It hit people by surprise. But by that point it was too late. It was easy for management to get caught up in the tidal wave of exuberance. The market was on speed, and it wasn't going to stop for anyone or anything. Companies project future results based on past performance.
Management looks at what happened historically and hopes to meet that or do better.
But CEOs were trying to grow their companies at unrealistic rates, says Ward. But they have to overshoot. Companies have to predict that they're going to do better than last year or nobody would buy the stock. Many times, however, companies purposely low-ball their estimates so they can beat those numbers and watch their stock soar. But analysts know this game, so they bump estimates even higher than the company's projection.