There is an interesting phenomena in the world I think of as a perception gap. One of the best places to see it is during a sports turnaround. Whether individual or team. People don’t react to what is happening until it is obvious, and I now understand why a lot of finance people move over to sports. Because there is never a need to wait for perception to catch up.
For some reason I woke up this morning to talk of Nike on Reddit. Mostly the stock. One of the questions was where is anyone under 40 wearing Nike. My answer was what is the average age of an NFL player. Another was what makes Nike different than Sears or Blockbuster and the answer is massive guaranteed contracts.
That is the problem with investing. It isn’t betting on the team. It is betting on the fans. In sports there will always be that guy standing at the championship parade talking about how the team got lucky and won it in spite of being bad or they didn’t win it so much as the other team lose it. Fans are fickle and that is what investors are, and lets not pretend that institutional investors are some sort of geniuses. They are as fickle as the rest of the crowd.
The business itself doesn’t require people to believe in it to make money, but the people investing in it do. Look at the great Netflix Brazilian tax episode. A big earnings miss caused by an isolated event and suddenly the business is judged by the price drop and not the price per share by the business.
Imagine trying to bet on the perception of sports fans. The Dallas Cowboys would be multi time recurring champs despite never getting out of the first round. Meanwhile the Chiefs wouldn’t be considered champions for reasons. That is basically what the stock market is. It is investing in a business but then counting on a large group of other people to agree with you.
I don’t know why I care about this. It is like I told my friend once. I root for intelligence.
David Huzzard Writes 