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GE's March Madness


Management tries to run up score, run out clock.

Mid-March is usually reserved for college basketball. But this year, there's going to be a different kind of March Madness.

I refer, of course, to the "deep dive" to be held on Thursday, March 19 by General Electric (GE) for its investors. GE's CFO and the head of GE Capital say they'll go into detail about the division's "hot spots" (their expression, not mine).

This seems to me a sort of confrontation, not unlike a major sporting event, where the parties don't like one another. GE's investors -- other than the ones who bought the stock below $6 last week (and few of them, other than management, are probably still in the stock now) -- aren't happy. Even by the standards of this epic market collapse, GE has performed badly - and this is after a 50% bounce off the lows.

Then again, investors in a losing trade often have a strange tendency. Rather than challenge the management team responsible, these investors often prefer to throw softball questions. They know management will handle the questions easily and sound confident doing so, and sometimes this is all it takes to get a stock going upward. Momentum being what it is, this process can feed on itself and drive the stock to an artificial equilibrium - at least for the current marking period. And, given the general time frame of the market, that's sometimes all you need.

It's sort of the opposite of shooting the messenger.

Then again, sometimes real investors actually do want the answers. And sometimes short-sellers get involved - and they're not known for asking powder-puff questions.

In the showdown, GE has the home-court advantage, and it's not trivial. They get to set the ground rules. They decide what's on and off-limits, and they decide who gets to ask questions - who gets to play for the other side.

On the other hand, it's a game of confidence. If GE is perceived as trying to play against the Washington Generals of investor relations, its strategy could backfire. The big question now is "what are they hiding?" So if GE is genuine in its desire to address that question, it will encourage the toughest possible questions - like a top seed actively seeking to play its highest-ranked opponent.

But this doesn't happen often in sports. Teams usually seek the weakest possible opposition and hope to look good running up the score in those mismatches. As more than one horse trainer has been known to say, "I try to keep myself in the best of company and my horses in the worst of company."

My first-level guess, based on years of experience watching sports and investor calls, is that GE's brass is going to try to run up the score against a bunch of straw-man questions. My second-level guess is the initial response to the March 19 call will be a pop in the stock, followed by a massive sell-off and a set of nasty, lingering questions from participants who weren't involved in the real call.

One way or the other, it'll be an interesting match.
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Position in GE

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