« ‘Spaghetti Westerns’ Posters of the Star Wars Trilogy
Jack Welch Rejects His Existence »

GE’s Jack Welch Knows About Cooking the Books

spacer spacer
By Barry Ritholtz - October 5th, 2012, 12:15PM

spacer

 

Of all the people who have something to say about the BLS, none is more unintentionally ironic than former GE CEO Jack Welch.

I have long stated that Jack welch was one of the luckier, more wildly over-compensated CEOs around. He became CEO of General Electric in 1981, just before an 18 year bull market in big cap stocks began. he left in 2001, just as the market implosion was getting rolling.

GE’s revenues grew 385% under his watch, but the company’s market cap grew 4000%. How did that happen? GE increased earnings over the years, and with stunning regularity, managed a quarterly profit beat.

Indeed, it was too regular: After the 2000 crash, we learned of earnings manipulation and accounting shenanigans. The criticism was GE Capital acted as an opaque leveraged hedge fund that always be counted on to help GE beat by a penny. (GE eventually had to settle accounting fraud charges with the SEC).

So if anyone knows a thing or two about cooking the books, its GE’s Jack Welch. Want even more proof? Have a look at this chart of Welch’s earnings versus his successor, Jeff Immelt:

 

spacer

Hat tip Tom Brakke

 

 

That was a nice smooth line under Jack — the sort of line the folks who prepare China’s GDP data aspire to.

 

PERMALINK
Category: Corporate Management, Data Analysis, Earnings, Really, really bad calls.
  • spacer
  • spacer Tweet
  • spacer Facebook
  • spacer Reddit
  • spacer Digg this!

Comments

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

58 Responses to “GE’s Jack Welch Knows About Cooking the Books”

  1. spacer Barry Ritholtz Says:
    October 5th, 2012 at 12:10 pm

    Looks like a heart attack !

  2. spacer Molesworth Says:
    October 5th, 2012 at 12:23 pm

    Another instance of once revered individual descending into a dottering angry old man. Tweeting is dangerous. Welch–known for firing people–and if above example is correct, good at cooking books. He could by happy if he would rest on his laurels and STFU.

  3. spacer VennData Says:
    October 5th, 2012 at 12:27 pm

    What’s more likely, one slick guy who – desperately wants to be President? Or the entire cast of thousands of PhDs at the Bureau of Labor Statistics?

    Prove what you say Welch. And the next time you dump your wife, give us a lecture on how other rich guys are dumping their wives.

  4. spacer JerryC Says:
    October 5th, 2012 at 12:31 pm

    “If anyone knows a thing or two about cooking the books, its Jack Welch.”

    If it takes one to know one, then maybe the books were ‘cooked’. There was an adjustment to the household survey which accounted for a large part of the drop below 8%. With the participation rate increase and the upward revisions, this was a pretty good report. Mostly for headlines, though. When is see 200K or better, I’ll more positive.

  5. spacer techy Says:
    October 5th, 2012 at 12:35 pm

    kind of makes me worried, what if Obama wins…will we have a gridlock for four more years? will the 35% of the right wing crazies just go militant?? democracy is such a bitch…even the fools in large numbers count more than the silent intelligent people grieving over the takeover of their conservative party. I think america is not ready for a black liberal yet, I am ok with mediocracy than a shocking revolution which obama represents.

  6. spacer jnkowens Says:
    October 5th, 2012 at 12:39 pm

    Perfect response. No hysterics, just facts. For those of us who still think facts actually matter. That’s why I love it here!

  7. spacer VennData Says:
    October 5th, 2012 at 12:45 pm

    Techy,

    Elizabeth Warren is ahead in the polls…

    www.washingtonpost.com/blogs/the-fix/wp/2012/09/30/elizabeth-warren-holds-slight-lead-over-scott-brown-in-boston-globe-poll/

    If the poster child for Obama’s destruction of American can win against a semi-moderate, then Obama’s coattails will be long. The Tea PArty is in the pocket of their big business creators. They will cut deals to keep the campaign money flowing to them. They will tell everyone that Santorum will “Fix everything” four years hence anyway.

    Also, laughing at the right wing…

    www.cnn.com/video/#/video/business/2012/10/05/nr-romans-jobs-numbers-not-manipulated.cnn

  8. spacer James Cameron Says:
    October 5th, 2012 at 12:49 pm

    Great piece. The only thing more that might be discussed is the possibility that the administration – or any administration – could actually manipulate the employment data.

  9. spacer Molesworth Says:
    October 5th, 2012 at 12:57 pm

    Techy,
    Obama’s policies are as liberal as those of Nelson Rockefeller and George Romney, both whom used to represent moderate Republicans.

  10. spacer TomOfTheNorth Says:
    October 5th, 2012 at 1:18 pm

    I was at Kidder when GECC bungled that. I completely agree that Welch is ridiculously overrated. Please Jack, no more business instructionals, no more memoirs, no more Suzy promotionals – just quit speaking in public and go spend your money….

  11. spacer tarheel95 Says:
    October 5th, 2012 at 1:22 pm

    I had the same thought about Welsh’s hypocrisy when I saw the Bloomberg headline.

    I remember those days back in the 90′s during his reign when GE was untouchable. They wouldn’t even stoop to hold conference calls with analysts to discuss their quarterly “results”. Apparently the nos. spoke for themselves. And good luck getting them to disclose what their organic growth rate was.

    BTW, I worked on BLS’s establishment (payroll) survey as an economist resp. for getting the monthly employment estimates out for certain industries. My time there spanned part of the Reagan-Bush-Clinton terms. The nos. were produced from the ground up (i.e. at the industry level and then aggregated) by civil servants not political appointees. The resulting nos. where what the process produced. There was no mechanism for someone at the top to wave a wand and tell the worker bees to modify the nos. (unlike say a CEO talking to his CFO prior to an earnings release).

  12. spacer DSS10 Says:
    October 5th, 2012 at 1:34 pm

    GE was, under Welch, notorious for booking revenue on a % complete basis (as was IBM services division then) and taking monster accruals to “smooth the line.” He is the personification of the low testosterone nasty E Level white guy and his screwing the HBR chick really was too much. His credibility is right up there with Greenspan’s. I don’t know why Bloomberg published his comments except to get people disgusted and generate a lot of comments and drive traffic via links like this one.

  13. spacer Biffah Bacon Says:
    October 5th, 2012 at 2:01 pm

    I would be fascinated to have a broader discussion of what people like Techy above see as “revolutionary” about Obama from a facts and policy based perspective. From actual policy positions it looks like Obama is to the right of Bush in financial, social, and foreign policy with the exception of serving party core constituencies, and even those core constitutencies have to squeal pretty loudly to get some action. Obama certainly looks more conservative than Romney (flippity floppity Romney who likes whatever you like for the moment) save for his unfortunate skin condition.

  14. spacer donna Says:
    October 5th, 2012 at 2:02 pm

    My reply to Mr. Welch:

    @jack_welch “Job numbers cooked” says the man who fired 100,000 people at G.E….

  15. spacer A Says:
    October 5th, 2012 at 2:08 pm

    As his former wife would tell you, when you start thinking with your hips, instead of your head, you should keep your mouth closed.

  16. spacer studiophototrope Says:
    October 5th, 2012 at 2:23 pm

    Barry,
    Thank goodness someone remembers the Welch “beat by a penny every quarter” charade. Thanks.

  17. spacer PDS Says:
    October 5th, 2012 at 2:27 pm

    So BR…..you conclude that Jack Welch is an expert at “cooking the books”…so extending the logic to his comments today re the employment report…that means he must be correct…that they were cooked…because he’s an expert at doing it…he must be an expert at spotting it!!!…Correct? :)

  18. spacer Moss Says:
    October 5th, 2012 at 2:37 pm

    Perfect working example of a partisan.

  19. spacer techy Says:
    October 5th, 2012 at 2:41 pm

    Biffah Bacon :

    His ideas or policies are anything but revolutionary. The biggest revolutionary thing about him which half of the country detests is: 1. Liberal supporting gay marriage[religious people think three things are most sacred worth a war] 2. His skin condition[deep south is still bitter about the civil war and everything around here gets blamed on the colorful people]

  20. spacer techy Says:
    October 5th, 2012 at 2:50 pm

    Just wanted to add some more:
    IMO this country is not yet ready for a color person to lead particularly if that person is a liberal candidate.

    around 75% of people here are christians and I am guessing that maybe half of that go to church weekly hence they beleive in all the propaganada dished out. So a liberal person will have hard time getting more than 60% of support no matter how good he is.
    On top of that majority of people in the southern states think that black people are inferior.
    How can you govern a country if you only have 55% support of the people. I mean 70 house members can completely paralyse the legislative process.
    Hence I believe that we need a moderate republican and hopefully romney has a good heart, even though I dont know what he truly stands for.

  21. spacer BennyProfane Says:
    October 5th, 2012 at 3:04 pm

    Another example of the bitter 1% rich white guy syndrome. You would think he would be more grateful that Obama helped bail out his former company and give the present CEO a desk in the White House.

    That’s OK though. Just as Romney has turned an unwelcome high power light on the PE industry, now Welch has woken up those who know better about his “genius” as a corporate titan.

  22. spacer VINCENT CIGNARELLA Says:
    October 5th, 2012 at 3:24 pm

    VINCENT CIGNARELLA

    About those August non-farm payrolls revisions:

    There seems to be an even simpler explanation to the revision of the August non-farm payroll data released by the Bureau of Labor Statistics — at least according to Andrew Zatlin, founder of SouthBay Research. According to Zatlin, from 1994-2012, August was revised upward in every year the economy showed growth. The only exception was in 2004 when there was a slight downward revision. In the years the economy was in a recession — 2001, 2002, 2007, 2008, 2009 — the average revision was actually down to the tune of 95,000 jobs. About the only thing one can really tell, it seems from the August employment data and the subsequent revision, is that the U.S. economy in 2012 is in a growth period. Whether or not that trend will continue through to next year is unclear, but one can at least take heart in that the August 2013 revision will give us a hint.

    (Vincent Cignarella is a currency strategist/columnist for DJ FX Trader and co-inventor of The Wall Street Journal Dollar Index

  23. Must be the Skew (Updated- Updated) « Flippin' Amsterdam NY Says:
    October 5th, 2012 at 3:50 pm

    [...] Update 3:44PM: Why you should read Barry Ritholtz:  [...]

  24. spacer patrick cullinan Says:
    October 5th, 2012 at 3:50 pm

    Concise and on the money, Barry. I am 62 and I ain’t (sic) tweetin’. 76? hmmm.

    Dear Jack…can you hear me Jack?

    Well, he wasn’t senile when he was cooking the books. He needs his young sidekick to remove the keyboard and, and, slowly walk away. It’s a damn shame nobody wants to walk into the sunset any longer.

    Pity.

  25. spacer MikeNY Says:
    October 5th, 2012 at 5:13 pm

    Welch is an embarrassment — most of all, to himself.

    He was on CNBC last week, and he made that buffoon Joe Kernan look like Isaiah Berlin.

    Welch really needs to STFU and stick to the tiddlywinks.

  26. spacer RC Says:
    October 5th, 2012 at 5:16 pm

    I have long stated that Jack welch was one of the luckier, more wildly over-compensated CEOs around

    Ofcourse Jack Welch was a bureaucrat and BR’s data shows that a crooked one too. I hate it when people call glorified bureaucrat who run companies where none of their own capital is at risk, great businessman. What is this “business” where there is no downside (or only downside is that you have to get another job), no risk?? It would be like Catholicism without hell.

    The GE bureaucrat factory generated many “leaders” who ruined many good companies. Nortel was ruined by an ex GE bureaucrat Mike Zafarowski. Bob Nardelli at Home Depot … There are many other examples.
    Beware of these “leaders” and “businessmen”…

  27. GE at 52-week high. Conspiracy? | News & Specials Says:
    October 5th, 2012 at 5:41 pm

    [...] to take emanate with a government’s jobs numbers. Barry Ritholtz (@ritholtz) has an inspired rant on this over on his blog, The Big [...]

  28. spacer ben22 Says:
    October 5th, 2012 at 5:56 pm

    He’ll be CNBC within two weeks now and Kernen will be beside himself with joy

    My father in law told me he did business with Welch in the late 80′s.

    he told me that he was, beyond a shadow of doubt, the biggest asshole he ever came across in his entire career, which I found very easy to believe

  29. spacer ben22 Says:
    October 5th, 2012 at 5:58 pm

    btw, BR

    this:

    “That was a nice smooth line under Jack — the sort of line the folks who prepare China’s GDP data aspire to.”

    was hilarious

  30. spacer drewburn Says:
    October 5th, 2012 at 6:03 pm

    Welsh is senile AND cooked the books big time. And it wasn’t just the “smoothining,” he downplayed the fact that the vast majority of his profits came from the financial unit. Loved the analogy to the Chinese GDP data, BR!!! Snark, snark.

  31. spacer VennData Says:
    October 5th, 2012 at 7:36 pm

    www.huffingtonpost.com/2012/10/05/chris-matthews-jack-welch_n_1943972.html

    Welch angrily says that “They’ve been accusing Romney of lying for 48 hours.”

    That’s his argument/ What a scum ball. Let’s see in a few months if if takes it back as the employment picture continues on its slow improvement. I bet he doesn’t.

    Boy he wants his tax cut real bad, doesn’t he?

    And who they heck follows Jack Welch on Twitter?

  32. spacer Iamthe50percent Says:
    October 5th, 2012 at 9:57 pm

    techy,
    your last post is a parody, right?

  33. spacer theexpertisin Says:
    October 6th, 2012 at 12:05 am

    Maybe Welch should just shut up and gracefully cast his one vote in obscurity. Old tycoons need to know their limitations.

    Are you reading this, Soros?

  34. spacer philipat Says:
    October 6th, 2012 at 4:00 am

    At least under Welch the line was moving upwards. Immelt is obviously more focused on politics and taxes.

  35. spacer jolietjim Says:
    October 6th, 2012 at 8:38 am

    Boffo!

  36. spacer manifest Says:
    October 6th, 2012 at 9:09 am

    I still think the story behind the story is Tom Brakke’s graph and the lineage of teachers responsible for nurturing Immelt’s note-taking skills. =)

  37. spacer jeffers5 Says:
    October 6th, 2012 at 11:37 am

    Given his track record, the inane tweet from Welch is not surprising. What is more troubling, is that I think he really believes the crap he says. How does someone get to that place?

  38. spacer Bob A Says:
    October 6th, 2012 at 1:40 pm

    I don’t care how successful he ever was. He’s a despicable little troll.

  39. spacer orvil tootenbacher Says:
    October 6th, 2012 at 5:03 pm

    oh that’s jack welsh. thanks for clearing settling a bet for me… but i am still suspicious that actually may be that abe simpson.

  40. spacer RobPublicAgain Says:
    October 6th, 2012 at 8:12 pm

    Next will be “GET OFF MY LAWN”

    or another geezer favorite

    “TURN THAT CRAP DOWN”

    ps – love the chart – it’s perfect

  41. Breakfast Links | Points and Figures Says:
    October 7th, 2012 at 6:01 am

    [...] Jack Welch fanned the flames of conspiracy theorists. [...]

  42. spacer CNN Money Says:
    October 7th, 2012 at 6:36 am

    [...] It really is quite astonishing that Welch decided to take issue with the government’s jobs numbers. [...]

  43. spacer wkevinw Says:
    October 7th, 2012 at 2:34 pm

    1. Thanks for the chart. It speaks for itself
    2. BR is being kind. The ethical rot that was exposed when he resigned is deep and wide. There were resignations at leading publications due to conflict of interest he caused. I am sure all that has since been taken down from the www. At one point you could search and find out lots of crazy stuff that he did.

    He now gives seminars for big corporate clients on ethics.

  44. Addressing the BLS Truther Controversy | The Big Picture Says:
    October 7th, 2012 at 3:27 pm

    [...] BLS truther controversy was, in a word, sad. That folks now nonchalantly float claims that government agencies fudge [...]

Related searches:
october people cooking really romney
gipoco.com is neither affiliated with the authors of this page nor responsible for its contents. This is a safe-cache copy of the original web site.