"Shareholder sentiment" at 1:30pm Eastern is what institutional trade desks think about the collective opinion of other trade desks that is reflected by the bid-offer spread for the usually very small equity interest traded in a public company each day. In other words, value, as measured by the ticker, is the result of transactions at the margin—the entire public float does not change hands in the normal course, only in a panic. Despite all the mumbo jumbo of triple tops of the sigmoid omega, most trades are made in hopes of a year-end bonus. The qualification for the bonus competition is to "beat the market." The safest way to do that is to do what everyone else appears to be doing plus assuming a tiny amount of risk. Shoot-the-moon players crash and burn earlier or later.
The alignment of executive incentives with shareholder value in any business is often accomplished through stock options entitling purchase at some day in the future at the price on the date of grants. So, in the pursuit of aiding options being in the money, management might be expected to express pessimism to exert influence on market sentiment to depress the price at the time of issuance and to express optimism at the time of vesting.
Management's expression will also be tailored to what's in vogue. If layoffs are the hot ticket, pink slips flow. The pink slips might also coincide with the expiry of commercial leases or other internal drivers that don't have public visibility. Or such event may take place without a direct nexus to headcount. The supposedly omniscient, infallible market doesn't know unless management makes it public. Rumors compete. Earnings calls and 10-Ks come out with their chances to ask and their depths to plumb. A CEO/CFO team that survives for long has mastered the art of the truth that hides reality by asking analyst questions as posed, instead of the questions that should have been posed. A team of security lawyers crafts and shapes the MD&A to disclose what must and leave undisclosed what need not.
The tenure of management is uncertain—For every seemingly immortal Jamie Dimon, there are a dozen In-and-Out Burgers. The bonus that you get when the getting is good beats the bonus that you might get on the basis of a 5-year or 10-year plan based not on the kindness of strangers' good opinion of the day but on fundamentals of the sustainability and profitability spread over the risk-free rate. There is an acute sense or mortality, not only personally, but for the institution.
Take any industry and look at the league tables from 50 years ago, say the Nifty Fifty. Some have survived, doing much the same business to this day with continuity of management (no losing mergers unike the two SF companies, Bank of America and PacBell whose HQ buildings were left empty within days of acquisition of the one by Nationwide and the other by SW Bell). Tick and tie those who meet the survival criteria.
Or, better yet, look at the masters of the universe of Wall Street who became Lost Boys: Merrill, Lynch Pierce Fenner and Smith, Bear Stearns, Stanley Brothers, Warberg, DLJ … dozens of others that may have been heard of before they faded from public memory.
Banks—my-o-my. Just in the Great Recession, alone. Or take any of the megabanks and feast on its krill of acquisitions by merger or from the FDIC as receiver for failed banks.
Shareholder value is a social engineering game of framing the question to advantage. I was there.
I like your article, but I feel the real reason for the discrepancy is because the economy is in a bubble. Right now big companies are still doing well on paper, but of course if we really go into a real depression and recession, then they are going to be affected too. Actually they already are being affected - hence the layoffs.
"Shareholder sentiment" at 1:30pm Eastern is what institutional trade desks think about the collective opinion of other trade desks that is reflected by the bid-offer spread for the usually very small equity interest traded in a public company each day. In other words, value, as measured by the ticker, is the result of transactions at the margin—the entire public float does not change hands in the normal course, only in a panic. Despite all the mumbo jumbo of triple tops of the sigmoid omega, most trades are made in hopes of a year-end bonus. The qualification for the bonus competition is to "beat the market." The safest way to do that is to do what everyone else appears to be doing plus assuming a tiny amount of risk. Shoot-the-moon players crash and burn earlier or later.
The alignment of executive incentives with shareholder value in any business is often accomplished through stock options entitling purchase at some day in the future at the price on the date of grants. So, in the pursuit of aiding options being in the money, management might be expected to express pessimism to exert influence on market sentiment to depress the price at the time of issuance and to express optimism at the time of vesting.
Management's expression will also be tailored to what's in vogue. If layoffs are the hot ticket, pink slips flow. The pink slips might also coincide with the expiry of commercial leases or other internal drivers that don't have public visibility. Or such event may take place without a direct nexus to headcount. The supposedly omniscient, infallible market doesn't know unless management makes it public. Rumors compete. Earnings calls and 10-Ks come out with their chances to ask and their depths to plumb. A CEO/CFO team that survives for long has mastered the art of the truth that hides reality by asking analyst questions as posed, instead of the questions that should have been posed. A team of security lawyers crafts and shapes the MD&A to disclose what must and leave undisclosed what need not.
The tenure of management is uncertain—For every seemingly immortal Jamie Dimon, there are a dozen In-and-Out Burgers. The bonus that you get when the getting is good beats the bonus that you might get on the basis of a 5-year or 10-year plan based not on the kindness of strangers' good opinion of the day but on fundamentals of the sustainability and profitability spread over the risk-free rate. There is an acute sense or mortality, not only personally, but for the institution.
Take any industry and look at the league tables from 50 years ago, say the Nifty Fifty. Some have survived, doing much the same business to this day with continuity of management (no losing mergers unike the two SF companies, Bank of America and PacBell whose HQ buildings were left empty within days of acquisition of the one by Nationwide and the other by SW Bell). Tick and tie those who meet the survival criteria.
Or, better yet, look at the masters of the universe of Wall Street who became Lost Boys: Merrill, Lynch Pierce Fenner and Smith, Bear Stearns, Stanley Brothers, Warberg, DLJ … dozens of others that may have been heard of before they faded from public memory.
Banks—my-o-my. Just in the Great Recession, alone. Or take any of the megabanks and feast on its krill of acquisitions by merger or from the FDIC as receiver for failed banks.
Shareholder value is a social engineering game of framing the question to advantage. I was there.
Whether its the market or raising shareholder value its done through reducing cost.
What made companies optimistic is the advance of Ai that will advance automation and robots with it.
Low interest days is a an opportunity to grow.
Hight interest rate is opportunity to destroy.
And also we have seen a lot of "heavy" selling last Year going into Year end from "Inside Trading activities"....
Capitalism, always shining a light on humanity.
I like your article, but I feel the real reason for the discrepancy is because the economy is in a bubble. Right now big companies are still doing well on paper, but of course if we really go into a real depression and recession, then they are going to be affected too. Actually they already are being affected - hence the layoffs.