Has Someone Moved Wall Street's Cheese? What Happened to All the Growth?

Remember the quick read by Spencer Johnson on change management written ironically in a business fable format? The characters of Who Moved My Cheese were Sniff, Scurry, Hem and Haw. Sniff and Scurry found the new cheese in station N, while Hem and Haw continued to wait for their cheese at station C lamenting about old times and wittingly engaging in the blame game.

It is no surprise that profits and earnings are a key indicator of company health. There is a high premium Wall Street rewards for increasing share holder value. However, once Main Street has turned their entrepreneurial spirit on expense control rather than top line growth it must be balanced with the bigger picture.

Wise investors will note the favorable earnings story while also scrutinizing top line revenue performance. Furthermore, the numbers companies are posting must be compared to the historical economic landscape. If performance the previous year in the sector was strong, there should be some concessions. Likewise, if the previous year was in a tail spin, demand stronger comparable performance.

The leading indicator of growth is a reduction in the unemployment rate. When business does not currently have the appetite to add payroll it will shackle the growth regardless if the burden is perceived from taxes, customer demand, or pending legislation. A confused owner with a blurred vision does not hire!

Are you Sniff and Scurry or do you find yourself acting like Hem and Haw longing for the days when your 401K statement had another comma in the total? Make no mistake; earnings will come to a screeching halt without a rebound in revenue.

The growth engine of the US economy is consumer spending. Much of the consumer psychology is emotional yet rational. Similar to the confused business owner, a worried consumer does not spend. They tend to hoard cash and significantly reduce discretionary spend. Simply put, checkout lines at Walmart far exceed the checkout lines at Neiman Marcus and even Target.

Change happens! Even on Wall Street. This is the time to challenge investment paradigms if you find yourself missing your financial cheese.