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One point that WSJ that NYTimes calls out too is that Markopolos is working with a hedge fund in releasing this report (that I believe is shorting GE stock). H

by kyrra 7y ago

One point that WSJ that NYTimes calls out too is that Markopolos is working with a hedge fund in releasing this report (that I believe is shorting GE stock). He's doing this so he can get paid up-front and not have to wait for potential whistle-blower payout (which takes years). While this doesn't mean his accusations are fake, but it's important to take these into account when evaluating the claims. https://seekingalpha.com/article/4286597-markopolos-short-report-ge-full-inaccuracies https://seekingalpha.com/article/4286597-markopolos-short-re...

panarky 7y ago
Just because Markopolos will profit from his work doesn't mean his work is bogus. In fact, if his work proves to be bogus, he most likely won't profit, and his reputation will be damaged forever. When GE people go on CNBC and make all kinds of carefully lawyered statements that sound like denials but aren't actually categorical denials, they're also getting paid. The GE people get paid whether or not their statements hold up over time. Given that, I'd put more weight on Markopolos because he actually has skin in the game.
- S_A_P 7y ago
  Well put. My knee jerk reaction is to frame Markopolos as the villain here but he does stand to lose much more if he is wrong. That said it is a dangerous game to be playing that can/will have ripple effects on all the folks working at GE that aren’t complicit in the fraud.
- Traster 7y ago
  The hedge fund shorting GE will profit from the value of GE dropping due to the bad news, it will profit from the value of GE dropping if there's an investigation, and it will profit if the accusations turn out to be true. There's no reason to think Markopolos won't profit if the accusations are bogus, because he profits from the market reaction, not from the actual merits of the accusations. In fact, his experience in the past tells him that even if his accusations are true, they're unlikely to result in successful investigations, and if his accusations are untrue, he's unlikely to face consequences for it. Also, whilst the people who go on CNBC to defend GE are paid to go on, they're paid a fixed salary, they generally aren't particularly incentivized to boost the stock price.
  - Excel_Wizard 7y ago
    >There's no reason to think Markopolos won't profit if the accusations are bogus, because he profits from the market reaction, not from the actual merits of the accusations. The strength of the market reaction is contingent upon the strength of his claims.
    - rando444 7y ago
      I'd like to recommend the book: The Myth of the Rational Market by Justin Fox
6gvONxR4sf7o 7y ago
You always hear about "the market can remain irrational longer than you can remain solvent." If you can convince the market you're right, I guess there's a lot of money to be made. It's an interesting incentive to search out and call out bullshit.
PowerfulWizard 7y ago
Here is another look at the GE insurance business with some napkin math regarding the adequacy of their reserves: http://brontecapital.blogspot.com/2019/08/one-more-brief-comment-on-markopolis-ge.html http://brontecapital.blogspot.com/2019/08/one-more-brief-com...
- PipBender 7y ago
  They hold a non-trivial amount (1,816,994 shares, valued at 19M on filing date, a lot less now) of GE stock: https://fintel.io/i/bronte-capital-management-pty https://fintel.io/i/bronte-capital-management-pty edit: added value
  - PowerfulWizard 7y ago
    Wow I didn't know that, he must be sweating.
roenxi 7y ago
Setting up a logical rock and a hard place for poor Markopolos with this one. If he shorts the stock, he has a bias. If he doesn't short the stock, different people would probably be saying "if he is so certain, why isn't he putting his own money in?". At least the logical outcome makes sense; everyone in the financial press should be considered untrustworthy at all times on all topics.
rumanator 7y ago
> While this doesn't mean his accusations are fake It is my understanding that Markopolos was paid to evaluate the company, and not to deliver a particular result. His money is in providing the results of his investigation, thus being paid when he delivers them. There is no need to come up with convoluted conspiracy theories. Occam's razor and all, and also the fact that GE is more than capable of hiring lawyers to defend their bookkeeping.
la_barba 7y ago
Other than assuming his accusations are flawed, how else would one "take into account" his motivations?

by kyrra 7y ago

panarky 7y ago

Just because Markopolos will profit from his work doesn't mean his work is bogus. In fact, if his work proves to be bogus, he most likely won't profit, and his reputation will be damaged forever. When GE people go on CNBC and make all kinds of carefully lawyered statements that sound like denials but aren't actually categorical denials, they're also getting paid. The GE people get paid whether or not their statements hold up over time. Given that, I'd put more weight on Markopolos because he actually has skin in the game.

S_A_P 7y ago
Well put. My knee jerk reaction is to frame Markopolos as the villain here but he does stand to lose much more if he is wrong. That said it is a dangerous game to be playing that can/will have ripple effects on all the folks working at GE that aren’t complicit in the fraud.
Traster 7y ago
The hedge fund shorting GE will profit from the value of GE dropping due to the bad news, it will profit from the value of GE dropping if there's an investigation, and it will profit if the accusations turn out to be true. There's no reason to think Markopolos won't profit if the accusations are bogus, because he profits from the market reaction, not from the actual merits of the accusations. In fact, his experience in the past tells him that even if his accusations are true, they're unlikely to result in successful investigations, and if his accusations are untrue, he's unlikely to face consequences for it. Also, whilst the people who go on CNBC to defend GE are paid to go on, they're paid a fixed salary, they generally aren't particularly incentivized to boost the stock price.
- Excel_Wizard 7y ago
  >There's no reason to think Markopolos won't profit if the accusations are bogus, because he profits from the market reaction, not from the actual merits of the accusations. The strength of the market reaction is contingent upon the strength of his claims.
  - rando444 7y ago
    I'd like to recommend the book: The Myth of the Rational Market by Justin Fox

6gvONxR4sf7o 7y ago

You always hear about "the market can remain irrational longer than you can remain solvent." If you can convince the market you're right, I guess there's a lot of money to be made. It's an interesting incentive to search out and call out bullshit.

PowerfulWizard 7y ago

Here is another look at the GE insurance business with some napkin math regarding the adequacy of their reserves: http://brontecapital.blogspot.com/2019/08/one-more-brief-comment-on-markopolis-ge.html http://brontecapital.blogspot.com/2019/08/one-more-brief-com...

PipBender 7y ago
They hold a non-trivial amount (1,816,994 shares, valued at 19M on filing date, a lot less now) of GE stock: https://fintel.io/i/bronte-capital-management-pty https://fintel.io/i/bronte-capital-management-pty edit: added value
- PowerfulWizard 7y ago
  Wow I didn't know that, he must be sweating.

roenxi 7y ago

Setting up a logical rock and a hard place for poor Markopolos with this one. If he shorts the stock, he has a bias. If he doesn't short the stock, different people would probably be saying "if he is so certain, why isn't he putting his own money in?". At least the logical outcome makes sense; everyone in the financial press should be considered untrustworthy at all times on all topics.

rumanator 7y ago

> While this doesn't mean his accusations are fake It is my understanding that Markopolos was paid to evaluate the company, and not to deliver a particular result. His money is in providing the results of his investigation, thus being paid when he delivers them. There is no need to come up with convoluted conspiracy theories. Occam's razor and all, and also the fact that GE is more than capable of hiring lawyers to defend their bookkeeping.

la_barba 7y ago

Other than assuming his accusations are flawed, how else would one "take into account" his motivations?