WEBVTT - Jeff Sprague Says He Hasn't Had a Positive Rating on GE Since 2008 0:00:02.600 --> 0:00:12.760 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:12.800 --> 0:00:16.239 with David Gura. Daily we bring you insight from the 0:00:16.239 --> 0:00:21.640 best of economics, finance, investment, and international relations. Find Bloomberg 0:00:21.720 --> 0:00:26.599 Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of 0:00:26.640 --> 0:00:33.479 course on the Bloomberg seth Masters. Join us now for 0:00:33.520 --> 0:00:35.280 our Bloomberg and Lemon three studios. As I said, the 0:00:35.320 --> 0:00:37.879 former chief investment officer Daby bernste great to have you 0:00:37.920 --> 0:00:40.480 with us, and let's begin with that. With this news 0:00:40.600 --> 0:00:43.080 about General Electric, what it says to you about the 0:00:43.120 --> 0:00:45.879 company itself or industrials in particular. What we're seeing here 0:00:45.920 --> 0:00:50.440 with this reimagining of our reinvention of General Electric, Well, look, 0:00:50.479 --> 0:00:54.680 I think the General Electric almost defined the manufacturing age 0:00:54.720 --> 0:00:57.560 for the United States and that we are now moving 0:00:57.600 --> 0:01:01.520 into a world of increasing focus on services and information 0:01:02.160 --> 0:01:05.679 and they need to pivot into that new world ahead 0:01:05.800 --> 0:01:08.120 if they're going to survive. And this isn't an example 0:01:08.160 --> 0:01:10.720 of the kind of renting transformations that have to happen 0:01:10.720 --> 0:01:12.679 if companies want to try to succeed. It's not an 0:01:12.720 --> 0:01:15.760 easy transformation to execute. Are we seeing a move forward 0:01:15.840 --> 0:01:17.640 here or a move backward. In other words, are we 0:01:17.640 --> 0:01:20.759 seeing a return to two general electrics roots, a paring 0:01:20.800 --> 0:01:22.800 down of the expansion that we've seen here over the 0:01:22.840 --> 0:01:26.080 last few years. Well, ironically in some ways yes, because 0:01:26.080 --> 0:01:27.600 they're going to have to focus on some of the 0:01:27.600 --> 0:01:31.959 businesses where they will have a sustainable edge as a 0:01:32.040 --> 0:01:35.520 service provider, and and where are they in predicting where 0:01:35.760 --> 0:01:37.440 do you see this company fitting and going forward? I 0:01:37.440 --> 0:01:40.160 know that there was some word last week about the 0:01:40.200 --> 0:01:42.119 calls for the death of the conglomerate. Are we seeing 0:01:42.160 --> 0:01:45.040 that here? Is that what this portends. I don't necessarily 0:01:45.040 --> 0:01:47.240 think it's the death of the conglomerate per se. I 0:01:47.280 --> 0:01:50.800 think it's shifting from a focus on making things like 0:01:50.880 --> 0:01:53.720 aircraft engines that you sell to somebody else who then 0:01:53.880 --> 0:01:58.000 is responsible for them, to becoming a provider of aircraft 0:01:58.040 --> 0:02:02.600 engine hours services that you meeter out for your users, 0:02:02.760 --> 0:02:05.720 where you still maintain the engine and are responsible for it. 0:02:05.800 --> 0:02:08.760 And of course the challenges that's a very big change. 0:02:08.800 --> 0:02:11.280 The skills that are required are different, and at the 0:02:11.360 --> 0:02:14.839 end of the day, it creates efficiencies for the system 0:02:14.880 --> 0:02:17.360 and that actually shrinks the size of the market. I 0:02:17.440 --> 0:02:19.120 just want to get your perspective before I moved to 0:02:19.200 --> 0:02:21.280 to a broader theme here, just about the the import 0:02:21.360 --> 0:02:23.520 of this, How how big a deal this is? As 0:02:23.520 --> 0:02:25.720 I mentioned, John Flannery is still relatively new to the job, 0:02:25.840 --> 0:02:28.400 scheduled to outline radical changes to the companies have just 0:02:28.440 --> 0:02:31.639 been discussing how big a deal is this? Just contextualize 0:02:31.639 --> 0:02:34.440 the moment for us, if you would, Well, I think 0:02:34.440 --> 0:02:37.720 in the context of the US economy, it's a it's important, 0:02:37.760 --> 0:02:40.959 but it's a modest deal because g is a large employer, 0:02:41.000 --> 0:02:43.240 but it's a tiny percentage of the US labor force. 0:02:43.720 --> 0:02:46.440 I think symbolically though, it does highlight a passing of 0:02:46.440 --> 0:02:49.959 the baton from great manufacturing being the defining characteristic of 0:02:50.000 --> 0:02:53.200 the United States to now being a smaller and smaller 0:02:53.240 --> 0:02:55.160 portion of GDP, just the same way that once upon 0:02:55.160 --> 0:02:57.920 a time we were an agricultural country too. Um, those 0:02:57.960 --> 0:03:01.160 phase changes are very wrenching and and challenging, but we've 0:03:01.200 --> 0:03:04.320 gone through them and the challenges to do that again. 0:03:04.520 --> 0:03:06.160 Context there about the company. Let me ask you for 0:03:06.240 --> 0:03:08.320 some context about this moment in particularly back in in 0:03:08.639 --> 0:03:11.000 two thousand and twelve forecast we'd see down twenty thousand. 0:03:11.040 --> 0:03:14.360 Here we are at now twenty two what do you 0:03:14.400 --> 0:03:16.000 make of of where we are? Just from a broad 0:03:16.040 --> 0:03:19.280 market perspective, I think where we are reflects the fact 0:03:19.280 --> 0:03:21.320 that corporate earnings have been very strong. They're growing at 0:03:21.320 --> 0:03:23.679 about ten percent this year, their forecast to grow at 0:03:23.840 --> 0:03:26.600 about the same it's not actually slightly more next year, 0:03:26.680 --> 0:03:30.200 which we'll see. Uh. And actually growth outside the US 0:03:30.320 --> 0:03:33.360 in corporate earnings is even faster than that, And that's 0:03:33.480 --> 0:03:36.720 partly because the economy continues to grow at a nice clip, 0:03:36.840 --> 0:03:39.240 somewhere between two and a half and three in real terms, 0:03:39.280 --> 0:03:42.119 plus we'll call it a dollop of inflation, so that's 0:03:42.120 --> 0:03:44.440 about four and a half to five percent nominal growth. 0:03:44.800 --> 0:03:47.520 And companies have been buying back shares, which means that 0:03:47.600 --> 0:03:50.760 earnings per share can grow even faster. This just in 0:03:50.960 --> 0:03:55.960 David jeff Emil to coach the New York Jeffy at 0:03:55.960 --> 0:03:58.480 some point, maybe they will. That would be good. I mean, 0:03:58.520 --> 0:04:01.520 there was a nice football player second he could get 0:04:01.560 --> 0:04:05.360 it done. Flords Angels is funny. Good morning everyone, Stepmasters. 0:04:05.440 --> 0:04:07.200 You know, I look at this and I guess, going 0:04:07.240 --> 0:04:10.360 back to the import of g E, everybody's got to 0:04:10.400 --> 0:04:13.320 move faster today. I mean I made a theme of 0:04:13.360 --> 0:04:15.800 this three four or five years ago Davos, where the 0:04:15.800 --> 0:04:19.000 new five year plan is three years. How much time 0:04:19.040 --> 0:04:23.039 does a guy like Flannery have, not specifically ge, but 0:04:23.120 --> 0:04:26.600 in general corporate officers it's like a one year two 0:04:26.680 --> 0:04:30.359 year time horizon now right. It's true, it's it's harder 0:04:30.440 --> 0:04:33.760 to get investors to be patient for more than a 0:04:33.800 --> 0:04:36.520 couple of years because their time horizon has shrunk. But 0:04:36.600 --> 0:04:38.520 on top of that, the pace of the economy as 0:04:38.560 --> 0:04:42.880 a whole is also accelerating, because if you fall asleep 0:04:42.920 --> 0:04:45.719 for one product cycle, you can really lose your business. 0:04:45.760 --> 0:04:48.160 And that was not true twenty or thirty years ago. 0:04:48.200 --> 0:04:50.440 So it's a much less forgiving environment for companies. You 0:04:50.600 --> 0:04:53.080 just can't make mistakes. How close are you watching what's 0:04:53.279 --> 0:04:55.880 what's unfolding? And watched in DC? The present making his 0:04:55.920 --> 0:04:58.839 way back from Asia over these next few hours, he'll 0:04:58.880 --> 0:05:01.880 be created by some political controversy on Capital Hill, of course, 0:05:01.880 --> 0:05:05.600 but also just the latest on this taxiform writing process. 0:05:05.640 --> 0:05:06.960 How much does that matter to you? How much does 0:05:06.960 --> 0:05:08.640 it matter the markets right now? How all of this 0:05:08.720 --> 0:05:12.039 is sorted out here over these next few weeks. Of course, 0:05:12.080 --> 0:05:14.400 it matters if there is a tax cut, and it's 0:05:14.440 --> 0:05:17.520 really about tax cuts that we're talking now. Um, then 0:05:17.720 --> 0:05:19.680 in the short run, people might think that that's good 0:05:19.680 --> 0:05:22.840 for corporations, but that's a one time benefit if it 0:05:22.960 --> 0:05:25.880 if it materializes. In the longer run, a big tax 0:05:25.920 --> 0:05:28.960 cut means much bigger deficits, and that will probably translate 0:05:29.000 --> 0:05:32.320 into not only more interest rate rises, but actually the 0:05:32.360 --> 0:05:34.320 need over the next few years to have a tax 0:05:34.400 --> 0:05:37.120 height to catch back up with those deficits. So I 0:05:37.160 --> 0:05:38.760 think that there's a lot of concern about that. The 0:05:38.960 --> 0:05:40.760 other thing I mentioned, and it's not on people's radar 0:05:40.800 --> 0:05:44.080 screens yet, but we're only about three weeks away from 0:05:44.120 --> 0:05:49.479 the whole that ceiling and and and and that that 0:05:49.600 --> 0:05:53.279 issue is going to be very gnarly, and given the timing, 0:05:53.320 --> 0:05:56.120 may very well interact with this whole tax cut discussion. 0:05:56.560 --> 0:05:57.960 I think that that is going to be a very 0:05:58.000 --> 0:06:00.560 messy process, different than it has been in the past. 0:06:00.560 --> 0:06:02.400 I mean, it becomes so inured to these short term 0:06:02.560 --> 0:06:05.520 spending bills and short term increases of the DEAT ceiling. 0:06:05.560 --> 0:06:07.320 What's going to make this one different? Do you think? Well? 0:06:07.360 --> 0:06:09.440 I think that some of the problems are really intractable 0:06:09.480 --> 0:06:12.240 because the Republicans at this point are really committed to 0:06:12.240 --> 0:06:15.719 a tax cut. They've made that their litmus test, but 0:06:15.839 --> 0:06:19.440 that actually interferes with a lot of their own program 0:06:19.560 --> 0:06:22.560 and exactly how they square the circle. I don't know 0:06:22.800 --> 0:06:26.440 scare the circle? Are you concerned, as a finance investment 0:06:26.520 --> 0:06:29.479 guy with the build out of our deficit in debt? 0:06:30.120 --> 0:06:31.960 I got all the econ guys saying no, it's no 0:06:32.040 --> 0:06:33.880 big deal. You know we're not there yet, but I 0:06:34.160 --> 0:06:37.520 just don't buy it. Well, it depends on exactly how 0:06:37.680 --> 0:06:39.800 you build the debt and what you do with it. 0:06:39.880 --> 0:06:42.839 So if you think about the tax cut that's currently 0:06:42.880 --> 0:06:45.560 on the table, it's fairly large, and the problem is 0:06:45.600 --> 0:06:48.359 it's unlikely to produce a lot of demand growth because 0:06:48.400 --> 0:06:52.320 the corporate tax cut isn't really focused on the kinds 0:06:52.320 --> 0:06:56.560 of investments spend that could actually perhaps create more growth, 0:06:56.600 --> 0:07:00.640 and the personal tax cut is focused mostly very wealthy 0:07:00.640 --> 0:07:04.320 people whose propensity to consume isn't going to change much 0:07:04.600 --> 0:07:06.520 as a result of the tax cuts. So in both 0:07:06.520 --> 0:07:08.320 cases you're not gonna get a lot of demand growth, 0:07:09.080 --> 0:07:12.640 and that isn't good. If you wanted to design a 0:07:12.720 --> 0:07:15.920 tax reform that was more likely to produce growth, you 0:07:16.040 --> 0:07:18.840 could have done it, but that's not on the table anymore, Seth. 0:07:18.880 --> 0:07:21.320 Thank you so much. Seth masters with us formerly will 0:07:21.360 --> 0:07:24.920 they be Bernstein wonderful perspective on growth and value on 0:07:25.560 --> 0:07:27.880 uh this bullmarkt David, did you did you go to 0:07:27.920 --> 0:07:32.480 cash this weekend? Did you? I'm in the triple leverage 0:07:32.520 --> 0:07:35.000 doll cash for so it's hard to get any more leveraged. 0:07:35.120 --> 0:07:38.160 You know, and do it, John Tucker, don't look at 0:07:38.160 --> 0:07:39.840 me like that. I'm making one and a half percent 0:07:40.200 --> 0:07:43.040 a year because I'm leveraged. I was doing the calculations 0:07:43.120 --> 0:07:45.560 for they do tre you. This is for another four 0:07:45.960 --> 0:07:50.680 acrears of New Jersey swamp. I'm moving into John McQuary's basement. 0:07:51.360 --> 0:07:53.720 Very good, very good, but yeah, I mean, I mean 0:07:53.760 --> 0:07:55.800 we make jokes about it. But you know, unlike the 0:07:55.840 --> 0:07:58.600 rest of us, Well, I can't afford to live local, 0:07:58.680 --> 0:08:03.240 John Tucker, You're live in Salt right, yeah. Um, And 0:08:03.320 --> 0:08:05.520 it's it's gonna be a big impact if they get 0:08:05.600 --> 0:08:10.160 rid of state local deductions. Just love mentioning Tucker by 0:08:10.200 --> 0:08:15.480 the fire doing his tax calculations. You and Biscuit, I mean, 0:08:15.960 --> 0:08:18.520 h and are blocked for you, right, it was not happy. 0:08:18.800 --> 0:08:21.680 Your texture turns like about four pages five pages the 0:08:21.680 --> 0:08:23.680 way you lie. And I told the kids, I'm gonna 0:08:23.680 --> 0:08:25.640 have to get I'm gonna have to let one of 0:08:25.640 --> 0:08:28.400 them go. Good. That's where I was this week, and 0:08:28.440 --> 0:08:31.600 all very good. Kevin's really will be with us through 0:08:31.640 --> 0:08:34.319 the week as we go, really an important week here, 0:08:35.040 --> 0:08:37.680 seth masters is going Jesus, maybe I should move to Jersey. 0:08:37.760 --> 0:08:42.720 That would be a good good, Oh it will be. 0:08:42.960 --> 0:08:44.840 We're laughing for those of you on the nation. We 0:08:44.920 --> 0:08:49.080 are laughing in New York and New Jersey and Connecticut, 0:08:49.160 --> 0:08:52.040 and we say good morning, Bluebird nine sixty the Bay 0:08:52.120 --> 0:08:56.199 Area in California, because our taxes are going down, John, 0:08:57.720 --> 0:09:18.480 some of us n Westinghouse disappeared. It was renamed the 0:09:18.559 --> 0:09:22.400 CBS Corporation, and of course there was Viacom in there 0:09:22.400 --> 0:09:26.720 in it was ancient history. How about this headline on 0:09:26.840 --> 0:09:32.640 General Electric bracing for Monday with the Westinghouse. Jeffrey Sprague 0:09:32.679 --> 0:09:37.000 is with Vertical Research Partners. Is Mr Flannery doing the 0:09:37.040 --> 0:09:40.840 ghost of Westinghouse? Mr Sprague, Well, I think he's going 0:09:40.880 --> 0:09:43.440 to try to avoid that ultimate fate and leave us 0:09:43.480 --> 0:09:46.640 with something that's left that's called General Electric. But the 0:09:46.640 --> 0:09:48.800 company is going to end up much smaller than it 0:09:48.880 --> 0:09:52.000 is today. And you know, obviously it's it's the less 0:09:52.240 --> 0:09:55.120 stock left in the original down Jones Industrial average, and 0:09:55.240 --> 0:09:57.280 it's not written anywhere on a stone that it has 0:09:57.320 --> 0:10:00.080 to be there forever. Um, what's the organic re a 0:10:00.080 --> 0:10:02.680 new growth that could be generated off the announcements that 0:10:02.720 --> 0:10:05.040 you see today. Can you get back to high single 0:10:05.080 --> 0:10:09.360 digit Can he actually do a double digit revenue growth? Uh? No, 0:10:09.480 --> 0:10:11.240 I think that's completely out of the question in the 0:10:11.280 --> 0:10:14.000 near term. I think, uh for the next two or three, 0:10:14.080 --> 0:10:16.120 maybe four years, there's gonna be a lot of pressure 0:10:16.160 --> 0:10:19.080 in this power business. And you know, it looks like 0:10:19.080 --> 0:10:21.120 the way they were shaping the portfolio, that would be 0:10:21.160 --> 0:10:23.360 a good third of the portfolio. So I think there's 0:10:23.400 --> 0:10:25.760 gonna be a you know, a fight here to generate 0:10:26.320 --> 0:10:29.040 you know, low single digit organic growth and ultimately maybe 0:10:29.040 --> 0:10:31.760 you can normalize it the mid singles looking at maybe 0:10:31.840 --> 0:10:34.560 three years or so. One of the great realizations Jeff 0:10:34.760 --> 0:10:38.160 is I use the c FA Institute curriculum three courses here, 0:10:38.200 --> 0:10:41.559 there's somewhere in the middle of the second level two 0:10:41.800 --> 0:10:44.960 where the clouds part, you realize the biggest mistake is 0:10:44.960 --> 0:10:48.280 what you thought were variable costs are fixed. Costs. Does 0:10:48.320 --> 0:10:51.400 he have the variable cost structure to play with to 0:10:51.600 --> 0:10:56.600 reduce costs this morning, He's got a lot of fixed 0:10:56.640 --> 0:10:58.760 costs to deal with. You. No, it's this is not 0:10:58.880 --> 0:11:03.480 an easy variable cost equation. And you know, we're looking 0:11:03.520 --> 0:11:06.680 at the company having spent upwards of twelve billion dollars 0:11:06.679 --> 0:11:10.560 on restructuring and other charges and actions here over the 0:11:10.600 --> 0:11:13.240 last three or four years, and we still have profits 0:11:13.280 --> 0:11:16.040 under pressure and cash under pressure. So there's I think 0:11:16.040 --> 0:11:17.920 they're behind the curve. And I think the other thing 0:11:18.559 --> 0:11:20.800 Tom that's that's relevant is a lot of this is 0:11:20.800 --> 0:11:23.679 a symptom of just deflationary pressures and some of their 0:11:23.720 --> 0:11:27.120 big markets like power, right, so when prices going down 0:11:27.160 --> 0:11:30.199 in a big multibillion dollar market, it's it's hard to 0:11:30.240 --> 0:11:32.280 get out of that. David, this is my theme for 0:11:32.320 --> 0:11:34.360 two thousand and eighteen. I haven't announced it yet, but 0:11:34.400 --> 0:11:36.000 let's sort of have to do it here with Mr 0:11:36.040 --> 0:11:39.560 Sprague pricing power. We're back to Jack Welch. We're pricing 0:11:39.600 --> 0:11:43.600 power and deflationary pressures are tangible. Jeff, what can we 0:11:43.679 --> 0:11:46.160 learn from what? What do The CEO of Siemens said 0:11:46.400 --> 0:11:50.200 last week about conglomerates, He declaring them them dead. Is 0:11:50.200 --> 0:11:53.920 this further confirmation of that as you see in Well, 0:11:53.960 --> 0:11:56.360 I think it is. It doesn't mean that we're gonna 0:11:56.800 --> 0:11:59.800 distill ourselves down to a bunch of mono line companies. 0:12:00.040 --> 0:12:03.600 I think it's very incumbent on these more diversified companies 0:12:04.000 --> 0:12:06.920 to have a focused diversity. If that's not an oxymoron, right, 0:12:06.960 --> 0:12:08.640 But you know, focus on the two or three or 0:12:08.679 --> 0:12:10.920 maybe four things that you can really do well and 0:12:10.960 --> 0:12:13.520 be on top of because there's just there's not room 0:12:13.559 --> 0:12:17.840 for mediocrity in this business world and any any business line. 0:12:18.000 --> 0:12:20.640 You know, things are moving so quickly, so you know 0:12:20.679 --> 0:12:22.360 you're if you're a conglomerate, you need to be lean 0:12:22.440 --> 0:12:24.200 and nimble and on top of the trends in these 0:12:24.240 --> 0:12:28.000 businesses or you get disrupted very very quickly. What's gonna 0:12:28.000 --> 0:12:30.040 happen to this, Baker Hughes Steak. I gather we're not 0:12:30.040 --> 0:12:31.600 going to hear much about that today, for at least 0:12:31.600 --> 0:12:34.240 from what I've seen that reported. But that's certainly something 0:12:34.280 --> 0:12:37.320 that John Flannery has got to be taken a look at. Yes, 0:12:37.400 --> 0:12:39.959 since it already trades. I think what we'll see is 0:12:40.000 --> 0:12:42.240 at some point there will be a split off of 0:12:42.280 --> 0:12:45.280 the asset as opposed to a spin. So in a split, 0:12:45.360 --> 0:12:49.400 GE shareholders canna leok to swap their GE shares for Baker. 0:12:49.840 --> 0:12:52.360 This is what they did with Synchrony, the consumer finance 0:12:52.400 --> 0:12:55.720 business when they separated that a few years ago. Um, 0:12:55.760 --> 0:12:58.320 you know, they also did pull some cash out of Baker, 0:12:58.640 --> 0:13:00.000 you know, a couple of weeks I guess about a 0:13:00.040 --> 0:13:02.480 week ago with the share of purchase announcement. So I 0:13:02.480 --> 0:13:04.120 think they'll try to pull a little bit of cash 0:13:04.160 --> 0:13:05.600 out of it here in the near term, but then 0:13:05.679 --> 0:13:09.280 ultimately the st will be separated, likely in a split off. 0:13:09.640 --> 0:13:12.400 What happens to research and design going forward? This is 0:13:12.400 --> 0:13:14.959 a company that has been for so many years so innovative, 0:13:15.000 --> 0:13:18.000 and if we see cost cuts to that, to research 0:13:18.040 --> 0:13:20.560 and development centeres around the world, what's that going to 0:13:20.640 --> 0:13:24.240 mean for gees future. Well, I think it's going to 0:13:24.320 --> 0:13:26.400 still be a very important part of what they do. 0:13:26.600 --> 0:13:28.960 And you know what I'm hearing sounds like it could 0:13:29.040 --> 0:13:32.640 make sense right to push that really more into the divisions, 0:13:32.720 --> 0:13:35.280 to make sure the company is investing on investing in 0:13:35.360 --> 0:13:40.120 things that really have you know, a commercial driver for them, right, 0:13:40.160 --> 0:13:42.640 and be careful with the blue sky stuff. The blue 0:13:42.640 --> 0:13:44.720 sky stuff. This is fine maybe around the edges, but 0:13:44.760 --> 0:13:47.679 you really want to be investing for the customers need 0:13:47.720 --> 0:13:50.600 and a clear vision of the future. What is your sign? Jeff? 0:13:50.640 --> 0:13:52.920 As we've said, you've been more than anyone I know, 0:13:53.080 --> 0:13:57.760 just dead on in your questioning of the income statement. 0:13:58.120 --> 0:14:00.480 What does it take for you to be by You've 0:14:00.480 --> 0:14:03.520 got a price target at twenty? What does he need 0:14:03.600 --> 0:14:06.240 to say? Where you go? WHOA, they've drunk in the 0:14:06.320 --> 0:14:10.360 kool aid. Let's go well, you know, I like part 0:14:10.360 --> 0:14:12.360 of what I'm hearing, just a simplification I think is 0:14:12.480 --> 0:14:14.880 very very important. Uh. The thing that weighs against that, 0:14:14.960 --> 0:14:16.959 in my mind, Tom, is where you started. One of 0:14:17.000 --> 0:14:19.440 your questions is just how do how and where do 0:14:19.520 --> 0:14:22.400 we grow from here? And that's really ultimately going to 0:14:22.480 --> 0:14:26.000 be what swings my opinion on the stock and whether 0:14:26.000 --> 0:14:28.920 it's today or six months from now when I you know, 0:14:28.920 --> 0:14:31.840 watch what they do and what they say. But really 0:14:32.560 --> 0:14:35.240 I think we have some kind of base being established 0:14:35.240 --> 0:14:38.760 here today and the question is can we grow off that? 0:14:38.960 --> 0:14:41.640 And how do we capitalize that growth? How? How did 0:14:41.720 --> 0:14:47.120 we get here? Was it accounting dreams and hopes? Do 0:14:47.200 --> 0:14:51.320 you blame quote unquote blame Mr Immel. Was it just 0:14:51.480 --> 0:14:56.480 the times? What's the negative look back that you have? 0:14:56.640 --> 0:15:02.040 Who do you? Who do you? I guess fault? Well, 0:15:02.080 --> 0:15:05.040 you know, ultimately you do have to fault Mr mL 0:15:05.120 --> 0:15:07.400 who was the chairman of the company and the board. 0:15:07.560 --> 0:15:12.000 I think the the ultimate uh, you know, the main 0:15:12.040 --> 0:15:13.680 reason we got here, if I just still it down 0:15:13.720 --> 0:15:17.080 into a single factor, it's just poor capital deployment, right, 0:15:17.120 --> 0:15:20.720 I mean they were just chasing too many things, buying 0:15:20.720 --> 0:15:25.120 businesses high, selling them low um and the cumultive effect 0:15:25.160 --> 0:15:29.680 of that mismanagement of capital just destroys value. And I 0:15:29.680 --> 0:15:31.560 can remember over the years, you know, they would do 0:15:31.600 --> 0:15:33.960 something that didn't look too great and people would defend 0:15:33.960 --> 0:15:36.240 it and say, oh, it's only a billion billion dollars. 0:15:36.320 --> 0:15:38.960 I mean, that's that's chump change for ge. Well, you 0:15:39.000 --> 0:15:41.200 know for anybody, you know, a billion here, a billionaire. 0:15:41.520 --> 0:15:44.119 It starts to add up, right, And the chumultive effective 0:15:44.720 --> 0:15:47.600 of poor investment decisions, particularly in M and A. I 0:15:47.640 --> 0:15:50.560 think really it brought us to this point. How much 0:15:50.560 --> 0:15:52.920 time are you giving this new CEO to to implement 0:15:52.920 --> 0:15:54.240 all of this? In other words, we're gonna get the 0:15:54.240 --> 0:15:57.360 outline today. It sounds like there'll be some intricacy to it. 0:15:57.880 --> 0:15:59.480 How much time are you and others prepared to give 0:15:59.520 --> 0:16:04.600 this company turn things around? Well, you know, I don't. 0:16:04.720 --> 0:16:07.080 I don't determine, you know, how long he stays on 0:16:07.120 --> 0:16:08.840 the pay roll or anything like that, Right, I mean, 0:16:09.080 --> 0:16:11.880 it's it's gonna be my role to you know, try 0:16:11.920 --> 0:16:15.680 to be a fair judge of what he's doing and 0:16:15.680 --> 0:16:18.360 and determine if if there's an investment case here for 0:16:18.480 --> 0:16:21.000 my clients. Uh, I want to give him the benefit 0:16:21.080 --> 0:16:23.320 of the doubt. I mean, actually have not had a 0:16:23.360 --> 0:16:26.840 positive rating on GE since early oh eight. I downgraded it, 0:16:27.040 --> 0:16:30.240 uh in that Bear Stearns quarter if you recall Q 0:16:30.400 --> 0:16:33.920 one of oh eight and have never come back. So uh, 0:16:34.680 --> 0:16:36.880 you know it's uh, you know, it's we'll see, We'll 0:16:36.880 --> 0:16:39.040 see what he does. Okay. I'm looking at the financial 0:16:39.080 --> 0:16:41.200 analyst screen in the Bloomberg, the f A screen. This 0:16:41.280 --> 0:16:43.560 is GE Equity f A. For those of the terminal 0:16:43.840 --> 0:16:46.320 in John and the Hummer. Do you have the terminal 0:16:46.360 --> 0:16:48.600 with two or four screens in the front seat. Oh, 0:16:48.680 --> 0:16:51.680 I've got the four screens. I wanted to be sure 0:16:52.680 --> 0:16:56.840 you've got that, Jeff, I got but at which is 0:16:56.960 --> 0:17:00.800 very industrial even if they downsize a coup Beny, can 0:17:00.800 --> 0:17:03.360 he stun people to come out with a boosted ibadal 0:17:03.440 --> 0:17:06.280 margin today? Or is the is the pricing up tops 0:17:06.280 --> 0:17:08.960 a week? He can't pull that rabbit out of the head. 0:17:10.680 --> 0:17:13.760 I think, I don't. I'm not expecting an explicit EVA 0:17:13.800 --> 0:17:16.439 don margin forecast today, but that's going to be the 0:17:16.520 --> 0:17:20.040 premise of where they're going to head with this today. 0:17:20.080 --> 0:17:25.119 Is this cost cuts and improve profitable profitability? Right and 0:17:24.359 --> 0:17:26.919 uh And that's really where the decision point is going 0:17:26.960 --> 0:17:30.159 to be. I mean, you know, as analysts, we have 0:17:30.280 --> 0:17:35.320 to be very careful about you know, gross actions versus 0:17:35.359 --> 0:17:38.000 you know, the next bottom line and the net to 0:17:38.040 --> 0:17:41.120 the bottom line. Has been very challenging with what's going 0:17:41.119 --> 0:17:43.440 on in these markets. Well, very quickly here Karen l. 0:17:43.520 --> 0:17:45.880 Lark didn't help me here. She said it was too squishy. 0:17:45.920 --> 0:17:48.640 Maybe you can be more exact. Two Hildren twenty nine 0:17:48.640 --> 0:17:51.080 thousand bodies. How many go out the door in the 0:17:51.119 --> 0:17:55.600 next thirty six months? Boy, I don't know. I would 0:17:55.600 --> 0:18:02.920 say probably upwards the ten percent of that count. Yeah, okay, well, yeah, 0:18:02.920 --> 0:18:04.720 it doesn't do it. We have to quote you worldwide 0:18:05.200 --> 0:18:08.679 Blue John Tucker help me here, Jeff Sprague twenty or 0:18:08.720 --> 0:18:13.040 thirty thousand, you can be in that vicinity next thirty 0:18:13.119 --> 0:18:17.560 six months. You see the silence that we got him. Okay, 0:18:17.600 --> 0:18:19.600 we'll take the silence is at Jeff Sprigg, thank you 0:18:19.720 --> 0:18:22.960 so much for the vertical research. I'm kidding, of course, Vicinity, 0:18:23.080 --> 0:18:27.800 John V, I, C I, Jeff Sbrigg, He's been wonderful 0:18:27.920 --> 0:18:31.080 on General Electric. We really enjoy having Jeff Spregg come 0:18:31.119 --> 0:18:46.720 on with us on General Electric. There is a firestorm 0:18:46.880 --> 0:18:51.800 of analysis. Tax Policy Center, Urban Institute of Brookings Institution, 0:18:52.480 --> 0:18:56.800 preliminary distributional analysis of the tax cuts and job back 0:18:57.720 --> 0:19:01.879 over the center and budget and policy priorities. Sharon Parent 0:19:02.760 --> 0:19:06.040 writing up Senate tax bill his same basic flaw as 0:19:06.040 --> 0:19:09.560 his house built. Jared bernstein enjoins us. He's the only 0:19:09.600 --> 0:19:13.800 one that's read five reports, six reports on all this. 0:19:13.960 --> 0:19:17.480 Of course, he is acclaimed in economics and I would 0:19:17.480 --> 0:19:20.880 suggest has a liberal bent. He studied under Vice President 0:19:20.920 --> 0:19:23.800 Biden over the last eight years. Jared, what do you 0:19:24.040 --> 0:19:27.840 make of this? And I think over the weekend. To me, 0:19:27.920 --> 0:19:32.399 the critical issue is is the comparing contrast with six 0:19:33.320 --> 0:19:37.320 or is it with early Bush? The younger tax reform? 0:19:37.560 --> 0:19:40.520 What what kind of tax bill do we have. That's 0:19:40.560 --> 0:19:43.240 a great way to tee up the analysis. It's very 0:19:43.320 --> 0:19:45.520 much the latter, very much in the spirit of the 0:19:46.440 --> 0:19:52.119 Bush too. And the key factor that informs that judgment 0:19:52.920 --> 0:19:58.760 is the fact that tax reform was revenue neutral. Uh, 0:19:58.920 --> 0:20:02.560 this reform loses at least one and a half trillion. 0:20:03.240 --> 0:20:07.159 That's not me talking, that's the Republicans themselves. They wrote 0:20:07.200 --> 0:20:09.960 one and a half trillion increase in the in the 0:20:10.560 --> 0:20:14.120 in the ten year deficit numbers into their bill. That's 0:20:14.160 --> 0:20:17.199 the leeway they've given themselves. And I think one of 0:20:17.200 --> 0:20:19.359 the frustrating things for many people who are following the 0:20:19.400 --> 0:20:23.600 debate is they sometimes these folks pose as uistical hawks, 0:20:23.600 --> 0:20:26.520 but they're looking more like cistical chicken hawks. And that's 0:20:26.520 --> 0:20:28.600 a problem. Jared, let me ask you how much we 0:20:28.680 --> 0:20:31.159 know about these two pieces of legislation. One is in 0:20:31.240 --> 0:20:33.240 co with the one before the Senate Finance Committee, is 0:20:33.280 --> 0:20:35.000 not a fully fleshed out draft. We do have a 0:20:35.040 --> 0:20:37.760 draft from the House Ways and Means Committee with some 0:20:38.000 --> 0:20:40.719 amendments attached to it. I look at what's happened here 0:20:40.720 --> 0:20:42.960 over these last few weeks. The Tax Policy Center having 0:20:43.000 --> 0:20:45.040 to issue mea culpa is it does some analysis of 0:20:45.520 --> 0:20:47.720 that legislation. Then we see the Tax Foundation doing the 0:20:47.760 --> 0:20:50.000 same thing. So both of these institutions trying to get 0:20:50.040 --> 0:20:52.960 a read on what's in this legislation and what it means. 0:20:53.119 --> 0:20:54.960 How much do we know? And how difficult is it 0:20:55.000 --> 0:20:57.720 to feel all knowing? Here as we move at such 0:20:57.720 --> 0:21:00.880 a break Nick nick neckclip here to thanks living into Christmas. 0:21:02.480 --> 0:21:07.520 Another important and piercing question. Um, we actually know quite 0:21:07.560 --> 0:21:10.120 a bit about the legislation, about the proposal it self, 0:21:10.200 --> 0:21:12.240 especially in the House where we've got four hundred pages 0:21:12.280 --> 0:21:16.199 of tax changes largely cut. I think the thing that 0:21:16.240 --> 0:21:18.640 we don't know, and where you see the dueling models 0:21:18.720 --> 0:21:21.879 causing some trouble in my view, is that people have 0:21:22.080 --> 0:21:26.200