The stock market works two ways and everyone knows the first: Use current information to guess the future price of a stock.
But the opposite is also true — and probably even more useful: Financial information from stock reports can give us insight into current events.
What we learn here is often better for one reason: If a CEO lies about his stock on his quarterly reports, he can go to jail.
Let’s look at news about cars and guns as two recent examples.
The airwaves are full of happy horse apples about electric cars, especially the Chevy Volt.
After the Obama administration loaned or gave GM $100 billion, reporters could not tell us enough about what a great car this is. The spin continues today.
CNN recently told us the Chevy Volt may have had a rough start, “But those concerns are beginning to fade.” Sales are up by 700 percent over last year. Hooray!
Then some wisenheimer at Reuters checked the real numbers and figured out that GM was losing $49,000 on every car. And the two biggest customers of the Chevy Volt are also its two biggest stakeholders: The federal government and GM itself.
Take away the subsidies. Take away the artificial purchases.
Take away all the rosy forecasts about the millions of electric cars that will soon dominate the highways. All that is left is a company betting its future on a car few people want; depending on subsidies more and more people are less and less willing to tolerate.
The stock is down about 33 percent over the last two years since GM zeroed out its stock price and issued a new IPO.
Economists like to look at what people do. Not what they say. That’s why financial information is so important.
Public information connected to GE’s stock is the only reliable source about what is really happening with our federal experiment making electric cars — and it is a different picture than most stories in the mainstream media.
Let’s look at guns.
After a recent spate of violent crime in downtown Baltimore, much of it caught on video, a crime reporter lamented at the over reaction, saying “crime statistics are down” but people just don’t know it.
To quote the poet: Something is happening here and you don’t know what it is, do you, Mr. Jones.
The “something” here is crime. There’s a lot more of it happening than reporters know or write about.
Occasionally this information escapes through the politically correct veil: The New York Times is just one of several large papers in the country to write a story about how police are refusing to take reports on some violent crimes.
A recent federal report says more than half of violent crimes are not reported — 20 percent of which are because people do not believe the police will do anything about it.
In Oakland, using a technology for pinpointing urban gunfire — the ShotSpotter — only about ten percent of gunshots are reported to the police.
Even so, governors like Martin O’Malley of Maryland slough off complaints of rising crime: “Baltimore had cut its crime rate more than any American city of comparable size.”
But gun owners have their own sources: Their own eyes. They see lots of violent crime and lots of people ignoring, excusing and condoning it.
Gun permits and sales are exploding to record levels. So much so, I wrote an article about it last year in the Aug. 21 issue of the stock market news site, Seeking Alpha: Guns are Better Than Gold.
Six months later the company I wrote about, Sturm Ruger, had to stop taking orders for new guns because they could not make them fast enough.
Some of the political people say it was because they felt threatened by potential pending gun and ammo control out of Washington. Maybe that was part of it.
But looking at the quarterly reports of Smith and Wesson and Sturm Ruger paints a more complete picture: Most of the increase in sales for Sturm Ruger are guns for self defense, says Investor Daily.
The politicos and papers may say crime is down.
But gun owners are seeing a big increase in mob violence in cities throughout the country, and also wondering why the newspapers are so eager to ignore it and the police to willing to explain it away.
Some are using that information to buy a promising stock. Others are it using to protect themselves from what many papers and politicians say does not exist.
But what quarterly stock reports tell us is real.
Bill Gunderson is President of Gunderson Capital Management in San Diego. He is an award winning author and frequent guest on local and national financial news shows for Bloomberg, Fox Business, CNN. His columns are featured at MarketWatch and TheStreet.com and other news sites.