Wednesday, 4 March 2009

GE - still has its 800 pound gorilla to deal with


The chart above illustrates just one of the very many structural issues facing the US economy. The hourly chart for Dow component, General Electric (GE) shows a uniform decline over the last month which has seen the price cut in half and - even on a day when stocks are getting a lift - the stock is trading around $6.
The real problem with this company is not dissimilar to the problems being faced by other former behemoths like GM and Citigroup - they strayed too far from their core competence. As distinct from its technology businesses GE has its GE Capital division which is a monstrous headache for the company. This division is suffering along with all of the other companies that just had to be in the forefront of financial wizardry.
There's lots of talk about the board replacing the CEO Mr. Immelt but frankly that's a sideshow
The CEO cult is dying and by now we should all be waking up to the fact that most of these legends in their own minds have almost wrecked the global economy.
Maybe the stock will get a lift if Mr. Immelt is fired but until the company figures out what its core business is chances are that investors will remain very wary.

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