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Making money can be hard.
That's why so many everyday investors and wannabe rich people follow the people who seem to have it easier. These supposedly smart guys make a ton of money running mega-conglomerates, private equity shops, and hedge funds like kings.
But beware. When ego gets in the way of what they do and how they want to look doing it, the fallout can be devastating. It damages not only them, but the investors riding their coattails as well.
Here are three excellent examples of stupid ego mistakes that three financial world "celebrities" made, hurting their reputations and everyone who believed their hype…
A Failure Fit for a King
First up, the last wannabe king of General Electric Co. (NYSE: GE).
If you own General Electric stock, you should be disgusted. Not just with its performance, but with the company's just-retired chairman and CEO, Jeffrey Immelt.
Talk about a meltdown. Since Immelt took over in 2001 from legendary GE boss Jack Welch, GE's market capitalization dropped from $394 billion to $175.25 billion, a 56% tumble. In comparison, Welch had increased the company's capitalization by 5,500% over his 20-year run.
Sure enough, the company's capitalization fell because Immelt jettisoned some business lines, most noticeably slashing GE Capital. But slashing unprofitable businesses is different than cutting profitable revenue-minting units. Under Immelt, revenue dropped 33%.
While the stock market soared 710% over the years Welch ran the conglomerate, GE's stock climbed a far more remarkable 2,790%. Since Immelt took over 16 years ago, GE's stock is up barely 8%, while the market's up 213%.
Obviously, Jeff Immelt was a poor caretaker of the company's businesses and stock.
Ego may have had something to do with it. While Immelt was low-key in public, at the company, he was the king. And he acted like it.
Company benefits were rich. From club memberships and extravagant executive getaways to the 700 company cars Immelt doled out (460 times as many as Welch approved) to moving headquarters and building fancy new digs as home base, the spending on executives and perks outweighed spending on growth strategies.
And then there's the plane. I'm not talking about the six company jets, or the one Immelt hopscotched the globe in. I'm talking about the empty jet that followed him on more trips than the company will admit to.
I've known real kings, and none of them has a second, empty jet follow them. Sure, some have a second jet for their luggage, but hey, a real king's family has to dress the part.
Of course, a GE spokeswoman said, "two planes were used on limited occasions for business-critical or security purposes."
And Immelt said, "The corporate air team was overseen by our senior human resource manager. Given my responsibilities as CEO of a 300,000-employee global company, I just did not have time to personally direct the day-to-day operations of the corporate air team. I had every right to expect that it was professionally run. Other than to say hello, I never spoke to the leader of Corporate Air in 16 years."
That says it all, folks. The chairman and CEO had an empty company plane following him at the cost of at least $6,500 an hour, and he didn't know it? That's the work of a stupid ego.
GE's got a new chairman and CEO who is cutting costs and figuring out what went wrong. I still wouldn't touch the stock, in case he finds more Immelt skeletons. At some point in the future, after they do some good housekeeping, GE stock might be worth a long hard look.
A $2 Billion Lie
Next up, the U.S. Commerce Secretary Wilbur Ross.
The bottom line with the smart bankruptcy lawyer (and banker and private equity player) is that he's got an ego that apparently led him to lie about his net worth for years.
Personally, I like how low-key Wilbur Ross has always been. But according to several articles over the past few days, former colleagues at Rothschild and his private equity partners (including a top lieutenant and the number three guy at WL Ross and Co.) have come forward. They say that Ross has always exaggerated his victories and his personal wealth to attract business and play in bigger and better sandlots.
While a little fluff is one thing, this level of lying has brought millions of dollars' worth of lawsuits and settlements against the company.
Of course, in the private world of private equity, that has always been under the radar.
Being nominated to become secretary of commerce by President-Elect Donald Trump last year forced Mr. Ross to fill out some of those intrusive financial statements Congress requires. Wilbur claimed he's worth $2.75 billion, on the low end.
But when Forbes, who had Wilbur on their list of the 400 richest people, took a deep dive into his submitted financials, they scratched their heads. Ross' net worth had always been questioned at Forbes, but they always ended up relying on his representations. At least, until they did some new math.
What they found was a $2 billion difference. As in, they couldn't account for $2 billion of his fortune.
Forbes subsequently reported they couldn't see Ross' $2 billion fortune because they were told he had put it in trusts or gifted it between his nomination and confirmation.
Then he backtracked.
About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.