A tale of two companies: Bear Stearns and General Electric

The stock markets around the world found comforts after the Fed rescued Bear Stearns in mid of March. Many thought worst days of financial troubles were over. Worldwide equities market rallied but Soros warned the rally will be a short-lived rally. True enough, the rally leg got snapped but not because of "financial sector". Many people were shocked when GE posted 12% earnings declined, year-on-year. GE was the gold standard in the Wall Street when comes to earnings guidance, right on the dot all the times. It is a barometer of the US and global economy health with its size. Interestingly, looking at the ETF losers, "financial sector" index did not show up but industrials and semiconductors took a beating. Did you get the picture?

When I first heard the news,GE dragged down DJIA 250 points plus,it must be serious. The first question came to my mind: is decoupling story dead? I was relieved when I gone through their analysts call presentation material. This confirmed my suspicion, this is a Wall Street problem affecting real estate, consumer and business spending. The sub-prime problem is "the US problem" and not a global problem. See some of the selected charts.


Strong infrastructure was not strong enough to offset the US weakness. Energy, oil and gas, aviations and etc were solid. Global business was still Okay.

Industrial segment: Asia you rock man! Up 57%


5% full year 2008 earnings cut is nothing, just a small hair cut.


The implication? Right here waiting to strike.