Truth really is stranger than fiction, which is why fiction writers have an endless source of material to choose from. And if one human being can make bizarre decisions, imagine what the human race en masse can accomplish. Nowhere is this more apparent than in the stock market.
While many people have simply given up on gambling in the stock market, those of us who think of ourselves as the old coyotes of the financial world look for opportunities to pick off dazed rodents stunned by financial explosions (or maybe implosions is a more appropriate word.)
Take the financial news of the day. Sprint, the cellular phone company whose stock value on paper approaches 15 Billion dollars at nearly $4.5 per share, has been steadily losing money for years. According to my stock-watching software, this year it’s estimated losses are $1.19 per share, over one quarter the value of each share. Losses narrowed slightly on reports that the company had added contract customers to it’s rolls for the first time in three years, so the stock rose 3.2% in one day. Clearly, investors believe it is a good idea to lose less money each year rather than lose more money. Investors put 480 Million dollars to work losing less money.
On the other hand, Cisco Systems, another technology company, with stock “value” somewhere between 110 to 115 Billion dollars at $20 per share dropped over 12% of its value in one morning on news that it had only beat analysts’ expectations of quarterly profit by 2 cents. The company is estimated to earn $1.36 per share for the year. Conservative money managers at the company have so much cash on hand, they are buying back company stock. However, “Investors” threw away 13 Billion dollars selling off stock on the disappointing news.
No doubt some of them invested in Sprint, so they could lose less money rather than make more money.
Now, if you understand the rationale of those kinds of decisions, you could be getting fat on lemmings.