If we are looking for reasons that our current economic state is less than
acceptable we need to look no farther than Wall Street for some answers.
I am not talking about the normal "talking head" analysis that
we are fed each and every day, but just some plain common sense analysis.
As an investor you are faced with an unique opportunity to invest in one of two companies. The first has turned a profit over the last 16 quarters including a net income of 1.4 billion in the last quarter. The other company has shown declining net profits over the past 5 quarters and posted a 3.4 billion dollar loss in the last quarter. Which comapny should you invest in?
Well if you picked the first company you shareholder value dropped 11% as of the last quarters statement. The second company would have resulted in you increasing your invetmsnt by just under 5% upon the earnings announcement. How is this possible, well welcome top the financial markets. Beacause the first company failed to meet wall street projections the stock was battered. In the second case the company did not lose as much as expected so was rewarded.
The relationship of profit being good and loss being bad, has been upsurged by a group of white tower crystal ball projections, ultimately made by the same people who pay for their childrens education with stock fluctuations. (the two comapnies above are real, Google and Citi Corp)
I would like to see any private (non traded company) go to a lending institution and convince them to invest because they only lost half the money they thought they would this year.
A larger scam is perhaps the financial institutions expanations of the current credit situation. The same companies that made billions from passing of mortage paper over the past few years are now crying the blues because their profits are down. The huge losses they are posting are paper loses based on market values which they help inflate and drive during the past decade. For an enjoyable read be sure to check out the comedy call Chase buys Bears which happened over a weekend. A fire sale that we were not invited to and involved just a few billion in assets. Driven to extinction by investors over a period of three days they went from being a viable company to a paper tiger in 72 hours. Has to make you wonder who is next to be driven down to nothing. Perhaps GM whose share value has dropped +60% over the past few months? Just have to wait and see who the king makers called wall street advisers will line up for execution.
Next Month - Our cost of living brought down to the rest the world by 2010...or how Wallmart pays top dollar for employees.
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