 Good day fellow investors and welcome to the weekly stock market news with a fundamental twist. Today I'm going to talk about general electrics meltdown, what is the fundamental reason behind that meltdown and how it can save you from future meltdowns in a lot of other stocks that have similar focus as general electric. Then we are going to slowly talk about demographics because it's a very very powerful trend related to long-term investing. Then we're going to shift on to governments debt and how the demographic story reflects in higher and higher debt levels. The governments aren't really thinking about the long-term debt situation except one government and then that government it's criticized about it. So let's immediately start with general electric. I can talk about general electric because a year ago a little bit more than a year ago I wrote an article about shareholder value destruction and how to spot that. And my example was of course general electric that was spending 21.5 billion of shareholders money on buybacks to push the share price higher even if their earnings per share was just 11 billion. As you can see a year ago the stock price was above 40 and now it is more than 50 percent lower. Why is it 50 percent lower? Because general electrics focus the management's focus is not on shareholder value creation and that's what you want to have when you invest for the long term when you are in pension fund where when you invest for dividends you want shareholder value long term creation. If a company sells assets to get to cash and the company doesn't focus on improving that assets they prefer to sell everything that doesn't have a good profit margin because they are incompetent. What do they do? They buy back stocks with everything that they have because they want higher stock prices to get higher options. Previous general electric CEO Jeff emailed he just wanted to push the stock price higher so that he can retire with a huge bonus. If he sent the company bankrupt he didn't care and that's the biggest problem of corporate America globally corporate problem is the management's focus not on creation of value but on buybacks. Let me show you what I wrote exactly a year and a month ago and that proved very very timely then. By the way these articles are published on Investive Daily which is an American investment platform that I write daily for. General electrics buybacks activity can be easily questioned as they spend 21 billion on buybacks while their earnings were 11.4 billion. General electric usually repurchases stocks when the stocks are expensive. Here we can see their buybacks are always done at extremely high price to book values. When the stock is cheap they don't do any buybacks of course logically. Then the CEO of general electric is paid 26 million a year of which 34% is in stocks. So he's so eagerly repurchasing those stocks to push the price even higher and decrease the value of his options. He retired he doesn't care anymore what's going on. What would you do if you were the CEO of general electric where your salary depends on the stock price and you have a 21 billion Canon that can be recharged yearly. That was my mistake the Canon can't be recharged anymore because there are no more assets to sell there are no more earnings because the value has been destroyed in order to push higher an imaginary stock price. So they didn't invest in the real business they invested in buybacks and destroyed a very very good company and this is just the first example of many companies in the future because the focus is wrong the focus is on stock price and not on value creation and the trouble of everything is that general electric and such companies are owned by pension funds so many many retirees dividend investors will see their dividend income fall their retirement income fall their retirement wealth fall because of what's going on with general electric now when the environment shifts and all other issues with all other companies that are doing the same come out then we will really really see trouble and what's going on with GEE is a problem of focus because management isn't focused on improving the business is just focused on buying back shares and spending as much cash as possible to increase the value of their options biggest problem in the global corporate environment second issue in the global not corporate but economic environment are demographics demographics are an extremely powerful force that evolves over the long term but that nobody likes to really look at because it's boring it's over the long term however it's extremely important here we can see the biggest risk of all deflationary demographics we can see that the US labor force growth has been really really slowing down so the trend is no longer your friend lower growth in labor force really led to the current economic recovery being the slowest in history never in history has the economy grown so slow as it is now this is because there is less people less labor force and even the growth that we have now is thanks to that similar situation is in Germany the country is about to see its peak in population and what's very important is that the population of people above 60 years is going to hugely increase really fast growth and the young population is going to decline which is where the value is created so that's something that will impact a lot of developed countries and they are solving that issue with debt a little bit more about that later now if we look at fertility rates across the globe we can see the blue a lot of blue in europe very low fertility rates a lot of red in africa very high fertility rates a mixed picture in asia however what you want is positive fertility rates above 2.1 which leads to higher population and economic growth higher economic development what's going on in india what's still going on let's say in china not that fast anymore but indonesia and such countries is really really good so we really have to think about how to invest in relation to demographics because the developed countries have one solution for what's going on except one country and that is debt this is the expected fiscal train wreck that will happen to the us the us is accumulating deficits deficits deficits and everybody thinks that is normal because every developed country is doing that so apart corporate craziness with buybacks this is governmental craziness with deficits this will put a burden on future generations there is no doubt about it if you see here when i was two years old the federal debt was 10 times lower than it is now and then you have one country that is saving that is thinking about the future generations that knows that there will be more older people so we have to save more now in order to have a good situation in the future and imf president says that germany has to spend more because it has surpluses it doesn't do what all other countries do which is take more and more and more debt so germany is trying to think about future generations and that's not good so that's really crazy since when saving thinking about the future protecting future generations really having common sense it's not good anymore what's good do what the us does would do what the ECB does take on debt debt debt and who cares about who is going to repay that debt in the future we're gonna print money and who cares so it's really corporate management is the trouble but also the government is the trouble everybody thinks short term which creates a train wreck that's getting bigger bigger and bigger as there is more debt in the world and as the corporations also pile more debt in the world what's very interesting is that us treasury holdings the foreign treasury holdings grow higher higher and higher so if those foreign institutions that hold those holdings hold those treasuries change their minds about the us then we could also see a shock so it becomes a story about sentiment that can put that can push interest rates higher and even further increase those deficits so the situation is really really crazy across the whole board nevertheless junk bond spreads are at the lowest since 2007 nobody is thinking about risk and i am probably very crazy because i discuss risks and often mention it however what can i say i must be crazy perhaps that's why you like watching these videos you never know and this what i found for the Deutsche Bank very very interesting the current refinancing of bonds is less than half of what it will be in a few years because all those bonds that have been issued now at low interest rates will have to be refinanced in the next few years and what if we see higher interest rates in the next few years if people start being afraid about this money about this constant debt about the focus on debt and on repurchases share repurchases if we see a recession so huge pile of risk piling up day by day day by day but nobody talks about it we on this channel will look at assets now how to protect yourself producing assets i'm going to talk about food and food stocks more in detail analyzing an old weather portfolio so that whatever happens because we don't know what will happen we are protected thank you for watching looking forward to your comments especially where i'm wrong i want to learn we have to learn here as a channel together as people that are interested not in being right or wrong but people that are interested in learning and the best way to learn is to be confronted with ideas so share your ideas where am i wrong what can happen everything that we everything that can add value to this channel i'll see you in the next video