, as reflected in the Ex-Im extension mobilization now underway, is causing the engines of capitalist prosperity to shutdown. The main culprit, of course, is our monetary central planners in the Eccles Building. But they are only the leading edge - the exemplar that tells Washington day in and day out that without constant ministrations by agencies of the state, our capitalist economy would continuously under-preform and tumble into the ditch. So what is at stake in the Ex-Im battle is the future of market capitalism itself. If Washington lacks the capacity to say no to the shareholders of a few big US corporations that can be counted on one hand, then the statist predicate will triumph finally and for ever more.
- Xi Says China Conflict With U.S. Would Be Disaster (BBG)
- Short selling drops to lowest level since Lehman (FT)
- Scoping the new subprime as watchdogs cry 'bubble' (Reuters)
- Carlos Slim to break up América Móvil empire (FT)
- Jury Acquits Rengan Rajaratnam in Insider-Trading Case (WSJ)
- Hamas rockets land deep in Israel as it bombards Gaza Strip (Reuters)
- Hong Kong Buyers Queue for New Homes After Prices Plunge (BBG)
- Rebel Stronghold in Ukraine Braces for Its Showdown (WSJ)
- Tiny Houses Big With U.S. Owners Seeking Economic Freedom (BBG)
- Chinese Cash-Bearing Buyers Drive U.S. Foreign Sales Jump (BBG)
Timothy Geithner is likely to go down in American history as one of the most dangerous, destructive cronies to have ever wielded government power. The man is so completely and totally full of shit it’s almost impossible not to notice. The last thing we’d ever want to do in our free time is read a lengthy book filled with Geithner lies and propaganda, so we owe a large debt of gratitude to former Congressional staffer Matt Stoller for doing it for us. Stoller simply tears Geither apart limb from limb, detailing obvious lies about the financial crisis, and even more interestingly, Geithner’s bizarre bio, replete with mysterious and inexplicable promotions into positions of power..."Geithner is at heart a grifter, a petty con artist with the right manners and breeding to lie at the top echelons of American finance..."
France's Economy Minister Arnaud Montebourg (of Titan tires debacle fame) has written to GE's Jeff Immelt explaining that his offer for Alstom is "unnaceptable",
- *MONTEBOURG SAYS GE-ALSTOM BID UNACCEPTABLE IN CURRENT FORM: AFP
We can opnly imagine the additional terms the French will require. On the bright side, Montebourg did not call GE's offer "ignorant and insulting" like he did Titan's CEO.
- Russia raises interest rates to 7.5% (FT)
- Shanghai to Allow Raw Material Exchanges in Trade Zone (BBG)
- US, Japan Fail to Clinch Trade Deal (WSJ)
- 'We don't have a magic wand', says ECB's Constancio (Reuters)
- Tokyo Inflation Quickens to Fastest Since 1992 (BBG)
- Demand for Home Loans Plunges (WSJ)
- EU banks urged to grasp chance to raise capital (FT)