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Jan 22

As goes GE...

Posted by Ron F in General ElectricGEeconomy, earnings, cash concernscapital expenditurescapex

Ron F

The results that General Electric reported on Friday for the fourth quarter of last year show that expectations continue to be everything on Wall Street. And so long as they're not as bad as expected, stocks will continue to rise.

Who knows, at this rate, maybe we'll never need a real recovery.

GE's shares rose 4.6 percent in pre-opening trading on the announcement despite a 19 percent decline in profits and a 10 percent fall in revenues from the year earlier quarter, because those results were better than expected.

"GE's environment has improved and we saw some encouraging signs at year-end," GE Chairman and CEO Jeff Immelt said in a press release accompanying the results. 

That's something, I guess. Analysts cited quarter-on-quarter improvement in orders even as they continued to worry about the company's commercial real estate portfolio.

Much as GE hates to think itself of as a cyclical company or a conglomerate, its results continue to reflect so many sectors of the larger economy that it remains a bellwether.

But Immelt noted that the company isn't about to start spending to beat the band. "We continue to operate the company with discipline," he said, even though the company now has $72 billion of in cash on its balance sheet.

And that pretty well sums up the current state of affairs in corporate finance: Deleverage, repair the balance sheet, and wait for a recovery to present compelling opportunities.

But this is a chicken and egg situation: Until those opportunities arrive, it's hard to see how they will. Yes, that sounds like a conundrum, because it is one: Companies have to start investing their cash without any guarantees, or no one will. And if not GE, then who?

The best can be said for such a situation is, it could be worse.

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