In the past, I have been critical of the effectiveness of the stock buyback programs at mega-cap firms like General Electric GE and Bank of America BAC. Specifically, General Electric trailed only Apple in largest amount of dollars spent repurchasing stock during the last quarter.

The company only had to pay 16x earnings to retire its stock. It is still early, but I am continue to favor the conclusion that the sale of the financial assets at GE Capital was not in the best interests of shareholders.

The industrial assets remain quite strong, and are so enduring that GE shareholders can suffer a lot of abuse and still eke out fine investment results.

The correct solution would have been for GE management to provide Gibraltar-like capitalization for GE Capital, and refuse to loosen the liquidity standards and budge below that in an effort to goose profits. Instead, it continues to be the case that the engineers and salesmen at the industrial units create the extraordinary value that ought to power double-digit wealth creation while the shareholders see their returns take modest haircuts from the latest bit of alchemy divined by the management team in Fairfield.

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GE Stock Soars Today, Announces $50 Billion Share Buyback Program, Selling Real Estate Holdings. - TheStreet

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