You know how everyone in the investment community loves to rag on IBM stock? Well, there’s nothing new about that. In fact, this lament might be something you have in common with your grandfather.
When part of President Roosevelt’s New Deal legislation included the Social Security Act of 1935, Wall Street got excited by the lucrative contract that IBM secured to process social security checks upon the program’s inception in January 1937.
Unfortunately for IBM shareholders, the contract contained a provision that demanded IBM perform the government services at cost if more than 3% of social security payments were made in error during the first year. By January of 1938, the independent congressional inquiry found that 4.7% of social security payments were not processed correctly.
As a result, IBM stock fell almost 20%. This wasn’t merely the result of IBM’s lack of profit regarding social security check processing, but rather, … Read the rest of this article!