Originally Posted by
satpak77
As long as the shareholder is being rewarded, management can do whatever they want.
I mean, you do know that, yes ? Or did someone tell you otherwise.
The majority shareholders are institutions. They make deals and collude together to put their money in certain sectors or stocks. A group of banks, for example will all agree to buy housing stocks, when they are low. Then the, 401K and mutual fund mgrs. will be paid off to buy these stocks, then the talking heads will start pumping up the stock or sector. As the public starts buying, the institutions start dumping--the CEOs are part of the inside club, so they do the same. Then the short options are put on. As the stock crests and tanks, the shorts make money on the downside.
All this has very little to do w/ actual performance of the CEO or company in today's market. So many books are cooked, so many audit firms are on the take, and so many analysts are nothing more than paid shills, that stock price is meaningless w/ regards to performance.
If a stock price is slipping, the company will borrow cheap money to buy back shares to prop it up. At these stock prices, P/E ratios are absurdly high.