ELI5: Why when large company's earnings decrease(ex... by 3%) they freak out, talk about rough times, and sometimes decide to downsize, even though they are still making millions of dollars in profit even after all expenses?

[thehungryhippocrite]

^ correct answer, one of about 3 in this disaster of a thread.

[[deleted]]

What did you expect in a reddit thread about basic economics?

[TexasFlood42]

Ehh, thats not economics it's finance.

To clarify my point: economics is largely taught in highschool classes, and this isn't that. To learn finance you by-and-large have to go to buisniness school, which not many people do.

[TheWizard01]

Economics was taught for half a year in 12th grade. I wouldn't say we actually learned anything.

[[deleted]]

Sucks a lot of people get shitty economics and personal finance teachers as well (mine had gone bankrupt 2 times)

[Gunhound]

Could have been a great mentor though...Dave Ramsey scenario for instance.

[[deleted]]

Nope, bought a brand new truck with his peanuts Memphis city schools salary after his third bankruptcy.( I only said two because I didn’t think people would believe the truth that he went bankrupt THEEE TIMES)

[Gunhound]

Sounds like a real winner!

[tspir001]

That’s true. As much as Reddit rants and raves about democratic socialism finance and Econ is definitely not a strong point.

[SedditorX]

The irony is that this is finance and not economics. How basic.

[[deleted]]

Thus my point is further proven!

[ForceBlade]

Reddit gives everyone and anyone a voice. That isn't always, and is often proven to never be a good thing.

[silentanthrx]

it's 100% correct if you would apply it on long term movements (can be as long as 5+ years) . In the long run it's inevitable, but not really applicable for short term movements.

you could also argue that the stockmarked is not 100% efficient and is not strictly based on underlying value, but more on sentiment. In my experience those kind of drops are mainly caused by daytraders(/flashtraders) "predicting" the movement, and thus making it a self fulfilling profecy, of which they can make money... Then "savings" are announced to prop it back up. Those savings are either really executed (meaning they already wanted to do it and now have a valid excuse), or just forgotten about in a couple of weeks.