Page 156 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

Individual investors fall for this when making their own investments, too.
The average equity fund investor underperformed the funds they invested in
COBACOBA
by half a percent per year, according to Morningstar—the result of buying

and selling when they should have just bought and held.⁵¹

The irony is that by trying to avoid the price, investors end up paying
double.

Back to GE. One of its many faults stems from an era under former CEO

Jack Welch. Welch became famous for ensuring quarterly earnings per
share beat Wall Street estimates. He was the grandmaster. If Wall Street
analysts expected $0.25 per share, Jack would deliver $0.26 no matter the
state of business or the economy. He’d do that by massaging the numbers—
that description is charitable—often pulling gains from future quarters into
the current quarter to make the obedient numbers salute their master.

Forbes reported one of dozens of examples: “[General Electric] for two

years in a row ‘sold’ locomotives to unnamed financial partners instead of
end users in transactions that left most of the risks of ownership with
GE.”⁵²

Welch never denied this game. He wrote in his book Straight From the Gut:

The response of our business leaders to the crises was typical of the GE

culture. Even though the books had closed on the quarter, many
immediately offered to pitch in to cover the [earnings] gap. Some said they
could find an extra $10 million, $20 million, and even $30 million from
their business to offset the surprise.

The result was that under Welch’s leadership, stockholders didn’t have to
pay the price. They got consistency and predictability—a stock that surged
year after year without the surprises of uncertainty. Then the bill came due,
like it always does. GE shareholders have suffered through a decade of