Contrary to what is said earnings don’t miss estimates, estimates miss earnings.
Why is the industry designed to keep the artist in debt? Why did they let the ‘Terminator’ win the election? Why do rappers lie so much of the time? These are but a few questions posed by Jadakiss in his 2004 protest song “Why.” It’s now 14 years later and many of his questions remain unanswered.
Truth is, from hip-hop to pop culture to politics to finance, we’ve all got unanswered questions. I’ve got mine too. And here are a few for Mr Market.
Why is 2008’s 33 per cent market crash so memorable, but 2012’s 33 per cent rally so forgettable?
Why do we have over 60 companies listed yet only 10 account for 85 per cent of the liquidity?
Why are women still scared of the market? For every three investors, only one is a woman.
Why did Kenya only get a pass at above six per cent (and not lower) in the Eurobond market? Is it the 53 per cent debt-to-GDP ratio? Is it the 6.1 per cent current account deficit? No.
Another country (Japan) whose gross national debt is 250 per cent of GDP, by far the worst in the developed world, and mega deficits year after year, still boasts of an A+ credit rating and bonds yielding almost negative? Why do markets behave like this?
Why do equity funds market themselves as long-term but spot less than 100 per cent turnover rates. Rates below 100 per cent means average holding periods are less than twelve months. Is 12-months the new “long-term”?
Why is cost-averaging still so popular? Hasn’t hope gone out of fashion yet?
Why do we believe “earnings missed estimates” statement means something? No. Earnings don’t miss estimates, estimates miss earnings.
No one ever says “the weatherman missed estimates.” We blame the weatherman for getting it wrong. Finance is the only industry where people blame their poor forecasting skills on reality. Same goes for these words: “cautiously optimistic.” They are an oxymoron. They mean nothing. But why is the opposite the reality?
Why after 65 years of market existence, average equity turnover rates are still under 10 per cent? Turnover rates are calculated by dividing annual equity turnover by total market capitalisation.
MSCI turnover rates stand at 15 per cent. Bonds market liquidity on the other hand stands at an average of 26 per cent.
Why was a company (think airline) with a Sh23 billion negative equity not suspended from trading?
Why is sports betting so popular with the youth than the stock market?
Why are we still selling money-market funds as “risk-free” yet history has witnessed many examples of money-market funds “breaking the buck”? Are not all assets risky assets?
Why is volatility the most feared 10-letter word by investors yet it’s the number one source for market returns?
Why is finance so complicated these days? Is it to just the fees? Why has it become mathier and excessively model-driven? Is it “physics envy”?
Why isn’t there more desire for investors to track and score experts’ forecasts? Shouldn’t there be a standard that says no forecast should be made without the analyst disclosing their track record?
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Note: The results are not exact but very close to the actual.
