General Electric investors may have a sense of deja vu heading into Thursday’s special presentation on GE Capital. Last December, as the credit freeze impaired everyone from Wall Street firms to Main Street banks, GE managers held a similar meeting to address the impact on GE’s finance unit.
Few had cared about how GE Capital made money when it drove company profits, but during a lending crisis what was inside the black box suddenly mattered very much.

Investors learned that their bluechip industrial company was a big player in consumer credit cards and commercial real estate, had exposure to UK subprime mortgages, and owned more than $50 billion in off-balance sheet, asset-backed securities.

Three months later the stock is down 40%. The company lost its AAA credit rating, once referred to as “the gold standard” and “sacred” by managers; and it slashed its dividend.

The questions about GE Capital’s books remain, and have even grown to include doubts about the company’s book of business in Eastern Europe and Russia, as well its loan loss reserves.

Today GE’s chief financial officer Keith Sherin, GE Capital chief executive Mike Neal and GE Capital managers will, in the words of Sherin, “do a deep dive around the hot spots” including real estate, U.S. consumer credit, UK home lending, and central and eastern Europe exposure. They will show that GE Capital will make money in the first quarter and put to rest loss reserve fears by explaining their balance sheet stress tests.

The meeting space at 30 Rockefeller Plaza will be full to capacity and investors left in the cold are tuning into the webcast. For those who can’t listen in, we’re blogging it from across the street with comments coming at us from in the room. Refresh here throughout the morning for more news. And feel free to comment and email me with thoughts at kbenner@fortunemail.com if you’re listening along, too or have thoughts on GE Capital.

Click here for the morning session and here for the afternoon.

Every time I watch a confirmation hearing or hear talk of a stimulus plan or find out about yet another inauguration to-do, I can’t help but think about how much work there actually is to do.

This, I’m told, is a very Gen Y impulse, the product of being young, sleep-deprived, and raised on Mr. Rogers, who told us we really could do whatever we liked. But I think it probably has more to do with getting older, and coming to grips with what exactly our future might hold. Sure, we’ve got the Wii, and HDTV, and Google, but those only go so far when you’re unemployed, drowning in debt and lamenting the plight of the polar bear.

It’s a topsy-turvy world out there, and while every generation has experienced some of that, the real grown-ups in my life say that feeling does seem more pervasive than ever, reaching into just about every aspect of life – from foreign policy to the domestic struggles of young vets, from student loans to the greatest economic instability since the Depression, from joblessness at home to the perils (human rights, environmental and otherwise) of globalization abroad. Or maybe we just hear about it more.

Regardless, I know this worldview might appear a tad extreme, so in the spirit of sharing, I thought I’d give you a little insight into what I saw and heard this week to put me in such a lovely frame of mind - a small snapshot of one Y perspective.

5 signs of the apocalypse, and why they made me think of you…

1. Gold might as well be fur. Last night, I told my boyfriend I’m off gold. I’m not that flash to begin with – and I’ve been off diamonds for a while for obvious reasons – but after reading National Geographic’s January cover story, “Gold: The True Cost of a Global Obsession,” I couldn’t believe I hadn’t already known to eschew gold. “For all of its allure, gold’s human and environmental toll has never been so steep,” author Brook Larmer writes. At this rate, I’m going to have to take up an ascetic lifestyle. I already had to stop eating shrimp. My sister’s even done with Coca-Cola. And if anyone ever marries me, it’ll probably be without a ring (and not because I’m easygoing). It’s easy to dismiss as a whole lot of fanatacism, but with the amount and visibility of information that’s out there, we’re going to learn some things we don’t like. Ignoring them won’t make them go away. On the contrary, we should be grateful we do know, and doing our best to act on that knowledge when we can.
2. Everyone owes $50k! According to a financial aid counselor at a well-known Washington, D.C., university who my siblings chatted up last week, $50,000 to $60,000 in educational debt from undergrad is just about expected these days for her institution and schools of its caliber. There’s so much to say about that, and yet, no need to say anything at all. Because, as the College Board says, educational debt is an investment in your future, and a bachelor’s degree is all but essential these days just to be competitive (someone with a B.A. will earn $800,000 more than someone with a high school diploma over a lifetime), so young people hardly have a choice. But that doesn’t make it any less shameful.
3. Kids use Facebook for (not annoying) good. Believe it or not, and whatever you might think of the situation in the Middle East, I found the following rather encouraging: The 14-year-old daughter of close family friends recently updated her Facebook status – which people use to say everything from “Joey is ‘eating spaghetti,’” to, “Sarah is ’so, so, so excited to be engaged!’” – to read, “R. is ‘702 Palestinians murdered by Israel in Gaza (more than 230 children & 100 women) & 3100 injured. Donate your status.’” Now this is a little girl I’ve known since she was a baby, and whose young adulthood I’m so in denial about that I assiduously avoid her Facebook page, lest I find anything I don’t want to know. And Facebook is running out of ways to surprise me. But unlike the 101 groups for this or that cause, or messages from people actively proselytizing, this just had an earnest, honest, youthful sincerity to it that grabbed me. And  how nice to find that on Facebook.
   
4. The government hates animals. New York’s Governor David A. Patterson has proposed “an immediate 55 percent cut and elimination of zoo and botanical garden funds altogether in 2010,” writes Andrew C. Revkin on the New York Times’ Dot Earth blog. All right, I get it — the state’s in trouble, and the $5 million it’ll save by slashing the zoo’s funding will no doubt go a long way in stabilizing things. Doom a hedgehog, feed an investment banker, and all that. But really, how sad. It isn’t enough that we’re destroying natural habitats all over the world, now we have to target the artificial ones we’ve created to shelter the few animals who might survive us. What difference does it make if my kids never get to see a red panda or Bengal tiger? (Never mind the American pika, a cute-as-a-button rabbit relative that’s on its way to becoming the second animal to join the endangered species list because of global warming, behind the polar bear. NatGeo can be such a downer.) Sheesh. The Wildlife Conservation Society’s pithy but pointed video response to the budget cuts is perfect. I hope someone listens.
5. And I love my Mom, but what about the elderly? And in what could have been my own personal apocalypse, on New Year’s Eve, my mother was diagnosed with breast cancer. And last week, she had surgery to remove it. It’ll be a few months of recovery ahead, but the way she handled it – bouncing right back better and bossier than ever – reminded me of that Boomer resilience that some say (and I hope) we’ve inherited. But it also underscored how important excellent health care is: While watching doctors dote on my mom was a relief, I couldn’t help but think about all the people who don’t have that, not just all over the world, but right here at home. And while nine million uninsured children is a disgrace, our aging population will be larger than ever in the coming years – because of both the number of Boomers, and their lengthening life span – and adequate health care will be essential for them. Not meeting those needs would be a disgrace, too.

So that’s what I’ve been thinking about, guys. What does it all mean? I don’t know yet, except that there’s a long road of recovery and rebuilding ahead for us, too. Have I fallen off the maudlin cliff, or do you feel it, too?

A few weeks ago, when Oracle (ORCL) reported fine quarterly results, the company said it was no closer to persuading the board of BEA Systems (BEAS) to accept its earlier takeover offer. Clearly, Larry Ellison’s minions don’t quit easily. Instead, Oracle announced Wednesday it would acquire BEA for $8.5 billion, or about $7.2 billion when you subtract out the cash on BEA’s balance sheet.

A few lessons here. Pundits will say that business software increasingly is a game played only by the biggest of the big. That list that includes Oracle, Microsoft (MSFT), SAP (SAP) and three companies long known more for their hardware than software: IBM (IBM), Hewlett-Packard (HPQ) and Sun Microsystems (JAVA), which announced Wednesday a smaller acquisition of the Swedish database software maker MySQL. But, while the giants dominant the business software market, startups continue to flourish, especially of the Web variety. Salesforce.com (CRM) and NetSuite (N) are two good examples. (Though, what’s this? NetSuite’s IPO bubble appears to have sprung a bit of a leak.)

A second lesson: Silicon Valley companies that refuse to adhere to modern financial theory become takeover bait. BEA is a solid cash generator whose growth has slowed. That’s what attracted raider Carl Icahn, who saw value in BEA’s stalled shares. The fact that BEA had more than a billion dollars of cash and a mere $20 million in debt shows that it suffers from a common tech-company disease: a failure to use its balance sheet to reward shareholders. (BEA’s debt-to-equity ratio, according to Yahoo Finance, is a mere 1.4 percent; By comparison, Oracle’s is a far more aggressive 32 percent.)

Here’s the final lesson. Larry Ellison gets what he wants in the end. The seer of Silicon Valley has long been quickly dismissed for picking unneccessary fights with Microsoft earlier in his career and for his flamboyant lifestyle. While Microsoft has been battling Google (GOOG), Oracle trained its balance-sheet guns on the business it knows best, spending $25 billion in the process. The results have been impressive.

When Katie Benner and I were reporting an article this summer on the role of the big credit rating agencies in the mortgage-finance crisis I had a weird education on how these firms work. To boil it down, companies that want to sell debt in the public credit markets first present their information to ratings agencies, which then issue ratings and research to investors. The agencies — Moody’s (MCO), S&P and Fitch are the biggest — collect fees from the issuers. In other words, the institutions charged with giving advice to investors make their money primarily from companies issuing debt. It’s a classic conflict of interest, a case of the fox guarding the henhouse. Their fee, by the way, is contingent on the sale, meaning that the agencies are motivated, financially at least, to move the goods, not give good advice.

What interested me over the summer was that whenever I pointed out this conflict to anyone in the debt dodge, they told me this was the way it always worked. Case closed.

Things may be changing.

Hank Paulson, the treasury secretary, addressed the issue in a speech Tuesday, saying: “It is clear that we must examine the role of credit rating agencies, including transparency and potential conflicts of interest. We must also assess if regulations and supervisory policies are encouraging an over-reliance on ratings by financial institutions and investors.”

Well, identifying the problem is a start, but Paulson hardly is offering solutions. You’d think debt investors would be willing to pay for impartial advice, right?

We’re all becoming tax experts now. You can’t pick up a paper these days without wading into the arcane topic of how corporations and partnerships pay their taxes. I waded into this a couple months ago when I was researching an article on the spat between venture capitalists and buyout barons, both of whom typically structure their firms as private equity partnerships. Last week Congress proposed a law (already known as the “Blackstone tax”) that would no longer allow publicly traded private-equity firms to avoid paying corporate taxes. In a new piece on Fortune.com, the one and only Shawn Tully analyzes all this, coming to the conclusion that none of it is very promising for the continuation of the so-called golden age of private equity.

My favorite snippet of all, though, is a quote in the New York Times last week by Robert Rubin, the Citigroup (C) official and former Treasury secretary, who basically said all his rich guy pals should be taxed more. He said:

“It seems to me what is happening is people are performing a service, managing peoples’ money in a private equity form, and fees for that service would ordinarily be thought of as ordinary income,” Mr. Rubin said. He made clear that he was not a tax expert but said the issue should be looked at “with great seriousness” by the appropriate tax committees in Congress.

What I loved about this quote is how Rubin captured the spirit of what’s going on. If you spend too much time talking to tax experts you learn that there’s at least a logical consistency to the rule that allows partners to claim long-term gains on their partnership profits. But common sense, the guideline being used by as august a figure as Rubin, simply suggests otherwise: These guys are investing other people’s money and when they do it well they pay a lower tax rate than you and I (and Bob Rubin) do. Something’s got to give. Tax the rich!

Last month I wrote an item called How the private equity boom will end that laid out the barest of details on how the great 2002-2007 era of leveraged buyouts will eventually come tumbling down. The post generated passionate comments, which told me that plenty of folks have plenty of thoughts on private equity.

Since then, the drumbeat has gotten louder. A succinct column by Dennis Berman this week made similar points, as did a front-page story in the Wall Street Journal today. The Web site breakingviews.com weighed in today with an article arguing that overly ambitious buyout firms, like Blackstone, will usher in the fall. A snippet:

Sure, Blackstone has hired more people to watch over day-to-day operations at their portfolio companies. But the founder Steve Schwarzman is said to be the man with the magic touch, who oversees all its investments. With Blackstone’s IPO around the corner and the firm rapidly raising new funds, there’s a danger of investment overstretch.

There’s more. The Financial Times published a great interview with short-seller James Chanos. Here’s his synopsis:

What’s driving it is easy credit availability and, as importantly, the boom in structured finance, whereby lenders are parcelling out the loans in various collateralised obligations and investors are buying small pieces as they see it. It’s diffused the risk but the risk has not been eliminated. (emphasis added.)

I love that last line. People always assume that diversification alone mitigates risk. But if you’re diversified among different securities in the same market, you’re going to get hit when the market gets hit. Chanos is saying that just because lots of entities own pieces of the buyout risk doesn’t mean it isn’t risky.

The fever pitch is building. Typically the end doesn’t come until the fever recedes – a head fake, if you will. Stay tuned.

That’s the joke, anyway, among firms and people with built-in conflicts of interest in their jobs. Lawyers, for example, who know everybody in town — and represent most of them. Labor organizers who have relationships with governors. And investment bankers whose own firms have buyout arms.

As I reported my recent article on Kinder Morgan (KMI), I asked numerous buyout investors not involved in the deal if they were bothered by the role Goldman Sachs (GS) played as advisor, investor and debt financier. The typical response was that there was enough work going around and so it wasn’t such a problem. That may be about to change. A handful of private-equity firms, including Blackstone, Providence, KKR and Carlyle, are complaining that they weren’t treated fairly in the sort-of auction for Alltel (AT) claimed by …. TPG and Goldman Sachs. Goldman’s investment banking unit is advising the buyers in this deal.

It’s a complex deal – aren’t they all? – and some good explanatory stuff can be found in this Wall Street Journal Deal Journal entry as well as in reporting by Andrew Ross Sorkin in The New York Times. (Note Sorkin’s fascinating tidbit about how the winning group exceeded debt-to-equity levels set out by management in the bidding process. Also note the WSJ’s contention that Alltel management wanted to end the process quickly because it was concerned someone else would launch a lowball bid. That doesn’t make a helluva lot of sense.)

The point here is that what passes as business as usual in good times starts to get new scrutiny as deal conditions become stricter and fears begin to rise that we’re seeing a top in the buyout boom.

Signs of a bubble are everywhere in the buyout game. It felt like this in techdom in 1999, and yet it took many months for the air to begin to come out. What are the signs? The Chinese government is investing in the most prominent buyout firm of all, Blackstone. That feels a little like Japanese companies buying Pebble Beach or Rockefeller Center. Fed chairman Ben Bernanke warned last week that so-called bridge loans for the equity portions of buyouts could signal trouble. (It used to be that bridge loans were for senior debt, or the loans at the front of the bankruptcy line, not equity, which stands in the rear.) Bloomberg quoted Bank of America (BAC) CEO Kenneth Lewis saying the following about private equity:

We are close to a time when we’ll look back and say we did some stupid things. We need a little more sanity in a period in which everyone feels invincible and thinks this is different.

So how will it end? I discussed this in an interview last week with Marketplace Radio host Kai Ryssdal. (Listen to the interview here.) Eventually, the market will turn. Economic conditions won’t be as favorable. Rates will rise. Banks will start imposing stricter terms, something they aren’t doing today. BofA’s Lewis is right. Everyone always thinks this time is different. It isn’t. All that’s left to decide is who gets to play the greatest fool.

David Wessel, the always insightful columnist for The Wall Street Journal, pondered this quintessential question of our time today. If you’re an online Journal subscriber, you can read the whole piece here. He makes some curious arguments as he rambles toward the correct conclusion, that this age of every company racing to leave the public markets will end. Wessle writes, for example, that:

Part of the answer lies in financial engineering. Publicly held companies, from the standpoint of their shareholders, may be too reluctant to take on debt. Leverage can sometimes increase potential profits – despite the textbook arguments to the contrary – and debt-financed private-equity takeovers are one way to leverage corporate assets to that end.

This is all right except the textbook part. The textbook of modern financial theory actually suggests that leverage, successfully applied, will increase profit, at least on a per-share basis (which is all investors care about), and certainly will improve return on capital.

Though I really like Steven Kaplan, the University of Chicago scholar Wessel quotes, I disagree with Kaplan’s point that companies go private because their CEOs “prefer” private owners. They certainly like private owners when the buyout firms cut them in on the deal in a huge way. But that still doesn’t explain why they are going private.

The answers actually are straightfoward, and Wessel gets to them: lots of capital in the hands of sophisticated buyers and in the form of extremely attractive interest rates. When the cost of debt goes up, and it will, the velocity of the buyout biz will slow dramatically. Then the good privately held companies will go public again, and the bad ones either will get sold for less than they were taken out for or go bankrupt (and then get sold). The cycle is totally predictable. We just don’t know when the fun begins.