To outsiders, Wall Street is a manic, dangerous and ridiculous republic unto itself – a sort of bizarro world where nothing adds up and common sense is virtually inapplicable.
Consider the following insane things that we believe on Wall Street, that make no sense whatsoever in the real world:
1. Falling gas and home heating prices are a bad thing
2. Layoffs are great news, the more the better
3. Billionaires from Greenwich, CT can understand the customers of JC Penney, Olive Garden, K-Mart and Sears
4. A company is plagued by the fact that it holds over $100 billion in cash
5. Some companies have to earn a specific profit – to the penny – every quarter but others shouldn’t dare even think about profits
6. Wars, weather, fashion trends and elections can be reliably predicted
7. It’s reasonable for the value of a business to fluctuate by 5 to 10 percent within every eight hour period
8. It’s possible to guess the amount of people who will get or lose a job each month in a nation of 300 million
9. The person who leads a company is worth 400 times more than the average person who works there
10. A company selling 10 million cars a year is worth $50 billion, but another company selling 40,000 cars a year is worth $30 billion because its growing faster
Away from Wall Street, no one believes in any of this stuff. It’s inconceivable. On Wall Street, these are core tenets of our collective philosophy.
No wonder everyone else thinks we’re insane.
Great post Barry, nice weekend ahead.
ADMIN: That’s Josh Brown’s column
I’d add # 11
“Why is it a bad thing for AT&T to borrow money at historically low bond rates to modernize their physical plant instead of borrowing money to buy back stock.”
#9–that’s easy to explain. The exec is paid 400 times more because he has to put up with the whining, bumbling, back biting and conniving of the 40,000 employees under him. A couple were enought to drive me nuts. Thousands? You’d better pay them a lot. Or pay them avg. and put them back on the line to duke it out for bathroom breaks with everybody else.
Pay me 400 times more and I wouldn’t whine about being whined at. Heck just 100 times and I would sit every day from 8 am to 8 pm listening to all the whining. At that pay I wouldn’t be a whining CEO.
Wall Street believes those things for 4-7 years, and then reality hits and they need bailing out by main street…see 2008, 2001, 1998, 1994, 1987, 1982, etc. When it happens with such regularity, one must at some point begin to ask if it is a flaw or a designed feature.
didnt layoffs used to mean that business was bad? and that its likely that management messed up.now it seems that it was employees messed up. and must be punished for their failure
also while punishing the employees, we must be sure to keep executives that lead the company no matter what. so even if the company goes bankrupt say, we must be sure to ensure they stick around
and its also true that rising gas and heating oil prices are great
Volatility is here to stay! Only stock picking can save you!
Uhh… There’s no volatility! The only way to make money is individual stocking picking!
All part of the Efficient Market Theory …
“Away from Wall Street, no one believes in any of this stuff. It’s inconceivable”
Then why do WE have to fucking put up with it?