Why are the sellers always right? Why are they always given the benefit of the doubt? What makes people feel smug about the short side or the sell side and feel indifferent and defensive about the gains?
Maybe because they see a stock get instantly hammered right after a report, and it must be all over but the shouting. The sellers are brilliant; the buyers are frauds.
That's what people are surmising right now in the big Salesforce (CRM) rollover after last night's tepid guidance after a much stronger than expected quarter.
They know they are right, that Salesforce is done, or the stock wouldn't be down so badly.
Do you know that this week Salesforce celebrates its 20th anniversary and all along the way there's been doubters who feel vindicated by that shortfall in guidance - not actual numbers but a shade down of a forecast - and the subsequent vicious decline as the end of the streak is finally upon this enterprise software scheme?
I used to be one of those people. I would be triumphant today as I saw the stock rollover because the sellers have rigor and the buyers are drinking the Kool-Aid and will suffer the same fate of the followers of Jim Jones in the jungle of Jonestown, Guyana.
In the beginning, in 2007 and 2008, I was right about the short side. There was a period where the stock had rallied into the Great Recession and was more than cut in half. I told people to stay away from a company with revenue growth but no earnings.
But then I met Marc Benioff, the CEO and co-founder of Salesforce. He came on "Mad Money" a decade ago in part to explain to me what he was doing and why and how I would be wrong.
At first, after listening to his "rap", I couldn't understand why anyone would pay this man and this company seven figures in order to figure out what the customer wanted and how to stay in touch with them using digital means based on the cloud. What kind of Pied Piper says that if you send all of your data to Amazon (AMZN) Web Services - actually take it outside of the servers you have on premises and rip out Oracle (ORCL) which has your database - you will end up making more money.
Fanciful. Right? I figured it was some newfound ponzi scheme and I watched the stock go from $8 to $5.
But Benioff was not deterred. At the height of the Great Recession he predicted that his company which had just done $749 million in revenues in 2008 would do a billion in sales the next year.
Next thing I knew the stock was back to $8 and he did more than a billion in revenues.
During this period he managed to convince me that if he kept doing those revenues gains he would do all the earnings I wanted but he would never stop spending until he got to $10 billion in sales.
As I read about customer after customer who signed on, I began to realize that Benioff was the real deal. Sure he might give a light forecast now and then but I said enough is enough, I'm going all in.
I never wavered. And he kept beating the revs and making a ton of money, to the point where it's actually hard for him to spend all he's making.
Last week the stock hit $166.
Last night Benioff gave us another one of those short-term shortfall predictions, of course after a gigantic beat. The fact that he actually raised his 2020 fiscal year guidance - this was his fourth quarter 2019 - to $16.05 billion, 21% growth year over year. That meant nothing. It didn't matter that he set a goal of $26 to $28 billion in revenue in fiscal year 2023 and a doubling of organic revenues again in the next four years.
That's not what people heard. They saw the stock go down, they read the guidance and they said it's right to sell. Not only that, but if you read my twitter feed you see things like someone who always said Benioff was a fraud and a couple accusatory tweets saying that I was an idiot to back him and his Pied Piper predictions.
How do they know they are right? Because the stock says they are right.
The stock has always said, short-term they are right. But how did it get to $166 if the sellers and short sellers have been right all the way up to its all-time high.
So here is what I say.
Call a top. Say Benioff's a fraud. Blast the hell out of it as I did when the stock was at $8 in the 2007-2008 period. But remember what history says.
It says you will be wrong.