In writing this next episode of my inside look at the corporate world, I am going to take the liberty of stepping outside and shining the light on another group, the stock market analysts. This group, in a manner of speaking, is like a super-company which has perhaps reached even greater heights in skullduggery than the most astute corporate gurus.
There is no gradual rising up the ladder for a member of this analyst group. Each one is a self-proclaimed pundit from inception. They have the final word on any situation or company, or both, except that the final word is never a conclusion or definitive recommendation on anything. If you think any of these ‘experts’ will tell you which stock or mutual fund to invest in, you will be sorely disappointed – the best you are going to get may be something like, ‘subject to global winds of uncertainty, we see a potential for this company to add value in the long run’. ‘How long is long?’; ‘Value for who?’; and, ‘What is Value anyway?’
When an analyst rates a stock, the words are well designed to be ambiguous enough to cover his/her backside when (not ‘if’, you may note) the predictions fall flat. ‘Outperform’, ‘Underweight’ and similar terms may give you the impression that you are looking at an advertisement for a gymnastics show or MMA event. And it becomes even more complicated, read incomprehensible, when the ratings of multiple analysts are averaged out on a scale of 1-5 and you get a ‘recommendation’ of 1.49. You might as well toss a coin to make your decision.
When these analysts form a panel to discuss ‘stuff’ on TV or other online media, it feels like you are watching an alien invasion of your property, read sanity. The topics discussed and the language used are bizarre and so full of jargon that discussions in any corporate meetings sound like nursery rhymes. Terms like ‘forward looking same-store performance’ and ‘earnings per share adjusted for reverse splits’ leave you mesmerized and frightened at the same time. To top it all, an array of charts and graphs are shown, moved around and superimposed on one another till you are dizzy with vertigo.
Data is the analysts’ forte and invincible weapon. Any point of view can be proven or dismissed using ‘relevant’ data. So, the analysts, over decades, have come up with more and more ratios and ‘indicators’. They could bind you into a tangled web with price-to-earnings-to-growth and return-on-equity ratios while befuddling you with operating income from ongoing operations. When they run out of numbers and ratios, they invent new ones by dividing two existing numbers.
If you feel the need to run for your life from the assault of these analysts, I would recommend you head for your backyard and, along with the squirrels, bury your precious savings.