What GE’s Earnings Miss Tells Us

General Electric reported first quarter earnings this morning and missed estimates by seven cents. GE reported 44 cents compared to the estimates that were at 51 cents.

This wasn’t a small miss.

It was also the largest miss by GE in years (maybe decades- but maybe someone can fill me in on the last big miss by the company.) General Electric, you see, is always pretty stable and dependable.

What was the problem?

It wasn’t the economy. Nope. Several of the company’s divisions are doing quite well- especially the global infrastructure division as the emerging market countries are still going gangbusters.

No surprise, the problem was in GE Capital Services- the company’s financial arm. GE doesn’t just build airplane engines. It is basically the country’s seventh largest bank.

The company has subprime loan problems and therefore credit problems.

But the scarier thing about this earnings announcement wasn’t that their financial segment was bad. That could be understood given what is going on in that sector.

The scariest thing was that GE is acting like it DIDN’T EVEN KNOW ABOUT THE PROBLEMS.

GE’s CEO was on CNBC this morning saying that March was awful and that in the last two weeks it has really looked into the businesses to see what was going wrong.

In the last two weeks?

The credit crisis began last August with the implosion of a Bear Stearns hedge fund. It continued in January when the Fed was doing emergency rate cuts.

Why did it take until March for GE to figure out that things were rotten in its financial division?

What it tells me is that NONE of these banks or financial companies knows what is going on in their businesses. They have no idea what their exposure is, how deep they’re in the doo-doo, what kind of money they owe, what loans will go bad.

They have no idea about anything.

And the credit crisis is supposed to be over?

I don’t think so.

Beware of the financials. What you don’t know as an investor CAN hurt you.

GE lowered its 2008 estimates today. Imagine that.

Who’s next?