"Are there any old timers out there that can comment on if the whisper
number is a new phenomenon?"
Not that I'm all that old, but the answer is a definite yes. You're right, the idea behind these rumored numbers is very new, an invention of the last approximately two years, I'd say. It's unfortunate that it's caught on the way it has. But the notion that someone has the very latest inside poop just before the public gets it officially is an old one. Otherwise you take all the analyst's estimates, average them, and come up with a "consensus" number. I guess that's too boring for the CNBC age, and so they have to manufacture another number to satisfy the growing anxiety as the market goes ever higher. Just goes to show that Wall St runs on information (and its perception) rather than $$'s. Never enough numbers...
The thing I've noticed over the years is that stocks tend to run up in advance of the earnings announcement and then sell down afterwards, regardless of what the facts are (unless they're a real surprise). This is because the certainty of the number itself has value and gets built into the stock price. As soon as the number is out, it's some 13 weeks of relative uncertainty until the next number comes out. This is why there's frequently a sell-off even after decent news, puzzling a lot of people who think the market should rightly reward a good earnings report with a (further) move up. Sometimes that does happen, though it tends to be short-lived, to the day or two after the number. Then the market moves on to focus on some other stock. Market lows often come in that middle period halfway between reports. This all amounts to the old "sell the news" adage. It's no coincidence that the NASDAQ and S&P 500 averages are at record highs right here in earnings season, taking out the highs set at the end of the last season.
Since the bizness media always has to sound like they have a rational explanation for whatever happens in the market, the whisper number gives them that leeway they need so they never sound like they're wrong: XYZ Corp reports good earnings, but the stock's off 1 3/4 -- must have missed the whisper number. Pure unadulterated BS, made in the USA, IMO.
I feel better now...
ChrisMeister |
