Don't Believe Everything You See On Cable Business Channels

Neil Cavuto hosts a 4PM weekday program on Fox News which he tries to make into a blend of political and business news, typically beginning the hour by discussing the US equity market performance of the day.

Last week, I caught a few minutes of a misleading and, frankly, just wrong-headed segment in which a guest contended that Costco will be losing business by raising its membership fee.

I forget the woman's name, but she had an axe to grind against the warehouse discount store chain. All the woman could talk about was that Costco was raising its annual membership fee by about 10%, so she alleged, to around or just below $55. For the record, I know Costco has raised my annual fee once since I joined over four years ago. It was $50 when I joined, and I just wrote them a check for $53.50 last month.

In the past year, I realized that there is almost nothing which I used to buy at my former usual grocers, Kings and Stop 'n Shop, that I cannot also buy at Costco for roughly half the price. The biggest surprise was how much I save on staples- milk, juice, lettuce, chicken breasts, cereal, salad dressings and fruit. I now buy a package of six romaine lettuce heads for about $5, or what two heads cost at Kings.

I probably visit Costco once per week, since it's located within a couple of miles from my fitness club. My actual visits per week probably average 1.3.

While there, usually after playing squash and working out, I usually eat a light dinner for a laughably small sum. It's hard to spend more than $3.50 to eat dinner there, and the choices include a surprisingly healthy array of choices.

While having dinner and reading the editorials in the Wall Street Journal, I also watch the parade of shoppers checking out and leaving the store. I'd say roughly half are families or a couple with a very full shopping cart. Just from my experience behind people buying large amounts of food, and my own bills, I'd estimate that a full cart can easily represent $200-300 worth of groceries. Multiply that by 50 weeks, and you have at least $12,500 annual sales for a family that shops at Costco. I'm reasonably sure that's a low estimate.

On that base, a $5 annual fee increase is 4 hundredths of a percent! Even for me, it would be only about a tenth of a percentage point.

Yet the woman whom Cavuto had as a guest railed against Costco needlessly increasing its fee, insisting that many families would bolt the warehouse chain to return to their local grocery stores.

To use a phrase, 'in a pig's eye!'

Has this woman ever seen families carting out a 40" flat panel plasma TV? A workbench, chair or bicycle? You can't believe the bargains to be had on high-end electronics- camera, TVs, gaming accessories, laptops and tablets. Microwave ovens, office furniture, and medium-sized appliances. All half-price.

You can't seriously believe anyone who uses Costco frequently would change stores over much less than a doubling of the membership fee. The economics are simply too compelling.

Yet Cavuto himself was unable to do this math on air and challenge the woman's assertions. It was really pathetic. She was a moron clinging to a totally indefensible viewpoint, while Cavuto just sat there and expressed dumbfounded surprise, without asking the woman why such a small fee increase would matter to people spending thousands of dollars per year at Costco.

Comings, Goings & Returns On Business Television

I get a lot of visits to this blog from people searching for Charlie Gasparino or news of his latest row with Dennis Kneale on CNBC.

After seeing several of those searches in the past week, I began to wonder where Gasparino had gone, since I literally cannot recall when he was last on CNBC.

Now, I know why. He popped up on Neil Cavuto's Fox News program last night in the 4-5PM hour.

As of mid-February, Gasparino joined the Fox News channels of Rupert Murdoch's NewsCorp.

I still can't get Fox Business News on ComCast, but I am sure that is where Gasparino is spending his daytimes. At this rate, perhaps the fledgling channel will eventually assemble a sufficient number of interesting on-air people to challenge CNBC.

So it's goodbye to the days of verbal fist-a-cuffs between Alan Murray and Charlie Gasparino on CNBC. Both are now at NewsCorp, and couldn't see them if they do spar during market hours.

Which brings to mind the also-absent Herb Greenberg. I vaguely recall him announcing some changes in his status a few years ago, having found this missive about him. He's a guy I truly do miss on CNBC, or anywhere during business days.

Meanwhile, this morning, on CNBC, I saw a very old face who I haven't seen for over a decade.

Long-time auto sector analyst Mary Ann Keller appeared this morning to discuss the latest Toyota problems, i.e., yesterday's runaway Prius in California.

I recall Keller as a frequent guest on Lou Rukeyser's old PBS program. Back in the day, she was the go-to auto sector analyst. Then, at least to me, it seemed that she disappeared. A Forbes bio of her career reveals that she moved from, I believe, PaineWebber to Furman Selz, which was bought by ING. Then she worked in a senior position at Priceline.

In any case, it was good to see her on air again dispensing sensible insights about her sector.

GE's Continuing Woes

Judging by this morning's Wall Street Journal article, Jeff Immelt and GE just can't catch a break these days.

It's not enough that Bill O'Reilly's Fox News Factor program bashed Immelt and GE yet again last night. It's become an almost twice-monthly event now, since he first did it in April, when I appeared as O'Reilly's guest to discuss Immelt's awful performance leading GE since late 2001.

The nearby Yahoo-sourced five year performance chart of GE and the S&P500 Index continues to show the diversified industrial giant struggling to even match the market index. And it's only gotten worse in the past two months.

Now it appears that Immelt can't even sell GE's private label credit card business.

It seems, believe it or not, that when you want to unload a turkey, other people actually notice and shy away.

Imagine that! Didn't Immelt and his minions figure other business people can do the math, too, on GE's card portfolio's weak returns?

According to the Journal article, GE, which does a lot of card issuance and processing for so-called private label accounts, runs a card business which is riskier and less profitable than the average major bankcard- Visa and Mastercard- business at a large commercial bank.

These days, your local department store or big box chain's credit card is, in all probability, actually outsourced to GE for the operation of the program.

What I find, well, arrogant, is that the senior guys at GE, including Immelt, think that they can just nonchalantly dump their mediocre card business onto some other company- preferably a bank- and the buyer won't notice the portfolio's problems.

The Journal article notes that Chase and other commercial banks have now retreated from considering the purchase of GE's business.

It's one thing when you have a rare crown jewel in your company, or a well-performing misfit with the rest of your business portfolio, and you expect to get some interest from prospective buyers when you want to sell the business.

In this case, however, GE is trying to peddle an also-ran credit card business as the whole sector is experiencing rising chargeoffs.

These guys at GE just don't get it, do they? Not only are they not the smartest guys in the room. Everyone else is not just stupid, either.

How much longer will GE's board put up with Immelt's follies? Probably a long time. But shareholders can sell now, and contribute to a further slide in the company's stock price and total returns.

YouTube Video Clip of My Appearance on The O'Reilly Factor RE: GE, Iran & Immelt

In this recent post, I referred to my appearance on last Monday's Fox News program, The O'Reilly Factor.

After a week, someone has finally put the video of the O'Reilly segment in which I appear on YouTube.

For those readers who did not see it, but wish to, here it is.

GE, Immelt, Iran, Bill O'Reilly's Fox News Story- and Me!

I had an interesting evening yesterday. Thanks to this blog, and my dozen or so posts on the mediocrity of GE's total return performance under its overcompensated CEO Jeff Immelt's 'leadership,' Fox News' program The O'Reilly Factor invited me to be a guest/analyst on this topic on last night's episode of the show.

O'Reilly led with allegations of GE's continuing fulfillment of contracts to do work with various entities in Iran, at a time when the US military has identified IEDs and other support for Iraqi terrorists who are causing US casualties as coming from Iran.

If this were all O'Reilly could say, it would be newsworthy, but perhaps not compelling on its own.

However, from reading my blog, one of the program's producers, and O'Reilly, further realized that Immelt has continued GE's involvement in Iranian projects while shareholders have lost money, due to GE's dismal total return performance. Meanwhile, as I noted in yesterday's post, and prior, linked posts, Immelt has been wildly overpaid for destroying so many hundreds of millions of dollars of GE shareholder value since he took over the CEO spot from Jack Welch in September, 2001.

O'Reilly ended his prepared comments on the 'Talking Points' segment about GE with rather strident language, saying,

"There are more than a few villain CEO's in this country, but Jeffrey Immelt could be the worst."

Given the available time and context of a news show like Bill O'Reilly's, one cannot always make all the points one would like to have expressed.

For example, in answer to O'Reilly's questions concerning why Immelt is able to remain as CEO of GE, despite poor total return performance and the alleged Iranian business dealings, I posited that it is, in part, due to GE's brand's homey, wholesome image for most American consumers, as well as the fear that many media and financial institutions have of GE's enormous spending power for corporate services such as: advertising, investment banking, stock trading, pension fund management, to name a few.

What I didn't have the time, or context, to add, were these points.

-GE, as a diversified conglomerate, is an anachronism. In today's equity markets, positions can be bought and sold for negligible transactions costs, making corporate diversification irrelevant and unnecessary. Gone are the days of LTV, Litton, Textron and Gulf & Western, whose diversification obviated retail investors to pay a 14% round trip brokerage commission to trade equities.

-It's very hard, in America, for companies to die or be killed off. CEO's don't typically fire themselves, and boards are reluctant to terminate the life of the company on the board of which they serve. There are millions of shareholders, but only a few board members, and one CEO, so there is little in the way of countervailing shareholder power to that wielded by the board and CEO of GE.

-GE, if split up, would no longer taint all of its business units with the performance and possible terrorists-related business practices of just a few of its units.

In any case, with a segment like last night's on The O'Reilly Factor, I was certain that someone from GE would begin to investigate who I am and what is on my blog.

I didn't have long to wait.

Thanks to my sitemeter javascript, this visit was logged at around 9:30AM this morning:

Domain Name (Unknown)
IP Address (omitted to protect privacy).# (GENERAL ELECTRIC COMPANY)
ISP AT&T WorldNet Services
Location Continent : North America
Country : United States (Facts)
State : Connecticut
City : Fairfield
Time of Visit Apr 15 2008 9:29:29 am
Last Page View Apr 15 2008 9:50:11 am
Visit Length 20 minutes 42 seconds
Page Views 8
Referring URL http://www.google.co...search associates%22
Search Engine google.com
Search Words "performance research associates"
Visit Entry Page http://pra-blog.blogspot.com/

Yes, someone from GE's corporate headquarters, located in Fairfield, Connecticut, spent about twenty minutes reading my blog. Probably beginning with yesterday's second post, and continuing back through several of my GE-related posts.

I know they were motivated by viewing the O'Reilly program, because the Google search term, 'performance research associates,' is the name of my LLC, as provided onscreen during my appearance on last night's Fox program.

What's next? I don't know. But I discussed with various friends and family members last night if, and how, GE might respond.

Since nothing presented on O'Reilly's program was false, there is no basis for defamation, slander or libel charges by GE or Immelt against anyone. The question becomes one of what, if anything, Immelt can reasonably do to respond to a set of highly embarrassing facts about him and the company he heads, GE, which aired on the most-viewed cable news show in America.

My business partner, one of whose other businesses involved distribution of information to media companies, marveled at how the conventional, old world of journalism has been turned upside down.

By writing frequently and factually about business topics on this blog, I was discovered by Fox News personnel and invited to provide analytic commentary about a major US corporation's faltering performance and overcompensated CEO. In today's online world, my blog, devoid of a dependency on advertising, owing no large company anything, is free to be objective and candid in my characterization of the performance of various corporations and CEOs.

No simple phone call to the head of Disney, CBS, or even Rupert Murdoch would affect this, or any other blog reporting on GE's dismal performance under Immelt.

But, back to the question, what will GE, and Jeff Immelt, do about last night's O'Reilly program?

Well, I doubt Immelt will resign or give back any of his past compensation. I don't think the board will announce that it is splitting up GE by week's end. And Immelt can't change history and make the total return for GE shareholders magically become better ex poste.

But what Immelt can do, and, I think, his predecessor, Jack Welch, would have done immediately upon being made aware of the Iranian contracts, is to summarily and instantly have all Iranian-related GE commerce halted. Period. Pay whatever contract penalties are required, and sustain whatever lawsuits may come, but shed the ongoing perception and liability of having to admit that GE is doing anything in Iran.

GE would still be left with its performance and structural mess, and Immelt's inept management thereof. But at least they'd be out of the crossfire over a sensitive issue like selling products to Iran in a Presidential election year during which American troops are deployed in Iraq and taking casualties from Iranian-supported efforts.