Apr

11

The silo that a certain conglomerate might like to use to fill earnings with sales of grain and other assets purchased 100 years ago, might have run dry today and its stock dropped to its lowest level since June '04. Like a pressure cooker whose valve was finally released, the market, after staying with a hair of unchanged the whole week, including its Friday 6:00 GMT level of 1368, finally burst the dam, and dropped a fast 35 before closing down a mere 2% on the major US and European markets. The last healthy gasps were in Japan and Asia with the Nikkei up 2.5% and other Asia markets up 1% to 3%. Amazingly this earnings report was not released before the announcement to the big boys, and the staggering immediate 1.5% drop that ensued in the minutes after the announcement must have been dismaying to all who are accustomed to fair warnings on things of this nature. It reminds one of the Charles Addams cartoons about the old couple that manages to put up a facade of happiness for many years, until a small incident, perhaps the failure to take out the garbage, causes an explosion.

Alan Millhone enquires:

It amazes me that the first time 17% drop in one quarterly earnings report in over five years for the conglomerate drives down the market by almost 260 tics. Also Vic's mention of 'time delay' release of sensitive financial information reminds me of the ruse in The Sting, where they used delayed track reporting over the wire service to dupe Robert Shaw (who played Doyle Lonnegan in the movie) out of all his money at the betting window. Could big financial firms (not all) be using this type of delayed reporting to dupe the average investor who mostly trusts financials and P&L statements in order to try and make educated investments?


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4 Comments so far

  1. Marco Loureiro on April 13, 2008 3:50 pm

    The silo of the big conglomerate is not empty (yet) as evidenced by the conference call. The problem is that the sale of grains that it was going to be used to offset the earnings shortfall coincided with the turmoil at the end of the March.

    The big conglomerate, now being called the new Chicago Cubs (shows a lot of promise but can never deliver), says that it will continue to sell grains. The only difference is that analysts are now being steered towards the low end of the lowered guidance. A bit more cushion in case the sale of grains hits another bump in the road.

  2. Paul Marino on April 13, 2008 8:18 pm

    Thankfully the Dow is price based.

  3. lawrence schulman on April 14, 2008 9:54 pm

    Ge was near 39 on April 1. Then the stock was down six straight days. During that time the worldwide financial numbers were being consolidated once the 3rd quarter ended so somebody knew there would be an earnings miss.

  4. Jason Leavitt on April 22, 2008 12:27 pm

    Jack Welch ruined GE. Here’s why…

    1) He was obsessed with Six Sigma. Sorry Jack, you don’t grow a company by taking a product which is 99.8% perfect and making it 99.9% perfect. The law of diminishing returns sets in. You should have been developing new stuff, not perfecting old.

    2) Time will tell, but when all is said and done, the internet might be the greatest “invention” in history, and GE totally missed it. Imagine that. One of the biggest industrial companies on the plaent has made no money either over the internet or laying the structural foundation of the internet.

    Jack you screwed up!!

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