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Minyan Mailbag - GE vs Citi



Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.

"Collins thinks General Electric (GE:NYSE) is the most important stock in the world. John Roque and I are in agreement that Citigroup (C:NYSE) holds that title. What say ye?"

Dear Todd,

I'm afraid I have to vote with the kid, the interloper -- Mr. Collins that is. I know, I know - how dare he have the temerity to disagree with you and what I am doing taking his side? But hey Toddo, life's full of these disappointments.

Citi is important, no doubt. It could be argued that the largest financial institution is the ultimate tell stock given the sensitivity of the financials to both interest rates and economic activity.

I would argue that GE is an even more important tell given that it does has a very significant financial services exposure (via its majority ownership of recent spin-off Genworth) which as noted in the case of CIti is important, but it has the even more important (in my estimation) industrial/manufacturing exposure that make it The Tell.

Why do I put more importance on the manufacturing aspect of the economy than even the financial sector? Why do I say GE is more important than Citigroup? The financial institutions themselves and the customers from whom they exact their revenues have been restructured, derivitized (nice word, huh?), written-off, fee-charged, consulted, investment banked, re-stated, rate-spread, carry-traded, and generally financially alchemized just about as much as they can be for a while.

Growth in the economy, if we are going to see real world growth, has to come in the form of some actual, tangible products being produced and sold. You can't indefinitely financially finagle the world into prosperity. We've got to move some turbines, and pumps, and circuit boards, and engines, and filters, and medical equipment, and .... In other words the GEs of the world have to do some real manufacturing business and sell real products to real customers who pay with real dollars.

That's why I say that the health and direction of GE means more to the market and provides more of a tell than does that of Citigroup.

Sorry to side with Collins. If it makes you feel better, go punch him or something.

Best Regards,

Minyan Rob Fraim
Mid-Atlantic Securities, Inc.


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