GE and Moody’s Paint A Dark Picture

Posted by LK on 3/02/09 • Categorized as The Economy and Markets

I don’t know how the stock market’s going to end the day, the month, or the decade. No one does, and run from anyone who claims to.

That said, Friday afternoon there were a couple of developments that don’t bode well.

1. Jeffrey Immelt, CEO of GE, announced a cut in their dividend less than a month after stating that the dividend was safe. GE is often taken as a proxy for the global economy, as they’re perhaps the most mammoth multi-national. If Immelt, a competent sort compared to the knuckleheads at AIG and Citi, has so little visibility that he does a 180 within a month, then clearly no one has fog lamps that can cut through the current smog.

2. Friday morning, the US government, with our tax dollars, took on a bigger stake in Citigroup, ostensibly firming up its ongoing viability. Later in the day, Moody’s, one of the big ratings agencies, downgraded a variety of Citigroup paper. Gee, you think maybe the government was tipped off and took action to preclude a very black Monday? This was the same Moody’s that assigned triple A ratings to toxic junk which then played a big part in the implosion we’re suffering through. Ironically, this time they’ve probably got it right.

I related my concerns to a couple of friends on Friday and they replied that even if I was right, people are tired of doom and gloom. From the articles I read over the weekend about Hollywood fluff doing big box office, they’re probably right.

The intent here is to inform, not alienate, the reader. I believe that the sooner we come to grips with the reality facing us, and temporarily muzzle the understandable but currently unproductive urge to blame and punish, the sooner we pull out of this nose dive.

Don’t get me wrong, I’m big on blame and punish. When Ken Lay, disgraced Enron CEO, died of a heart attack, my only regret was that he didn’t suffer more prior to passing. I’m not cold, I’m just saying out loud what his former employees were thinking.

Bottom line: disregard the signs of the times at your own peril.