Eye on the Market: Just the Facts
By David O. England
CARTERVILLE, IL - Eye on the Market with David O. England - Just the Facts…

If Wall Street wants to regain trust with investors they need to realize investors are not ignorant and that the Wall Street deception must stop-period. Today I will cite examples that can fall in the “just when you think you have seen it all” category.

I must first state, this is a story from the Wall Street media and is indicative of what I feel is deceptive reporting.  I am using a highly respected company, Alcoa, as an example.  Alcoa is an industry leader employing over 61,000 hard-working men and women in a difficult business environment. 

This week the Q3 Earnings reporting season began with Alcoa reporting last Tuesday.  The following headlines soon appeared.  “Alcoa Kicks Off Earnings Season with a Beat”.  Sounds like things are looking up for Alcoa with increased earnings.  One of the most important items I have taught my stock market students beginning in 2002 is to not believe everything you hear and learn to discover the facts.

Let’s take a moment to see how factual the Alcoa headline is and then look behind the report.  The term “beat” refers to a company reporting better earnings than expected.  The game some on Wall Street play is to project low earnings estimates and if the company does better than the ratcheted down expectations the spin headlines flow.

The facts.  Alcoa reported a loss of 143 Million or -13 cents per share and revenue was +5.83 Billion. Excluding charges from the settlement of a civil lawsuit and other one-time items it earned 32 Million or .03 per share beating analyst’s forecasts. This was better than some analysts expected so the headline is factually true.  The company reported performance improvements across all segments and solid revenue despite a 5% decline in realized aluminum prices.

As a financial educator I teach that figures alone are meaningless unless compared to something.  During the same time last year Alcoa had a profit of 172 Million or 15 cents per share with revenues of 6.42 Billion. So while the headline was factually true, only in America can a company’s revenue drop 590 Million (.12 cents a share) have $140 Million less in profits and still consider the earnings a beat- in my book this is extremely deceptive.

A word of advice to Investors, take time to investigate the facts. Always keep in mind when you buy a stock or ETF someone has to be willing to sell it.  Take extra time to figure out why and what they may know that you do not.  Make all of your market decisions rationally and not emotionally.

Wall Street, you cannot operate without our hard earned dollars/investments. First, take time to learn that investors are not ignorant; we know a pig farm well before we see it. Second, if you want to improve trust with American Investors then stop the deception.  A little integrity can go a long way.

The bottom line…just report the facts-we can make our own conclusions.

Full Disclosure-I do not own any shares of Alcoa.

For questions or info on upcoming seminars contact me at

(Disclaimer) The information above is for educational purposes only and is not intended to be financial advice. Your decision to buy, sell, short or hold any stock or investment product is a direct result of your own decision, free will and research.

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Published 12:00 AM, Saturday Oct. 13, 2012
Updated 08:36 PM, Saturday Oct. 13, 2012

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