Re: Toyota profits - "The sky is falling..."
Where have you been? The stock market has worked in this obscene way for years. It's not a matter of profit or loss anymore, it's a matter of actual vs projected.
You have two companies:
Company A is a dynamo, making lots of money with a solid reputation and a good product. At the start of the quarter, they have been predetermined by market analyisis to make a projected 1.7 billion dollars next quarter in profits. At the end of the quarter, their profits are 1.6 billion. Articles about how they don't meet projections abound, articles about what's wrong with the company and who should be fired circulate all the trade rags, and the stock price dips.
Company B has no real product, and has for the last 3 years posted a loss for every quarter. They are projected to lose 800 thousand dollars by the next quarter. At the end of the quarter, articles abound about how great this quarter was and how they're the company to invest in now, because they lost 600 thousand in the quarter and the stock price skyrockets.
That's how the modern stock market works, and has worked for far too long. It's also why there's such a short term focus at every big company despite their product lifecycles, because the executives all get bonus' or golden parachutes for meeting or exceeding market forcasts, and the only way they can do that is to focus only on short term and make absurd (to the long term) decisions. Even articles suppositioning that a company may or may not make their expected profits can have an effect on the companies stock price.
Some people have blamed this shift on the day traders, others on the futures market rubbing off on shareholders, and some on too many short term investors compared to long term investors on the market. Many "old school" investors blamed the internet for introducing too many "stupid" investors looking to make an overnight fortune and buying without any idea of what they're buying, just looking at the bottom lines and accounting divisions who try to make their company look appealing by doing what they can to those bottom lines.
BTW, both companies I used in my example are real, and both went through the situation that I described, though I did make up the projected amounts; company B is/was Amazon.com.
Last edited by Pravus Prime : 05-15-2008 at 11:02 AM.
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