So much for the theory that because there weren’t a lot of profit warnings, earnings will be hunky dory.
Just back from a morning meeting, having heard about GE earlier this morn.
Obviously, this does not change our main thesis at all: The slowdown in Consumer spending caused by a weak economic recovery, and then by the Housing collapse, combined with increasing cautiousness on the side of Business spending and hiring is taking its toll on revenues and earnings. Markets are not cheap, and are not priced for a full blown earnings recession.
The stock market may be entering a mine field as earnings start
to flood the tape next week. We shall soon see if investors are getting real about earnings. GE proves that the economic slowdown is directly impacting corporate America.
Again, there’s that word "Surprise!" We know that financial services
contribute about 35% — down from 40% Q1 07 — of GE’s operating profit. So who is it that is truly surprised that they missed? Quite bluntly, the bigger shock would have been if they hit their numbers.
How many CEO’s get to miss their quarterly numbers, and then get such a kid glove treatment from a major business news channel? I can tell you, not many.
"Hi Jeff! Hi Joe!"
click thru for softball interview
A few highlights:
– GE CEO Jeff Immelt blames the financial shortfall to a large degree on Bear Stearns;
– Immelt takes responsibility for the earnings miss;
-Immelt also confirmed GE’s triple AA rating (something that id din’t know you could do yourself);
– If we are not in a recession now, we are very very close
One point that needs to be made: There is an obvious conflict of interest for any journalistic entity to interview their own CEO. Its an interview that most journalists would shy away from. Its impossibly conflicted.
My friend Herb notes that this is a thankless task, and "CNBC would get criticized for not covering their parent. If I were interviewing my boss on tv I’d probably be careful — at least if I valued my job." Given all that, this interview was stunningly gentle — the only thing missing was a group hug at the end. I don’t know what sex acts Spitzer paid for, but I suspect the interview above was not dissimilar to them.
Here’s an alternative to this sort of nuzzling interview: If I were GE’s CEO, I would say to my reporting staff:
"I expect you to maintain our reputation as the pre-eminent business news channel, and if you are too soft on me, it costs the company its reputation.
Ask me tough questions. Raise difficult issues. Challenge me as if this were 60 Minutes.
Anyone who pulls their punches or throws me a softball question is fired."
But that’s just me . . .