« Alex Acosta let the cat out of the bag: the Justice Department knew all about the Jeffrey Epstein Florida plea deal | Main | Open Thread 19 July 2019 »

17 July 2019


Feed You can follow this conversation by subscribing to the comment feed for this post.

John Minehan

Welch is an interesting case.

Peter Drucker, the management gaon, used to say that Reg Jones was the greatest CEO he worked with in his long career because Jones could pick someone very different from himself as CEO who better fit the times.

However, those traits were apparently conspicuously absent in Welch, who picked a successor not obviously suited to the times while Welch himself hung on too long even as the world changed around him (he didn't notice, for example, that GE Capital, a major source of GE's profits in the 1980s and 1990s, became a potential liability by the early 2000s).

Not everyone has the self-awareness that Jones had. Not everyone can read the tea leaves well enough to know, " now it's time for something completely different."

Welch was tough, unsentimental and perfectly suited to the demanding business environment of the 1980s and 1990s. He made the changes that had to be made early and voluntarily and GE did far better than other companies like IBM and GM that didn't.

But it seems that Welch didn't realize that being right for one period isn't enough.

John Minehan

Which is Friedman's point.

If executives can spend shareholder's money of furnishings and charitable contributions, rather than maximizing shareholder's returns, they will. Keep them from doing so.

The big question is: "How?"

As lord Keynes said, "In the long term, we are all dead." The US, with its short term orientation has generally out performed Japan with its long term orientation. It is possible, but not yet determined, that the same is true of the PRC.

John Minehan

"periodic debt relief programs"

"Comes the Jubilee?"

Well, given its Halachic roots hardly a radical or socialist solution, but does it undermine people's willingness to loan money to strangers (which was not the case in Ancient Israel, Ancient Mesopotamia or modern Islamic nations with a Hawiya/Islamic lending system)?

John Minehan

COL (R) Lang, well said. As my Corporate Finance Prof put it: "(1) Cash is good; (2) the balance sheet is crap: and (3) their ain't no such thing as a free lunch."

As for your item (4), never forget you can always sell the PPE and mitigate losses to meet new (and, often, reduced) needs, Mitt Romney mastered this in East Coast M&A.

John Minehan

Your 4 points are true and concise enough, I'd like to share them with some people, with or without attribution, as you prefer.

The Twisted Genius

For over six years I felt I had a calling to become a Maryknoll missionary priest. I even went to a future priest summer camp at Stockbridge, MA run by the Marionists. Then the hormones kicked in. I became a Special Forces officer instead.

LA Sox Fan

Actually, under Delaware corporate law, directors are required to “maximize shareholder value.” That doesn’t mean increase profits. It gives directors a lot of discretion under the business judgment rule.

That being said, directors are elected by the shareholders. Shareholders will vote for the directors who will raise the stock price so that those who already own stock will profit. Thus, we have corporations taking out billion dollar loans to purchase stock, which increases the current stock price for current shareholders, but puts future shareholders in debt. In sum, the drive to increase shareholder value leads to the cannibalization of the corporation.


Ray Dalio is also looking at some aspects of MMT and if it works, that is wonderful. If it does not, it can make things even worse. Where many agree with Mr. Dalio, is that the current financial system is working less and less. Boeing and others are a symptom of that.

My wife was not sure why I insisted over the last decade that we use paper profits from Wall Street to buy diamonds, gold, silver and such. She does like wearing it now and then.


Talking of warrior priests, here is a story of unofficial action taken by priests and Catholics in The Philippines to stop the ruinous drug wars between Dutarte and the drug barons:


ex-PFC Chuck

I neglected to mention that the full text of the 2003 edition of Super Imperialism is available as a PDF download from Hudson's personal website. Here's the link:




I considered being a priest for a about a week when I was ten. Sadly, my long search for universal meaning in the Church came to the end when I realized that the senior clergy that I had long dealt with as an invested member of a papal order of chivalry had always been lying to me about their state of grace with regard to sex.

ex-PFC Chuck

Most of what Hudson writes about in and forgive them their debts - the late 4th through the mid 2nd millennia - predates the coalescence of the Jewish identity and religion. He is said to be working on a sequel to that book that will address attitudes toward periodic debt relief from the late 2nd millennium up through Greek, Roman & early Christian times.

Not all types of debt were relieved in ancient Mesopotamia, only those which if unforgiven posed a threat to the establishment, which in that era was usually the political and religious authority combined in the person of the monarch/high priest. These were typically debts owed by free holders who were available to be called upon to put aside their plows when necessary to defend the city or state. Often the debts were owed directly to the temple/government and were forgiven every 25 or 50 years, or upon the ascent of a new occupant of the throne.

The Twisted Genius

I was lucky to Father James F. O'Dea as the pastor of our Church for as long as I lived there. He grew up in nearby Waterbury and was a Navy chaplain in the Pacific during the war. He was of that rare breed of men of high honor, morals, courage and compassion. We had an abnormally high concentration of that breed in my hometown. Father O'Dea told us the story of how some young seminarians asked him how they could stifle normal sexual urges. Father O'Dea told them he had no idea and that he would love to know if they ever found out how to do so. I didn't become jaded until I saw what caliber of men infest most of the world. Oh well. FIDO.

LA Sox Fan

GE became a finance company that had a manufacturing side business under Welsh. He also moved that manufacturing to China and forced GE’s subcontractors to move manufacturing there too. That financial business that Welsh created has ruined GE and it currently is close to bankruptcy.



We've been living MMT for the past decade. Just look at the scale of monetization in Europe, Japan, Switzerland and the US in that period. Now in the "greatest economy in history" with the stock market at all time highs, see how the yield curve looks with the Fed readying rate cuts and $13 trillion of sovereign debt with negative yields and swap spreads negative. Isn't it incredulous that Italian 10yrs yield less than 10yr Treasuries and Argentina can issue 100yr bonds?

If MMT works, why after trillions in monetization does semiconductor and auto sales on a YoY basis decline and why does Singapore print negative economy and German industrial production decline?


We own Boeing stock. Even though the price hasn't dipped as much as I expected in the wake of the 2 crashes, I've soured on the company and have wanted to sell to cut our losses. But while I'm a worrier, my eternally-optimistic husband wants to hold on especially now that Boeing has announced a $5 billion earnings hit, thereby finally putting a number to its [presumed] liability and thus ending some degree of fear and speculation. He may be right. We shall see.

Besides this, one of his brothers was a Navy pilot and blames poor training for the crashes. He thinks African and Asian pilots (except for Singapore) generally aren't as well trained as American pilots.

The Twisted Genius

Eric, government safety and fuel efficiency regulations have something to do with that but that's clearly not the only reason. These companies are improving engineering, designing and manufacturing all the time. Getting the reputation of producing nothing but cheap crap is not good for the bottom line. However, this isn't always for the best. VW made a decision about a decade ago to "cheap out" on its cars in the US market. The difference was noticeable, but it was a marketing success. Most US buyers preferred the cheaper price over better features and materials.


Labour might fill its role better if it wasn't hemmed in by pesky regulations that hinder its right of association.



You are making excuses for men who have broken their vow of chastity.



Feel free to do so.



That is true of you want to sell or liquidate the business. I suppose you know that you can sell the business entity with its book, etc. Or, you can sell the assets.

The Twisted Genius

Colonel Lang, to the absolute best of my knowledge, Father O'Dea never broke his vow of chastity. He acknowledged he had normal male desires which he kept fully controlled through his faith and self-discipline. Without those desires, a vow of chastity has no real meaning. I make no excuses for those who lack that faith and self-discipline.


Trained? One word Colgan. Read the pilots voice recording transcript. The FAA raised required experience levels as a result without even a murmur from the industry.

As for these accidents being due to poor training, I think that is wishful thinking. I’ve read the reports so far, and even if they diagnosed the problem correctly, there was no time to perform the “roller coaster “ method of getting the aircraft back into trim.


Yup. Welch destroyed the company through financial engineering. Making sure that during his tenure he beat eps expectation by a penny every quarter for years. No one questioned in the financial media how an industrial company could achieve such precision and consistency in its earnings. Now GE is liquidating as it tries to pare down its massive debt load which trades a couple notches above junk.

Another great American icon IBM who used to have a pristine balance sheet is now all levered up buying back stock and buying and selling assets to engineer it's financial statements each quarter while it's top line declines.

Sad how we have destroyed our industrial base and our ability to engineer and manufacture great products all in my lifetime. Blue Peacock in an earlier thread linked to an article that showed how vulnerable our military has become to the same financial engineering as the defense industrial space has also consolidated into a few behemoths.



"taking out billion dollar loans to purchase stock, which increases the current stock price for current shareholders, but puts future shareholders in debt. "

Please name a couple that took loans for the purpose of buying back stock rather than using cash from business operations to do that. Which brokerage firms had analysts covering those transactions and what did the SEC do in that regards over the past few years?

The comments to this entry are closed.

My Photo

February 2021

Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
Blog powered by Typepad