The Boring Company goes brick-and-mortar with The Brick Store

Elon Musk has shot out some crazy, unbelievable tweets over the last year, but he wasn’t joking about the bricks. Musk has started a company called The Brick Store LLC to produce and sell bricks, according to public documents obtained by TechCrunch.

The new company, which was founded in July, will be managed by Steve Davis, the ex-SpaceX engineer who is also running The Boring Company (TBC).

TBC is developing new tunneling and transportation technologies, and the bricks will be made from soil displaced by the company’s tunnel-boring machines. Elon Musk has tweeted that the bricks could cost as little as 10 cents each, and might even be given away to affordable housing projects.

The Brick Store’s first physical outlet will be a far cry from Tesla’s sleek, designer showrooms. Planning documents submitted to Hawthorne, a city in southwestern Los Angeles County, show a rundown stucco building about a mile from TBC and SpaceX’s headquarters. Forbidding black steel security grilles “will be utilized … to accent the entrances and windows,” TBC wrote in its application to repaint the building.

Despite these design flourishes, TBC did not select the building for its aesthetic appeal. The building — formerly housing a kitchen cabinet business — is located above an exit tunnel that TBC is digging to extract the boring machine from its first test tunnel. This is intended to showcase Loop, a proposed underground transportation system carrying people or cars on self-contained electric skates traveling at up to 150 miles per hour.

The tunnel was originally planned to stretch around two miles under public roads from a parking structure next to SpaceX. However, in April this year, TBC used a subsidiary to quietly buy the Hawthorne corner lot, which sits about halfway along the planned route, for $2 million.

In July, TBC asked Hawthorne for permission to use that lot to build an access shaft to extract its tunnel-boring machine, which, because it cannot move backwards, would otherwise have been abandoned at the end of the excavation.

The same month, Musk founded The Brick Store, whose purpose, according to state filings, is the “manufacture and sale of bricks.” TBC has already produced some structures from bricks made from tunnel spoil, and Musk tweeted yesterday that they would be used to build a watchtower at the entrance to the tunnel.

Turning tunnel waste into a valuable commodity fits in with Musk’s environmental leanings — and will save TBC from the cost of disposing all that dirt. TBC has even suggested that the bricks could potentially be used as part of the tunnel lining itself. Musk has previously said that the tunnel would officially open on December 10.

TBC did not immediately respond to requests for comment on this story.

Bricks made from everyday soil, usually called compressed earth blocks (CEB), date back to ancient times. CEBs are still used in developing countries today, and are part of building codes in California and New Mexico. But even there, the market for them is tiny — possibly because CEB buildings can be awkward to build, wire and insulate. BC has even suggested that the bricks could potentially be used as part of the tunnel lining itself.

Dwell Earth sells machines that produce CEBs by applying pressure to a mixture of earth and a little cement.

“Elon seems to have a way of bringing energy and talent to big challenges, and we are happy to see that he may be as excited about [CEBs] as we are,” Dwell Earths founder Bob de Jong told TechCrunch.

The Boring Company

TBC received around $112 million from Musk earlier this year. These funds will be used to build a number of tunnels around the country, including a Loop to connect Dodger Stadium to the subway in L.A., one that would link Chicago and O’Hare airport, as well as an ambitious commuter Loop between Washington, D.C. and Maryland.

These projects could be thwarted, or at least delayed, because of an increasingly heated trade war between the U.S. and China.

TBC lawyers wrote to the United States Trade Representative in July that the tariffs imposed by President Trump on Chinese-tunneling machine parts, among other products, would delay its projects by up to two years and mean lost job opportunities. The company asked for an exemption from the tariffs that has not yet been granted.

If there’s anyone who can re-brand dirt and build a market for CEBs, it’s Elon Musk. But even if The Brick Store’s bricks don’t raise enough money for a Mars mission or save the planet, at least they are a little more practical than a novelty “not a flamethrower.”

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Deadly salmonella outbreak forces USDA to recall raw turkey


By Jen Christensen and Madeline Holcombe, CNN

With Thanksgiving just around the corner, the US Department of Agriculture’s Food Safety and Inspection Service has recalled turkey products linked to a salmonella outbreak.

Jennie-O Turkey Store Sales, LLC recalled 91,388 pounds of raw ground turkey products after the USDA found that a sample of the products tested positive for a salmonella reading matching the outbreak strain.

The labels for the affected products can be viewed here. 

The samples were from a Sept. 11, 2018 production, and, according to the USDA, the rest of the products shipped nationwide.

The US Centers for Disease Control and Prevention first announced the outbreak linked to raw turkey products in July, but more people have gotten sick, bringing the total to at least 164 in 35 states. One person in California has died, and 63 people have been hospitalized.

The outbreak started in November 2017. It’s unclear where the turkey at the center of this outbreak came from, as there doesn’t appear to be one centralized distributor, the agency said. This could mean that “it might be widespread in the turkey industry.”

Lab tests show that the salmonella came from a variety of products, including ground turkey and turkey patties. Tests showed that it’s also been in live turkeys and pet food.

The US Department of Agriculture and the CDC have been working with the industry, asking what steps could be taken to reduce this kind of contamination, and the investigation is ongoing.

Symptoms of salmonella infection include fever, diarrhea and stomach cramps, and they usually last four to seven days. Most people recover without treatment. In rare cases, the infection can cause death if a patient is not treated promptly with antibiotics.

There are an estimated 1.2 million salmonella cases in the United States annually, and various foods are to blame for about 1 million of those illnesses, according to the CDC.

The CDC said that if you plan to handle raw turkey, make sure you are extra careful: Wash your hands after touching it. Cook products thoroughly to avoid getting sick. Thaw turkeys in the refrigerator, not on the counter.

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Stocks start lower; Nvidia, Applied Materials lead tech drubbing

Stocks edge mostly lower at the open, weighed by disappointing earnings reports and guidance from chipmakers; Dow flat, S&P -0.1%, Nasdaq -0.4%.

Tech stocks (-1.1%) tumble in the early going after Nvidia (-16.8%) and Applied Materials (-4.3%) beat earnings estimates but issues below consensus guidance for earnings and revenues amid weakening chip demand.

Investors also worry over political developments overseas amid heightened fears of a hard Brexit; the British pound yesterday suffered its biggest one-day loss vs. the euro in two years as a flurry of resignations rocked Prime Minister May’s government.

European bourses are sharply lower, with Germany’s DAX -0.9% and U.K.’s FTSE and France’s CAC both -0.8%; in Asia, Japan’s Nikkei -0.6% but China’s Shanghai Composite +0.4%.

In the U.S., Facebook (-2.6%) falls to a 19-month low following a NYT report that said the company has tried to cover up mistakes, prompting calls for improved corporate governance and executive changes.

Early sector leaders include utilities (+1.6%) and energy (+0.5%); U.S. WTI crude oil +1.8% to $57.48/bbl on rising talk of OPEC supply cuts.

U.S. Treasury prices continue to rise, pushing yields lower across the curve, with the two-year yield down 5 bps to 2.81% and the 10-year yield off 4 bps to 3.08%; the U.S. Dollar Index -0.4% to 96.56.

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Dollar takes dive after Fed’s Clarida strikes dovish tone

The U.S. dollar sold off versus its major rivals early Friday in New York, after Federal Reserve Vice Chairman Richard Clarida offered some dovish comments. The ailing buck gave more room to rebound to the British pound, which recovered from its worst one-day performance in more than two years on Thursday.

Clarida said in an interview with CNBC offered a more dovish view on the Fed’s path to monetary policy normalization, but said that central bank’s pace of rate hikes wasn’t too fast. Clarida also said the global economy showed signs of slowing.

The U.S. dollar weakened following the comments, with the ICE U.S. Dollar Index

DXY, -0.60%

 dipping 0.5% to 96.445. The gauge is on track for a 0.5% decline for the week, according to FactSet.

Meanwhile, the “anti-dollars”, the British pound and the euro, benefited from the buck’s weakness.

Sterling

GBPUSD, +0.5010%

 bounced back from the sharp loss incurred Thursday on the back of further government resignations over Brexit. Sterling, which logged its worst performance since October 2016 on Thursday, according to Dow Jones Data Group, was up at $1.2865, up from $1.2774.

Michael Gove said Friday he wouldn’t resign his position as environment secretary, quelling speculation—for the moment—of another high-profile departure. News reports said Gove had turned down an offer from May to replace Dominic Raab as the government’s top Brexit negotiator. Raab resigned Thursday.

Check out: These are the latest resignations from the U.K. government that rattled investors

But new Brexit secretary or not, the outlook remains uncertain after multiple calls for a vote of no confidence in Prime Minister Theresa May were made Thursday. Investors are also concerned about the likelihood of May getting an agreement with Brussels through parliament in next month’s Brexit bill vote. In case of a “no” vote, the options would be a “no-deal” Brexit, new elections or a second referendum.

Don’t miss: Here’s how much Brexit turmoil might whack the British pound, analysts predict

In continental Europe, the euro

EURUSD, +0.6530%

 last bought $1.1405, slightly up from $1.1332 late Thursday in New York.

Versus the pound, the shared eurozone currency

EURGBP, +0.1917%

 was little changed at £0.8867

Harmonized eurozone inflation increased 2.2%, in line with expectations, year-over-year in October, while core inflation stood at 1.1% over the same period. European Central Bank President Mario Draghi said in a speech earlier that eurozone inflation could be negatively affected by businesses dealing with uncertainties. The ECB is expected to begin raising interest rates, for which rising inflation is a key condition, around summer next year.

Speaking of interest rates, Mexico’s central bank upped its key rate by 25 basis points to 8% Thursday, in line with consensus expectations. Mexico’s peso

USDMXN, -0.0746%

 is a popular emerging market currencies, in part due to its high local interest rates. One dollar last bought 20.2153 pesos, versus 20.2293 pesos late Thursday.

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Nvidia ‘finally stumbled:’ What every major Wall Street analyst said after the chipmaker’s earnings

A gamer  plays a video game with the Graphic card GeForce during the 'Paris Games Week'on October 27, 2016 in Paris, France. 










Chesnot  Getty Images

A gamer plays a video game with the Graphic card GeForce during the ‘Paris Games Week’on October 27, 2016 in Paris, France. 

Nvidia shares fell steeply after the chipmaker gave weak fourth quarter revenue guidance when it reported third-quarter earnings after the close on Wednesday.

Nvidia’s stock cratered 19 percent in trading, pushing the stock even deeper into correction. Nvidia had already fallen to $202.39 a share at Wednesday’s close, a plummet of more than 30 percent from its 52-week high of $292.76 a share.

“We were clearly wrong on the stock,” Goldman Sachs said as the firm removed Nvidia from its list of conviction stocks. However, Goldman said it remains “Buy-rated on the stock as our view that Nvidia has access to one of the best growth opportunity sets in Semis and that it has a sustainable competitive lead within remains unchanged.”

“The stock will likely not bounce back right away, given the severity of the miss,” Morgan Stanley said.

Here’s a wrap of all the major analyst opinions.

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VW confirms talks with Ford on light trucks, broader partnership



CLOSE


Analysts note that the car companies recently initiated talks about small partnerships, but each may be motivated to think big because of their limited product lines and limited regional scope.
Wochit

Ford Motor Co. and Volkswagen Group will move forward with discussion to jointly manufacture a range of light commercial vehicles, Volkswagen said Friday during a news conference in Germany. 

Talks on a broader partnership continue with an aim to firm up plans by year’s end, VW CEO Herbert Diess said.

“We’re looking into common platforms that we have,” he said, adding: “Ford is very strong in the U.S.; we are strong in other markets.”

The opportunity delivers lower costs and bigger profits to both companies, which “will remain competitors” in other arenas, the German company said. Diess emphasized that a merger with Ford was “never” contemplated as part of the discussions. 

Ford and Volkswagen have been engaging in a wide-ranging partnership with game-changing consequences for the auto industry.

Ford spokeswoman Jennifer Flake responded Friday morning, “Our MOU (Memorandum of Understanding) with VW covers conversations across a number of areas. It is premature to share additional details at this time.”

The carmakers have not ruled out joining forces to potentially develop electric vehicles and driverless technology. 

Volkswagen officials said Friday they plan to invest 44 billion euro ($50 billion) in “e-mobility, autonomous driving, new mobility services and digitalization” over the next five years.

The company, headquartered in Wolfsburg, Germany, is the world’s No. 1 automaker by sales.

Collaboration between the two companies is viewed as a path to significant savings on research and development while at the same time delivering big revenue. 

Ford officials said this week during a driverless vehicle media presentation in Miami that the company predicts incredible return on investment with AVs (autonomous vehicles) and a higher profit margin than exists today in the car industry.

The opportunity is “massive,” said Sherif Marakby, CEO of Ford Autonomous Vehicles LLC, who estimated the market value to exceed $300 billion per year for driverless delivery of people and products.

Ford CEO Jim Hackett has said technology companies see trillions of dollars at stake. 

Working together, the iconic German and American companies could dominate the industry.

VW is strong in South America and Europe and Asia, but lacks vehicles in the high-profit full-size pickup category. Ford is strong in the U.S. with its sales of lucrative F-Series pickups and SUVs.  

Ford makes nearly 40 percent of all full-size pickups sold in the United States. And VW sells nearly 15 percent of the vehicles purchased in China, the largest auto market in the world.

On Friday, news leaked early out of the VW supervisory board meeting that the CEO of Volkswagen would assume leadership of China operations in early 2019. Such an unexpected pivot in a highly valuable market signaled concern among analysts.

“From what I have heard from on the ground in China, things apparently feel much worse in China than the government press is letting on, and hence the global press is realizing. Since China is huge for VW, if China is troubled, they are worried,” said Jon Gabrielsen, a market economist who advises automakers and auto suppliers..

“This would also be consistent with the struggles Ford is having in China and that GM may have as well. Just the abrupt change from 10 years of 15 percent annual auto sales growth literally every year, to becoming flat to slightly declining for now, is a massive shock to the market.”

Collaboration with VW is familiar ground for Ford, Gabrielsen said. 

“What VW and Ford appear to be planning for commercial vehicles is joint design, development and manufacturing to then be separately branded, marketed and sold by each of them individual companies,” he said. “This would be analogous to past joint car production for North America such as Mazda Flatrock Michigan that produced Ford and Mazda cars, Mitsubishi Bloomington Normal Illinois that produced Mitsubishi and Chrysler cares, and CAMI in Ontario that produced Suzuki and Chevrolet cars.”

Bundle forces

Ford and VW started talking in June about cooperation on light commercial vehicles, reflecting the pressure from new players and scope of the transition in mobility.

On the Volkswagen website, now listed under “Partnerships are a key success factor for shaping the future” is the following statement about Ford: 

“The talks with Ford about an industrial cooperation announced earlier are progressing positively so far. The two companies complement each other very well in terms of both products and regions. The joint development and manufacture of a range of light commercial vehicles is at the core of the envisaged cooperation. Volkswagen expects significant synergy effects from the potential to lower costs or increase performance via scales. Ford and Volkswagen will nevertheless remain competitors, as the proposed cooperation does in no way concern commercial, marketing or pricing strategies. Additional fields of cooperation outside the light commercial vehicle segment with the potential for expanding collaboration have also been identified.”

Executives at both Ford and Volkswagen referred to ongoing talks and potential collaboration during third-quarter earnings calls in October.

“The companies want to bundle their forces,” German news reports said. “The aim of the cooperation is to significantly reduce the costs for the development of these future technologies: At Volkswagen alone, investments in this area would add up to around 34 billion euros (or $38.8 billion)” through 2022.

Diess planned to present on Friday to the Volkswagen board his investment plans for the next 10 years — “and this is all about the development of electric motors and self-propelled and networked cars,” Handelselsblatt reported.

Discussion has been simmering for months, and followed closely in German media.

VW was talking to Ford “about various projects” with a “clear focus on light commercial vehicles,” Thomas Sedran, the new chairman of the board of management of Volkswagen Commercial Vehicles, told a Hanover, Germany, newspaper on Aug. 31. “Although Volkswagen is the largest car manufacturer in the world, we still don’t have the scale in certain areas to achieve optimal cost positions.”

Hundreds of millions at stake

Ford and VW signed a Memorandum of Understanding to explore several joint projects, including (but not limited to) joint development of a range of commercial vehicles to better serve global markets.

While the MOU is designed to allow for confidential exploration of a potential partnership, any strategic alliance explicitly “would not involve equity arrangements, including cross ownership stakes,” news releases said at the time.

Ford and VW could save hundreds of millions through collaboration, analysts said. VW’s Sedran noted in August that the carmakers have had success previously. 

“(Volkswagen) and Ford have worked closely together before, for example in AutoLatina, a strategic alliance for South America. The interesting thing is that when this joint venture came to an end in 1995, there was no conflict or bad opinion of one another,” he said. “Today, we have key figures on both sides who were involved back then. The cultures of the companies would be a good match.”

Meanwhile, Ford has announced it would begin workforce reductions globally in coming months while implementing Hackett’s vision to make Ford more “fit” and competitive. Thousands of white-collar jobs are expected to be eliminated as the company searches for better efficiencies. 

Industry experts say job tightening would likely happen in places where VW is already strong and Ford is already weak, so a partnership wouldn’t actually impact the planned jobs reduction. 

“We are the market leader in Europe but less well represented than we have come to expect from Volkswagen in many other regions,” Sedran said. “I recently spoke about the scarcity of resources — this has also repeatedly slowed down the development of new markets. We have more scope for internationalization. … Ford would also open up new opportunities for us internationally.”

Ford observers and German press went into the news conference Friday with strong expectations for significant information relating to Ford.

“My hopes had been too high,” Gabrielsen said. “But at least, in the excruciatingly slowly emerging picture of future improvements for Ford, Volkswagen confirmed the partnership in light commercial vehicles and alluded to additional decisions and announcements of possible additional partnerships to be made by the end of this year.”

Related stories:

Ford and Volkswagen flirting with relationship possibilities

Report: Ford, VW ‘want to join forces’ on electric, driverless cars

Bill Ford shares vision for Corktown

Contact Phoebe Wall Howard: phoward@freepress.com or 313-222-6512. Follow her on Twitter @phoebesaid

Read or Share this story: https://www.freep.com/story/money/cars/2018/11/16/volkswagen-confirms-talk-ford-broader-partnership/2022792002/

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Dunkin’ Donuts owner calls police on woman who tries to use store’s free Wi-Fi

A Dunkin’ Donuts owner called the police on a customer after arguing over the company’s free Wi-Fi policy.

“I had just sat down when a woman I had never seen before walked up and asked, ‘Are you going to buy coffee?’” White, 46, a former assistant professor at the University of Maryland and mother of two, tells Yahoo Lifestyle. “I told her I planned on buying coffee after I got settled, but not if it were mandated.”

According to White, the woman, who identified herself as a “quality control” official, gestured toward another black customer, saying that he had purchased food before using Wi-Fi. White responded by asking Cabral if a nearby white customer was held to the same standard, and Cabral ordered that she purchase coffee or leave.

Timothy E. Nelson was ordered by a Dunkin’ Donuts franchise owner in Sante Fe, N.M., to leave the store due to its “one-hour rule” for customers. He told KOB-TV that if he wasn’t a black man with dreadlocks, “I don’t think I would’ve had the problem.” The owner, Irene Deubel, told the Santa Fe New Mexican that she asked Nelson to leave because “he was sitting here without purchasing something.” She later apologized for the “poor experience.”’ data-reactid=”78″>In October, a college professor named Timothy E. Nelson was ordered by a Dunkin’ Donuts franchise owner in Sante Fe, N.M., to leave the store due to its “one-hour rule” for customers. He told KOB-TV that if he wasn’t a black man with dreadlocks, “I don’t think I would’ve had the problem.” The owner, Irene Deubel, told the Santa Fe New Mexican that she asked Nelson to leave because “he was sitting here without purchasing something.” She later apologized for the “poor experience.”

Follow us on Instagram, Facebook, and Twitter for nonstop inspiration delivered fresh to your feed, every day.‘ data-reactid=”85″>Follow us on Instagram, Facebook, and Twitter for nonstop inspiration delivered fresh to your feed, every day.

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Here Are All of the Black Friday Deals and Ads We Know About So Far

Black Friday, one of the busiest shopping days of the year, is just days away. And retailers are gearing up.

Over the last couple of weeks, a variety of retailers have released ads and deals in anticipation of Black Friday. And during that period, we’ve been keeping a close eye on what they’re offering and tracking their very best offers. But as you prepare to hit the road for Thanksgiving and gear up for Black Friday, we wanted to make it a bit easier for you to analyze deals in one spot.

So, if you read on, you’ll find a collection of all the Black Friday deals and ads we’ve discovered so far in one spot. From Amazon to Best Buy, read on for quick access to the best deals from top retailers:

Amazon

Amazon’s Black Friday Deals Start Early. Here Are the Deals

Amazon Launches Black Friday Deals Store as Sales Heat Up

Sam’s Club

These Are the Best Deals in Sam’s Club’s Black Friday 2018 Ad

Walmart

Walmart Is Kicking Off Black Friday Deals With a Thanksgiving Cookie Party

Target

Target Announces 2018 Black Friday Deals—And Thanksgiving Hours

Best Buy

Best Buy’s Black Friday 2018 Ad: 5 Can’t-Miss Tech Deals

Costco

Costco’s Black Friday 2018 Ad Arrives With These 5 Outstanding Tech Deals

Jet

Jet Black Friday Deals: 5 Tech Offers You Can’t Miss

Macy’s

Forget Free Shipping: Macy’s Is Giving Away Free Goods This Black Friday

Miscellaneous

Want a Game Console? Black Friday Will Be Loaded With Deals

These Retailers Are Offering the Best Black Friday Discounts

Check back for more updates as retailers release more ads.

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General Electric: My Thoughts On The CNBC Interview And The BHGE Sale

I have written a lot about General Electric (GE) lately, as this company is in the midst of major restructuring efforts that were first announced in November 2017. GE has changed course seven or eight times over the last two years (exaggerating, kind of) but the most recent change occurred when Mr. Larry Culp replaced Mr. John Flannery as CEO.

Mr. Culp has been on the job for only a few weeks now but he is already making himself available to the financial community. And more importantly, he is making structural decisions that will have a lastly impact on this once-great conglomerate.

The Interview

Mr. Culp sat down with CNBC’s Mr. David Faber to answer questions and discuss the current state of General Electric. Before going any further, the interview is a must-watch (or read) for shareholders and prospective investors. Here is a transcript of the interview.

Mr. Culp and Mr. Faber discussed many different topics but two [related] points really stuck with me – (1) the focus should be leverage not liquidity, and (2) management has a sense of urgency but they will not panic.

Focus On Leverage Not Liquidity

Mr. Faber asked about several concerns that were raised after GE reported Q3 2018 results and, more specifically, he asked if investors should be concerned about liquidity or leverage.

Mr. Culp’s response:

I think that’s an important distinction that you just made relative to liquidity verses leverage. Two weeks ago, folks were I think understandably asking the liquidity question. I think we’ve put that to rest given the fact we’ve got 20 billion of cash. We have a robust here too CP program and $40 billion of bank lines. We’ve only tapped two. But I think that gives us a foundation.

He went on to say:

And again, whether it’s an equity analyst, whether it’s the rating agencies — witness the downgrades, or what we’ve said ourselves, we need to bring the leverage down. And I think we’ve got plenty of opportunities through asset sales to do that.

Mr. Culp is correct that leverage, not liquidity, should be the focus for investors. Moreover, as I recently described, I am not sure why liquidity as a major concern was even brought up by the bears. Leverage is a concern but, in my opinion, management has some levers to pull (and one was actually just pulled – more on this below).

Sense of Urgency But Not Panic

Mr. Faber asked if there was a sense of urgency for GE to sell assets.

Mr. Culp’s response:

Very much a sense of urgency, David. But as John Wooden, the famous basketball coach said, “be quick but don’t hurt.” And I think that’s the mindset that we have. When we look at healthcare for example, a tremendous franchise, we talked in June about an IPO there where we’d take 19.9% of the proceeds as cash. We have flexibility, we have options there. We could preserve our tax-free spin status while selling up to 49.9%. So there’s a lot of cash there, given some of the estimates of value that are out there. We’re tracking very well with the closure of our merger with [W]abTec, with our transportation business. We’ll end up with just under 10% of that business in equity. Another option there. And Baker Hughes. A lot of people have talked about Baker Hughes. A $28 billion market cap company as of Friday’s close. We own 62.5% of that company. So lots of options just in those three to generate real cash to bring that leverage down.

He obviously telegraphed the Baker Hughes, a GE Company (BHGE) sale but another important point that he made that is GE has a lot of optionality with its assets/holdings.

Additionally, I find it funny how many times JPMorgan’s Stephen Tusa was referenced by Mr. Faber during the interview. It is almost to the point that whatever Mr. Tusa says “has to be true”, which somewhat makes sense given the fact that he is been so right about GE over the last two plus years. I honestly do not believe that GE shares can move higher without Mr. Tusa saying something positive about the company, which is not a great place for Mr. Culp and team to operate from. I do not like to see a pundit have so much control over one of my investments but, in a round about type of way, I guess he earned it, right?

Anyhow, I believe that Mr. Culp was on point with his comments and that he appears to understand how GE is viewed by the Street (“the can’t do right” company). Mr. Tusa will likely eventually jump on board once management is able to make a string of good decisions. And, in my opinion, the Baker Hughes, a GE Company transaction was a step in the right direction.

“Bad” Timing But The Right Decision

Analysts have rightfully called into question management’s decision to sell a large stake in Baker Hughes, a GE Company for approximately $2.3B. Remember, BHGE shares are down big since the merger between the old Baker Hughes and GE’s Oil & Gas segment was completed in mid-2017.

Chart

BHGE data by YCharts

BHGE shares are down over 30%. While I agree with Bob Nardelli that the BHGE sale probably happened 15 months too late, let’s also remember that Mr. Culp is only a few weeks into his tenure. So, yes, it is painful to see GE buy high and sell low (a common occurrence over the last 17 years), but, looking forward, I believe that it was the right decision to make.

After this sale, GE’s ownership stake in Baker Hughes, a GE Company will shrink from 62.2% to slightly above 50%. In my mind, this decision signaled two things: [1] Mr. Culp does not care if he makes the prior management teams look bad, which is an area where Mr. Flannery struggled; and [2] Mr. Culp is trying to change the narrative sooner rather than later.

I do not believe that the BHGE sale absolutely had to occur now, especially when shares were already down big, but I understand why the decision was made. He has to show investors and other stakeholders that structural changes are no longer just talking points. It’s never good to take a loss on an investment but I believe that a statement transaction, like this one, will have other long-term benefits. Also, GE still maintain over a 50% stake in BHGE so the company still has a lot of optionality in the quarters/years ahead.

This is pure speculation, but I believe that Mr. Culp will slowly transition GE into more of a holding company. With this, I could very easily see GE eventually holding majority (or large) stakes in Healthcare, Power (the “good” part of the business), Aviation (may retain 100% ownership), Renewables, Transportation (yes, this would mean that management would have to change their plans to distribute most of ownership position to shareholders) and BHGE. A Siemens-like (OTCPK:SIEGY) structure for GE, as Mr. Henry Miles recently described in this article, would be well-received by the market, in my opinion.

Risks

Headline risk is taking over and, more specifically, the market listens any time JPMorgan’s Tusa talks about GE, and rightfully so. And more broadly, investor sentiment is the key driver of GE’s stock and it will likely be for the foreseeable future, so I would pay close attention to what the Street has to say about the prospects for this storied company. Remember, analysts can be wrong (and they are a lot of times), but it seems like the market hangs onto any of the GE bear stories that get floated in today’s environment.

Bottom Line

Mr. Larry Culp talked a good game during the CNBC interview and he then followed through with the BHGE decision a few days later. When was the last time GE’s management team told investors what they were going to do, and then followed through shortly afterwards? Crickets.

The BHGE sale was a good decision, in my mind, because it help change the narrative (yes, more still needs to be done). I believe that GE is a 3- to 5-year story so I will continue to hold onto my position, but, in my opinion, I would avoid putting new capital to work in this industrial conglomerate until more is known about (1) the SEC/DOJ investigations and (2) the adequacy of the long-term care reserves. GE’s other businesses are performing well, but I believe that the risk level for this industrial conglomerate continues to tick higher so it is hard to get excited about the stock, even after the recent pullback.

Disclaimer: This article is not a recommendation to buy or sell any stock mentioned. These are only my personal opinions. Every investor must do his/her own due diligence before making any investment decision.

Disclosure: I am/we are long GE, BHGE.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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