Short Term Market News Takes Toll; Businesses Need Time to Grow

Things are suddenly worse than they were yesterday and the Dow sunk 283 points because of it. I simply can’t resist the inclination to be facetious these days. In reality, I would prefer that the market stay flat and not make these wild swings on every smidgen of good or bad news. The market cannot seriously justify on a daily basis a swing of 200+ points on good or bad news. This is ridiculous behavior. It is already bad enough that the market runs on a quarterly basis as it is. The companies that made it to the Dow did not merit a place by driving profits on a quarterly basis. This short term basis requires re-organization after re-organization when a company lays off workers or restructures in an attempt to balance the bottom line and show Wall Street good numbers. In fact it has gotten to the point where the market goes up when a company announces layoffs.

Back in the not too distant past, the companies in the Dow had the time to build a business, to grow knowledge and market share organically and to research new products and materials without worrying about whether their quarterly numbers were going to meet Wall Street estimates. 3 months is not enough time to move a business towards profitability or even unprofitability for that matter. So many companies are spinning their wheels these days. They haven’t made a “real” profit in years. Increases in sales are attained through discounting products which in turn requires a corresponding decrease in costs to maintain profits. Workers are doing the equivalent of 3 people’s work because the easiest way to cut costs is either through layoffs or attrition. A company may initially try to fill a vacancy but before long the realization that the work is still getting done with the remaining folk means that after a while no one is hired and no one notices because they are all busy working so hard.

Everyone is so afraid of losing their jobs these days that they are clutching at straws to appear valuable. Then the next round of layoffs arrives and everyone wonders how they can survive without Sally, because she knew everything and knew where everything was. The company continues to limp along scheduling more and more meetings because no one wants to make a decision and set themselves up to be accountable for any actions that may lead to them losing their job. As always the workers on the bottom of the pyramid are cut first since no one in management will vote themselves out of the picture. If you look at many companies today, many of them are top heavy. The reality is if management was reduced by half, most companies would show much better numbers, much more profitability and much more efficiency. But as these over-bloated companies limp along trying to sidestep the street with their accounting sleights of hand, they cannot react dynamically to a changing market. Hence, the likes of Ford and other major companies posting billion dollar losses. How could they be so far off the mark? Don’t they employ business professionals?

When all is said and done, bad management is bad management. Bad management is intensified by the short term thinking currently employed to boost quarterly performance. America needs real companies creating real products and services and being able to present those results in a fair and cohesive manner and maybe the stock doesn’t budge that much for years but it moves on real performance, not phantom deliverables.