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Lying CEOs Crash Their Stocks (So Will The Fed)
Submitted by Daniel Drew via Dark-Bid.com,
CEOs are not the most trustworthy figures in society. They will lay off thousands of employees to beat analysts' estimates, and yet they have no trouble looting the stock to pay themselves millions while the company loses money. However, one theme that keeps coming up is that unethical behavior has a price tag. Layoffs do not always boost the stock price. Treating people as expenses instead of assets does not pay off in the long run. Corruption is a drag on stock performance. Now, a new study shows that CEOs who lie about poor performance end up crashing their company's stock.
Stephen Ferris, Don Chance, and James Cicon wrote a paper called, "Poor Performance and the Value of Corporate Honesty," which will be published in the next issue of the Journal of Corporate Finance. The authors scanned press releases for words like "apologize" and "regret" to find negative reports. They reviewed 150 company announcements from 1993 through 2009 when the company reported poor performance. When companies blamed external factors, they usually provided vague explanations. When they admitted mistakes, they used specific phrases like "bad acquisitions strategy," "accounting errors," and "manager mistakes."
Two-thirds of the announcements attributed the poor performance to external forces. The authors were careful to assess relative performance to account for industry-wide downturns. The University of Missouri reports,
Those companies accepting responsibility saw their share price stabilize over the next several months, while those that blamed others continued to experience falling share prices. Ferris said several factors could be the cause of trying to lay blame on external forces. Those factors include arrogance, pride, fear of litigation, and the inability of company leaders to see their own shortcomings. Of those companies that blamed external factors, 44 percent replaced their CEOs in the following year compared to only 32 percent of companies who accepted responsibility.
Don Chance cited BP as an example of a company failing to take responsibility. On April 20, 2010, the Deepwater Horizon exploded, which started an oil spill that lasted for months, eventually totaling about 5 million barrels. It was one of the largest environmental disasters in history, and CEO Tony Hayward's bumbling response to the emergency was quite memorable. Hayward said the oil spill was "relatively tiny" compared with the ocean. He also said, "You know, I'd like my life back." The eleven men who died in the explosion probably wanted their lives back too, but they weren't around to tell Tony Hayward.
As Don Chance noted, the BP spill was a textbook case of poor leadership. The stock crashed, and Hayward was eventually replaced by Bob Dudley a few months after the spill.
With this study in mind, consider the implications when the New York Fed tells us that economic activity declined because of the weather. Now that it's summer, it's not clear how cold weather is interfering. Perhaps the Fed has a South Pole subsidiary? When will the market crash and the Fed be replaced for lying about poor performance?
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Everybody knows that CEOs and Central Bankers are Noble individuals doing God's Work, so it has to be the weather. That or I can't find my dentures.
Indeed, the greater the ego, oft fueled by positions of money, power, property and prestige lead to narcissistic beliefs of infallibility based upon vanity.
The Weather's Fault is simply the Popular Excuse du jour.
You misspelt whether.
When will the market crash and the Fed be replaced for lying about poor performance?
When that pig, Mr. Yellen, flies.
Yep. Only after a dollar crash. Then, banks will be forced to use 'real' collateral instead of the lost taxability of the US debt serf.
Welcome to The Great Depression 2.0, serfdom worldwide, and the elite have got a ticket to an aeroplane....
https://www.youtube.com/watch?v=pnGl8Nz0oLE&feature=youtu.be
Sorry. I was distracted by the morning Kool-Aid which tatsed kind of like puppy urine and drain unclogger with just a touch of lemon.
As a west coast hindu, shouldn't that have been cow urine in the AM knuks..
Krishna is a vengefull god.Beware.
I knew it didn't taste right!
And all this time I thought it was the RonCo Popiel Magic Blender's fault. Well, that or the weather.
MOAR Cowbell
The indicators I see point to a crash. September is my guess. Mfg is in decline - an early indicator.
"You screw up, you move up" - your lovely bitch Fiorina.
It's all about lying and pretending.
Being consistent with the same lies long enough and everyone believes them.
Comedy:
Reality:
They have crashed the market before. The President's Working Group on Financial Markets was set up right after the crash of '87 to create the markets. Litterally create the markets how they want when they want. Want a bubble? Create a bubble? Want a crash? Initiate a crash.
From the government website -
By virtue of the authority vested in me as President by the Constitution and laws of the United States of America, and in order to establish a Working Group on Financial Markets, it is hereby ordered as follows:
The provisions of Executive Order 12631 of Mar. 18, 1988
Executive Order 12631--Working Group on Financial Markets
http://www.archives.gov/federal-register/codification/executive-order/12...No man in 1988, like the rest of men in human history until 20 years ago, would have ever thought a woman should be in charge of anything. They were correct.
US economic statistics have been lies for decades especially inflation, GDP and unemployment rates.
Every statistic about the US economy is now a lie as David Stockman looks at 5.5% unemployment:
At the present time, there are 210 million adult Americans between the ages of 16 and 68—to take a plausible measure of the potential work force. That amounts to 420 billion potential labor hours, if we accept the convention that all adults are at least theoretically capable of holding a full-time job (2,000 hours/year) and pulling their share of society’s need for production and work effort.
By contrast, during 2014 only 240 billion hours were actually supplied to the US economy, according to the BLS estimates. Technically, therefore, there were 180 billion unemployed labor hours, meaning that the real unemployment rate was 42.9%, not 5.5%!
Yes, we have to allow for non-working wives, students, the disabled, early retirees and coupon clippers. We also have drifters, grifters, welfare cheats, bums and people between jobs, enrolled in training programs, on sabbaticals and much else.
http://davidstockmanscontracorner.com/the-warren-buffett-economy-why-its...
Inflation in the land of the free is not so phantom though - Chapwood Index shows real inflation in US.In 2014, it was 9.7% - 1212% of official US inflation (0.8%)
http://www.chapwoodindex.com/
When you have such a devastatingly cold winter, the psychological shock sometimes lasts well into the summer. God help us if it gets really, really hot this summer. I just don't think we can take any more. On the bright side, if people are afraid to go outside or to get out and be productive and spend mioney, they will likely stay inside and buy more stocks.
So it the heat thats cauing the problem ?
I've had to travel all the Lowes in a 30 mile radius in the last few days trying to locate a
particulay shade of Travertine for a client, emptying and refilling the crates in the store, sorting..
Even my helpers are commenting about how dead all the stores are, gaggles of staff outnumbering
customers 15:1 .
Another recovery summer is at hand.
When did the CEO position become decoupled from the business itself? I can't recall...I seem to remember, when I was much younger, that your average CEO of a company KNEW that business, had WORKED in that business, frequently from young adulthood, and gradually ascended to the top position.
Of course, such a CEO would truly be the "best and brightest" because of all his (yes, they were nearly ALL male back then) experience.
At some point, this position WITHIN a business became a BUSINESS ITSELF. Separated from those businesses that gave rise to them, these new CEO's became their own industry. They could flit to this company and that, could go from making sneakers to fast food to Hello Kitty lava lamps just like that. They owe NO allegiance to that company, only to some faceless band of "shareholders". These shareholders might even have an interest in harming the company, depending on how they are invested, but no matter, THEIR wishes and interests come first.
These CEO's do NOT work for the companies that pay them. They are employed by that loosely-organized corporation called "Shareholders Inc.". They are more properly viewed as a hostile, occupying force that must be repelled as quickly as possible, before they can do too much damage.
If you figure in the double seasonaly adjusted temperatures, it's still quite cold out.
You don't get to those high positions by being 'Mr. Nice-guy'. That said, there should still be room left for integrity and dignity. Or not.
But everything is fine, because that was the plan all along.
First it was too cold to buy shit, now it's too hot to buy shit. Even though everyone sits on their ass in their climate control and orders online. How is amazon doing?
Mr Yellen is correct: it is the weather. There's a shitstorm brewing and people smell it.
The FED isn't lying, they are gods chosen people. If what they say contradicts the data than means the data is wrong and needs to be fixed.
Personality tests required to join management in any publicly held company and any sociopath rejected from the available pool would be a great place to start.
It is the fear of blame vs the identification of responsibility. A manager that fears blame will kick the can. One that solves problems will identify the factors that are responsible for an undesired outcome and make changes to those factors. He is not going to double-seasonally-adjust them or goalseek them. He will take effective action.
This is what now passes as capitolizm. Financial engineering. Instead of GDP or manufacturing. IMO