Thoughts on GE

8am Anyone who follows the market has seen the stone-like drop in General Electric (GE) shares recently. The CFO came on Squawk Box this morning trying to talk the company up. He made a good case for why you should be buying GE hand over fist. He tried to ease fears about GE Capital and credit downgrades. And while the argument was compelling, I'm not buying shares.

The reason is we have seen this story before. Remember the CEO of Bear Stearns issuing a press release saying their capital position is fine? Remember AIG trying to calm fears in the market by going on the record with a statement? My point is when things got really bad for a company, the stock reflected it long before executives had the chance to lie to the public.

I am inclined to think there HAS TO be some serious mispricing going on with this company. They are not like the criminally mismanaged financials like AIG and Bear. They have a huge industrial business. They have the whole Universal franchise. They touch so many parts of the business world that they have to be sufficiently diversified. It seems like they should have the cash flows from the other businesses to support any problems with the GE Capital business.

The reason I am not buying is that the market tends to tell the truth and executives tend to lie. While common sense compels me to believe the company vs. the market, at the end of the day the market is all that matters. The market values your stocks. No one else does. It is very easy for an executive to say something to try and prop up their stock. Then later, when the excrement hits the fanblades, they can say, "I had no idea." And guess who is left holding the bag?

You'll get an update on the URBN trade after the market closes. Until next time, stay low risk..