Tuesday, June 20, 2017

Why do you think that General Electric would do this?

Mish reports that GE's pension hole is $31 billion and growing.  It used to have a 20bn surplus back in 2007 decreasing to a $10bn surplus as recently as 2013.  But now its $31 billion underwater.  All the while, GE was buying back shares hand over fist.  Well, I'm on record for a long time now saying that GE would eventually BK when the big crash finally showed up so this comes as no surprise to me.  But people should be trying to figure out what the ex-CEO Immelt was thinking.

Let me tell you what I think.  This is just a theory and I don't have proof but if it walks like a duck then what the fuck. 

When I was young I had a room mate.  The guy was an entitled rich kid from South America.  His parents had sent him to the states to live and they gave him a credit card to use.   After a couple years of paying his monthly party bills, they pulled the card from him.  He knew that poverty was coming to him because he had a low paying job and high lifestyle expectations.  So he used the fact that daddy was paying all his past credit card bills as credit experience for himself which enabled him to go get tens of thousands of dollars in new credit cards.  He then went on a massive buying spree of high end goods before he inevitably filed for bankruptcy.  He got to keep most of the toys.

GE's stock buying spree kept the shares up longer than they should have.  This allowed time for the execs there to cash in.  While they were selling their insider shares they were using the money that should have been going into pensions to buy those same shares back thus disallowing said shares from hitting the market and dropping the price.  Then they would gift themselves more options by the truckload and again dip their greedy mitts into the retirement plan to effectively cancel said options.  They would have accomplished the same goal but more efficiently if they had just not taken on any options and instead written themselves paychecks directly out of the retirement fund.  But that would be blatantly illegal and someone would be held accountable.  So the game was to make a circular shell game out of the money flows thus obfuscating what really happened.  You know, a lot of things work that way as we are now learning from whistleblowers.

I wonder if Jeff Immelt will live to spend much of it after he steps down as CEO in August.  I mean, I don't really care about him one way or the other but soon enough someone is going to go for their GE retirement pension and they will be told the money is gone.  What people do during times like that is anyone's guess but these people we are talking about, they are getting old and they know they don't have much time left.  It could lead some of them to believe they have nothing to lose. Some of them might even become terminally ill with only a few months left even though they can still get around just fine.  Some of those people might even find themselves in possession of a weapon wondering what the right thing to do might be.  So yes, I really do wonder if Jeff Immelt will get to spend all the money that he made running this shell game.

You know, I like to do thought experiments to visualize what the future might bring us and it has struck me more than once that old people who are terminally ill but who can still pull a trigger might decide to live up to the title of "greatest generation" by righting some of the obvious wrongs that exist today.  I can't say I advocate this but it would not surprise me to see it happen.

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