[hangonhn]

It's inaccurate to say that GE outsourced all their engineering. That's not true at all. GE Aviation is a powerhouse and their engineering abilities is still world class. Despite all of China's advancements, creating engines like the type GE Aviation created is still beyond their reach (although they will eventually catch up).

GE Power made a bad bet against renewables and went with gas but that's a business mistake, not an engineering one. They recently hit a milestone with one of their biggest wind turbines. So they're slowly fixing themselves. This is again a management error, not a lack of engineering abilities.

GE Healthcare is still a leader in their field and also VERY valuable (along with Aviation, these two parts are the best parts of GE).

What the problem for GE is that they've saddled themselves with financial engineering and moved away from their core competency to generate the numbers they want. At one point that made a lot of sense because it enabled their customers to make those large capital investments but then GE managers started using GE financial engineering to smooth over earning reports. Anyone remember when GE was the darling of Wall Street? GE was touted as this well managed firm that gave steady dividends. Well part of that steady dividend and growth came from these financial engineering methods and rather opaque accounting practices (to be fair other companies did similar things).

I can't tell you if GE is a good investment or not. I am long on GE but this new report is pretty damning but as someone pointed out, the person behind the report is far from neutral. Then again, having followed GE for so long (I was long on them starting 2008, sold it all before the plunge, and now long again), there are no real neutral voices in this debate. This though is the fault of GE management, which is not as transparent as they should be.

[swframe2]

I'm curious. Why are you still long on GE given today's news? Do you disagree with Markopolos' findings?

[hangonhn]

Some of the counter points to the report holds water. The interest of Markopolos isn't neutral. And some long time observers have pointed out mistakes in his report. Accusation of accounting issues with GE isn't entirely new. GE is a beast and it's not transparent enough so that leaves a lot of room for speculation. It's probably one of the most divisive stocks out there (strong opinions on both sides). I think people with an interest in shorting it assumes the worst and vice versa.

Also, the CEO purchased a whole bunch of shares before the report and again after the report. He is probably well positioned to know GE fairly well. It's not a necessary move on his part but it does signal some confidence in GE. Also, having watched him, I can see some inflection points. If you were to graph "sentiment" of news for GE for the past couple of years, it would be kind of a parabola: lots of negatives, then less negative, then it's mixed, and now it's more of "not good enough" (although today was a hugely negative one).

In the end it's still a gamble. I'm not betting the house on it -- it's in fact a tiny percentage of my portfolio (I generally stick with index funds) but sometimes I like to keep myself honest by putting some skin in the game along with my opinions.

[piva00]

> Also, the CEO purchased a whole bunch of shares before the report and again after the report. He is probably well positioned to know GE fairly well. It's not a necessary move on his part but it does signal some confidence in GE.

Couldn't this be seen as a PR move to do damage mitigation and earn market confidence? As you mentioned that it's an opaque company accounting-wise it'd be hard to evaluate this objectively but the CEO of a possibly fraudulent company buying stocks to earn the market confidence seems to be a very low price to avoid the possible side-effects if the allegations are true.

[hangonhn]

It's totally a PR move but it certainly does increase his exposure to the fortunes of GE. His ability to sell his shares are limited by his position as CEO. I also imagine that if the frauds were real and gone on for as long as the report states, the first thing a new CEO would do is to expose them because otherwise he will be on the hook for the frauds committed by his predecessors. (Culp was a successful CEO at a very successful company before taking the helm of GE)