The problem with Wall Street and analysts

[Mark B. Morrow]

Here is a guy who really gets the problem with the Wall Street mind set on short term profits and its gearing towards speculators.

 

http://www.detnews.com/apps/pbcs.dll/artic...UTO01/609090304

 

The "Analysts" who have been trashing everything Ford does don't have any interest in long term goals, just short term gain. A company that makes huge profits over a short term boosts its stock price and then goes under is more profitable to Wall Street than one that is steady but not spectacular. Wall street made out great on the DotCom boom/bust. They had people paying huge sums for companies that didn't make anything. It was all based on the speculation that the stock would continue to go up.

 

The problem is plagueing American business. It makes a very few people very rich but hurts the country as a whole.

[RichardJensen]

I like Warren Brown, he of the "we need our heads examined" remarks about the Five Hundred, and its early (as opposed to its more recent) critics.

[retro-man]

Wall Street creates nothing. It innovates nothing. It simply cashes in if the gamble pays off and cashes out if it fails. Wall Street is loyal to nothing except the illusion of uninterrupted profits and constant economic growth in a finite world.

 

Amen.

 

Now, on to the topic of executive (over)compensation.

[DSenstad]

I usually slam reporter but that man is a genius. :bowdown:

[g48150]

Its been this way since the Great Depression, when the SEC was first formed. Its the reason why stock brokers need to be licensed, and is DEATHLY afraid of the "day trading" crowd. In the 90's when Greenspan would complain about "irrational exuberance", he basically was saying don't shoot your wad all at once, you got to learn to spread it out.

 

Why do you think most companies tell their employees not to day trade? Its not because of wasting company time and money (they're already good at doing that...)

 

The internet IS the 21st century, its killing EVERY American post-WWII era "industry" except for one, Big Oil. Big Music (RIAA), Big Motion Pictures (MPAA), the Big 3 (offhandedly, mainly being able to sell cars and buy cheap knock off parts over the 'net), Big Money (remember the M&A's that happened in the banking industry post-9/11, e*Trade anyone?), Big Telco's (internet phone), etc.

 

This isn't a Ford problem its an American problem that we as the denizens of the USA are going to have to, well, change or die. Maybe going 100% online isn't the answer, but its got to be a good start...

[goingincirclez]

I've been on this subject re: wall street to my wife for years. I don't understand how people expect "infinite growth" out of an economy with finite resources. Especially now that it's essentially running on the "debt standard". Oh well, I'm no expert and I realize it's far more complex than what can be discussed here... but I will say, particulars of going privtae notwithstanding, that this Warren Brown guy gets it...

[RichardJensen]

The economy, while finite at any given point in time, generally continues to grow year over year. When the economic output of the country declines for two consecutive quarters, you have a recession. The question of finite resources hasn't really come up. We have seen a runup in energy prices based on a perceived scarcity, which may or may not pan out. At this time, there is no scarcity of anything. At least here. We have no shortage of wood, metals, oil, people, knowledge, or capital (money to lend). This is not the same everywhere else. Because the economy is finite, at any given time, there is only so much of the basic stuff that keeps the world running (especially capital and skilled workers), so a concentration in a few areas (NA & EU) necessarily deprives other parts of the world of these resources.

 

The means by which wealth is created (how GDP increases from quarter to quarter) is rather complex, and I haven't read enough on the subject to explain it simply, other than to say, it happens.

Edited September 10, 2006 by RichardJensen

[marc-o]

I think the article is pretty severe on Wall St, although overall, I agree with the point the author is making and most of what has been said. Short term thinking can yield short term results, which is great if you're trying to hold a stock until you get a good gain, then dump it... but the real world, where huge companies employ thousands of people in vast factories/buildings, you can't turn productivity, profitability and payroll on or off like a switch. These people, all people, need more certainty in their life than the whims of Wall St analysts.

 

Analysts provide valuable financial opinions, the problem is greedy executives listen to them too much. If they are told ways to increase their stock value (which executives usually own), they'll do it. Why? Because most CEO's and executives ARE Wall St people! GM is notorious for this. Car companies, any companies, run by financiers who have Wall St credentials are going to be trying to please that crowd, and those are usually not people who have worked their way up from within. Not to say that outsider blood isn't welcome, you just have to look at where it's coming from (the airline industry ain't all that bad methinks).

 

 

Of course we can't forget, these Wall St bad guys are ultimately trying to please shareholders. Yes they are usually significant shareholders themselves, but other shareholders can include the government, your bank, your employer, your pension fund, and in the case of most middle class Americans, yourself, one way or another. A lot of people are demanding to see the money now, not later. Those people don't all live in NY.

[Blue II]

The best option is the Ford family owning 51% of the class B voting shares and 51% of Mazda. Then tell WS to pound sand.

 

Sell LR, Jag, and AM. Roll Ford, Volvo, and Mazda into one engineering group.

 

See Ya Carlos.

Edited September 10, 2006 by Blue II

[wescoent]

As a Wall Street punk myself, let me lend some insight. Analysts tend to be some of the most overworked people you'll meet in a white collar environment. Staying in the office until the next morning and just changing your tie is not uncommon. In spite of the amazing compensation, making people work like that doesn't result in top quality work all the time. As an analyst, your job is to find a stock that is going to perform well, so your boss can look good when the stock does good. You get your bonus, drive your M5 back to New Jersey, and continue every year until you become the boss. Finding a good stock doesn't require getting 100% of the picture.

 

On the surface, Ford ain't looking too hot. They've had some seemingly weak launches after BIG hype (Five Hundred and Freestyle), they rely heavily on fuel-guzzling vehicles in what seems to be an age of unending gas price hikes, they have a lot of aged and uncompetative products in their line, and they are being very quiet on future products.

 

There is good news. They have embraced flexible manufacturing, have SOME good products in the pipeline (Edge/MKX), are a leader in hybrids, and have management that "get it". Hydraulic hybrids are in the imminent future, which if rumors hold true, could be a game changer that will vault Ford ahead of the competition and leave every other light truck manufacturer choking on their exhaust.

 

Lots of bad news, lots of good news. This is a classic case of a high risk company. They could crash and burn within a few years, they could be the industry leader in a few years, or they could continue being mediocre. No clear picture one way or another. A big gamble, something analysts are NOT comfortable with.

 

From a Wall Street perspective, here's my set of recommendations for Ford.

 

-Don't listen to us. Wall Street is good at making money, but not good at running manufacturing companies. Ford doesn't need Wall Street to raise cash, so don't worry about junk bond ratings and low stock prices.

 

-I don't think Ford should go private. It's a waste of money that Ford desperately needs to get product development on track.

 

-Concentrate your energy and cash on revitalizing Ford, Mercury, and Lincoln. Those are your core brands, and where a LOT of money could be made with the right products and image.

 

-Do not sell Jaguar. Make sure the S-Type and XJ have what it takes to compete with the best from Germany and Japan.

 

-Do not sell Volvo. The XC50, new V70/XC70, and C30 will give it a needed sales and hype boost.

 

-Do not sell Land Rover. They finally have a good product range, and they are on the cusp of another huge sales boost with the LR2. Nothing but profits here.

 

-Take Aston Martin public, but retain a controlling stake, ala Mazda.

[Mark B. Morrow]

From a Wall Street perspective, here's my set of recommendations for Ford.

 

-Don't listen to us. Wall Street is good at making money, but not good at running manufacturing companies. Ford doesn't need Wall Street to raise cash, so don't worry about junk bond ratings and low stock prices.

 

-I don't think Ford should go private. It's a waste of money that Ford desperately needs to get product development on track.

 

-Concentrate your energy and cash on revitalizing Ford, Mercury, and Lincoln. Those are your core brands, and where a LOT of money could be made with the right products and image.

 

-Do not sell Jaguar. Make sure the S-Type and XJ have what it takes to compete with the best from Germany and Japan.

 

-Do not sell Volvo. The XC50, new V70/XC70, and C30 will give it a needed sales and hype boost.

 

-Do not sell Land Rover. They finally have a good product range, and they are on the cusp of another huge sales boost with the LR2. Nothing but profits here.

 

-Take Aston Martin public, but retain a controlling stake, ala Mazda.

 

Good suggestions Wescoent. Ford needs to listen to the automobile market not the stock market. Perhaps the rest of American Business will follow. When your products sell, the stock price will take care of itself.

[wescoent]

I'm also pleased to note that Ford has hit $9 a share in trading today