I want to talk to you as an investor because you own G.E. we talked to Larry called and he said part of the benefit is for
investors so they can focus as well on which line they take to be invested. As you look at this breaking up of G.E.. How do you
analyze it. Well I just want to set the stage that we may be one of the few
who are analyzing it. She's absolutely hated by investors because of the damage they've done. If you think about it David
two to today go back. And so the last five years the annualized performance of the S&P 500 has been 20 percent. That's 20
percent per annum on average. The comparable number for GS negative 13 percent. G.E. disaster.
So Larry Cup's arrival in October of 2018. He had his work cut out for him and he's very incentivized financially to get it
done. But there are two great businesses. There were aviation and health care and then power renewables and digital weren't
quite as good. And the key was to set them free. There were some co-dependency because not only did power and
renewables have some serious problems but then we had Covid. So then what happens to the aviation business here. This is an
aircraft engines avionics systems. It grinds to a halt. So free cash flow collapses and therefore the health care business had
to support the other two. So what makes this announcement so interesting is that it may be signaling that G is getting beyond
its problems. It'll actually coming back into blue skies where the long term care business that the company has that is
supposed to pay people for nursing care and end of life assistance.
That was it. Gee G stop writing those policies in 2006. But it's been a huge financial burden for the company under reserving has
been a chronic problem. So this breakup is it may as Larry noted in the video allow these three areas to shine on their own. It
may be signaling according to our industrial analyst that G.E. is not worried any longer about long term care because that is
we shouldn't as investors be worried. And that is a very good thing. It sure is given the history there.
But let's take those three lines of business because they're not bringing it all at once.
I thought that that was important. I mean first they spin off health care which you said that's the strongest one anyway
that's ready to go on its own. They're going to take another year on power to sort of get that up and running. You may need a
little more help. And then you have aviation at the end. Talk about those three lines of business and their futures.
Well the health care business is in very good shape and it intends to retain nineteen point nine percent of that business.
Ultimately that may be sold that will end up if this process continues to its fruition in the aviation business.
At stake. But then that that's 2023. So here we are 20 21. If this a bit of waiting time and that means the stock may be
volatile or it could be down. Who knows. Investors hate reading but it takes some time to do these tax free spin offs. And also
GS determined that this was part of the announcement to set these three areas off on their own at
much lower levels of financial leverage. And that's really where the cash flow is so important. How much can the company generate
to be to get investment grade credit ratings for all three is going to be a real that's the serious effort ahead. So that's
why they need time. There's twenty twenty three and then twenty twenty four for power renewables. So we are we await all that
information. But but there's some really positive signalling happening here. Otherwise why would it not. Why would they
announce it now. They would just continue to work on it not let us know. The alert kept emphasizing its three public investment
grade companies. Is very proud of that that they'll be all the investment grade from his point of view. At least talk about
power which has also struggled had a lot of problems some residual problems with some maintenance contracts and things.
What about keeping traditional power together with renewables. Siemens what a different way they let renewables go off on its
own. Maybe a bigger growth thing. Do you think that makes sense as an investor. Do you look at that and say yeah that's
sensible. It is given the mix the G has renewables ultimately as we all
assume will be the business that sustains in the future. But it was never really our preferred of their businesses and we're
glad to see it be set aside and spun off again. The aviation and health care
business is far superior to free cash flow generation aviation and generate almost none in the downturn and now is coming back.
We think there's a normalized 4 billion dollars of free cash just not business. And if you wrap the whole all of it up
together and you think about it today there might be normalized 7 to 8 billion dollars of free cash flow coming from the sum of
the three parts. That's something that no I don't think GS delivered for a very very long time. And so come back to you as
an investor because as I say Larry kept emphasizing that allows an investor to say which if any of these lines they want to play
in. Is it more valuable to be able to pick and choose among health and power and aviation than to have all lumped together
have to buy the whole package. Very definitely. We as investors prefer that and then we think
about them. You want them senior managements of each and they're not. Larry's according to our industrial ounces is the best
industrial CEO in the country. So there's a lot right there. In running aviation without distractions. Fantastic. And then there
two very skilled individuals will be the CEOs of the power of health care business. But think about it. They and their and
their team can be compensated on their own efforts without the distractions and or dilution of any other parts of the business
they can really focus. They'll have each have their own individual boards of directors who can focus on that business.
So yes this is a given the work synergies this makes perfect sense. And we expect the stock price to ultimately reflect this
and be a very significant return for our clients very quickly with injuries is the end of conglomerates.
You know I I. Hard to say. I think they'll continue. There are plenty of them
in Japan for example. And unless they're desperate like Toshiba they don't they don't
break up. But but we're not patient as investors. And this is true globally. And when we see a company who's who. For example
if it's multiple being suppressed we want them to fix it.