The 10,000 job cuts at Amazon increased to 18,000
Just days ago Microsoft announced 10.000 job cuts.
Now Google.
The cuts represent more than 6% of the company’s workforce, according to Reuters and (apparently) comes primarily because now that free money is gone revenues at all advertising-based companies is plummeting.
Still Google CEO Sundar Pichai comes out smelling like a rose compared to amazon founder Jeff Bezos. On the same day that Amazon announced its massive job cuts Bezos announced that he would be giving away his fortune to causes “fighting climate change and supporting people who can unify humanity,” (IOW left-wing political causes.)
And here is the crazy thing about today’s stock market:
Microsoft announced it is cutting 6% of its workforce and the stock price jumped up almost 1% and then rose all day together with the rest of the tech sector
Ask yourself:
Which way would you expect the price to move it had announced “We are doing great, so great we are going to hire 12,000 people?”
.
This is not the first time that has happened other household name tech stocks (popular with individual investors) have done the same. The stock of less well known companies and non-tech companies behaves the wall stock prices always have when a company announces it is down-sizing (price goes down.)
The talking heads in financial media shake their heads and wonder aloud “Why do people buy a stock when they announce bad news?”
The most likely explanation is that the stock market these days
Is dominated by “cash on the sidelines” and
That cash is held by persons eager to invest bullishly (probably unaware how to short a stock or short the market.
Such investors, normally a small group are eager to invest naively believe “Well, they downsized so, now they are going to get it right. It’s time to buy.” It’s kind of a kid-in-the-candy-store mentality, and a strong sign that the market is going to fall farther, perhaps all at once.
a lot of stocks rally after announcing layoffs. wall street expects the same revenus coming in with less going out in employee expenses and therefore higher net earnings.
If Microsoft announced
“Things are going great! so great we have to hire 12,000 people just to keep up,” which way should the stock move? Obviously up.
If GM or Ford downsized tomorrow and announced
“Things suck we have to layoff 5% of our workers” obviously the stock would move down.
What’s going on now is not wrong. It is neither morally wrong nor irrational.
It IS however a kid-in-the-candy-store effect.
True.
both examples are absolutely true.
they are both also
are recent (describing the madness of the current market, not long term time tested truths
apply specifically to tech stocks that are super popular with individual investors for whom
– “hiring is a buy sign,”
– “laying off is buy sign”
– “filing for bankruptcy is a buy sign” (literally happened)
– “getting out of bankruptcy is a buy sign,”
Nothing irrational nor immoral about it.
Drunken sailors spend until their money is gone.
always have, always will.
Q: How do you get a kid in a candy store to stop buying overpriced stuff?
A: You don’t. When he is out of money he will stop. The more money he has to begin with the longer it will take.
Yes.
In some cases they were like Amazon which once said “We don’t know how many people we will need during the shut down but people are hard to find so we are just going to keep hiring and hiring.” (reasonable)
In other cases they are like Meta and Twitter, they had stupid-many employees to begin with. Helicopter money made them do stupid regrettable things. (stupid)
Also GDP growth was negative the first 2 quarters of last year
Hence. were it not for the (then) strong labor market the 1st half of last year would have been called a recession.
Because inflation was 7% (then) itw ould have been called a “stagflationary recession.”
