Consumers are confident. I’m not sure they have all the data. It’s a lesson for public companies.

In case you missed it, The Conference Board’s monthly consumer confidence survey reached a two-year high. Nielson runs the survey, and The Conference Board will sell you a year’s worth for $1,140.

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I spoke one time to The Conference Board’s investor-relations council, thanks to an invitation from the IR officer for Intel at the time.

What’s called the “Current Conditions” report is the best since February 2020 before the Pandemic. I don’t know if it’s got predictive capacity.

Let me throw more data at you.  Don’t worry. I’ve got a reason. Stay with me.

Shifting from the confident consumer to the ebullient stock market, Goldman Sachs says the run from late October last year till now is one of the best ever, ranking in the 99th percentile of all market data. Previous similar rare outliers marked exits from recession.

For perspective, we might infer that there’s a 1% chance of duplicating it ahead.  Now, that’s still a set of odds. Not impossible.  Improbable.

And I wonder if consumers have seen these data.  The St Louis Federal Reserve says January 2019 aggregate savings for US consumers were about $1.3 trillion.  I’m not sure how it’s defined but call it the family rainy day fund.  Last month it was down to about $680 billion, a 43% decline.

That’s after savings surged to records on government checks during the Pandemic (we never got one, probably most of you didn’t either). We’ve gone from records, to half what it was before the Pandemic.

Meanwhile, the number of people working is up about 3% since January 2019, consumer debt is up 18%, inflation is up 22%, GDP is up 25%, and federal debt is up 33%.

GDP gains are inflation + jobs. Hm.

If you’re running a growing business, you want to see cash balances rise and debts decline. These data are the opposite. I’m not knocking consumer confidence. I’m wondering if it’s realistic.  I guess we’ll find out.

Which brings us to public companies.  What’s your confidence around what your stock will do when you report results? 

I’ll tell you why confidence isn’t what it used to be. Let me paint a picture.  It’s 1999.  Your webcast is clogged with retail investors, maybe thousands. Tens of thousands if you’re Yahoo! You’ve got hundreds of investors and analysts on the phone lines.

They gobble up facts and figures in your press release about how well you’ve differentiated yourself from the rest. They hang on your CEO’s every word.

Your aim as the investor-relations professional is to do so well explaining quarterly and annual changes, value and growth drivers, investment thesis, that nobody has any doubt you can keep driving alpha.

That scene doesn’t exist anymore.

And I doubt you have the data. Money doesn’t want outliers now. It wants beta. The herd. The index. Not alpha. How many people are on your phone lines for earnings calls?  How many stock-pickers are in your top 25 holders?

Apollo Management CEO Marc Rowan said, “There’s no alpha left in public equities. Hasn’t been any for 20 years. We’re all leveraged to five growth stocks and the Fed.”

Speaking of which, the Federal Reserve hosts a press conference today as month-end options used by trillions of dollars of passive investment to true up monthly index-tracking expire.

Yet, you’re still doing it.

Every quarter, you detail in vast paragraphs and tables how you’re driving alpha – which has a 1% chance of success (like duplicating the last quarter for stocks).  You work that earnings release over to put the best comparative bullets atop hailing your achievement as an alpha-driving machine.

But 10% of the market’s volume is stock-picking. Seventy percent of assets at the seven largest managers ($45 trillion of assets) are Passive. The last thing they want is your stock veering from the mean, the average.

Yet public companies every quarter en masse (same time even) chase the 1% odds.

Machines set the prices, make the quotes, fragment the liquidity. Machines listen. Machines chew up the machine data that your earnings release becomes and spit it at the market in rat-a-tat machine-gun order-fire through automated order-management and execution-management systems.

Algorithms.

And half your volume, give or take is likely borrowed. It’s wise to know if that level is rising, and investment falling, before you report (we have that data).

And hedge funds are making big leveraged bets outside market hours that move your stock before everyone else can react.  And they do their own research, don’t care about the skeletal remains of the sellside.

So.  Exactly why are we doing this, public companies? The data don’t support it. We should be reporting earnings in a manner that reflects what Passive money buys, and what machines trade, and why.  It’s not 1999.  It’s 2024. 

If you want to rethink your earnings cycle, ask us. It’s THE core of our services now.

As to consumers and stocks?  Confidence is not a strategy. Preparation and data are.  But I tend to wander out of the room when everyone is cheering.

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