May

11

The earnings beats/misses game is one of the greatest cons out there. It is a total distraction from the underlying economic trends or performance - a company can be in terminal decline but have 10 "beats" in a row which generates positive "momentum" - each one generating enough optimism for the better informed to liquidate into, including an opportune share issuance by the failing company itself.

Victor Niederhoffer writes: 

One is sure that a broker would espouse such a strategy. How about writing a box. That way 4 commissions and no way to win.

anonymous writes: 

It is imperative to the con that a study is done on markets with monstrous bid/ask spreads and a few contracts traded per day. Similar to the "small cap" effect where the companies that juice the return in many cases started the period with a sub $20M market cap and 2k of daily liquidity.


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  1. Jordi Ozir on May 27, 2016 3:33 am

    Could you please write a more elaborate storry on this? I would really appreciate that. I also think that during a boom a lot of companies go public that have no value. However, a part of revenue of banks is underwrittings of IPOs. Stock get an upgrade ratting even when the company is not good. Look at GoPro for instance. The stock gained much after IPO and it trades today below $10.

    In some cases an analyst that upgrades the stock works for a bank that also did the underwritting. In some rare cases the firm also owns stock in the firm that went public. It sounds like a conflict of interrest.

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