The Wall Street proverb "When the ducks quack, feed them" signifies that financial institutions should supply investors with what they want to buy. This strategy is employed even when the offerings, such as initial public offerings (IPOs), are perceived as overpriced. The underlying principle is that Wall Street's primary objective is to generate revenue, and meeting investor demand is a direct path to achieving this, regardless of the intrinsic value or long-term prospects for the buyers.
This adage gained significant traction during the internet IPO boom of the 1990s. For example, if technology stocks are popular, firms will sell technology mutual funds; if biotechnology is hot, they will push as many biotech IPOs as possible. This approach often benefits the sellers greatly, even if it doesn't always work out favorably for the buyers.
The phrase has been cited in print since at least 1991, with the head of First Boston's equity desk reportedly fond of saying it. It underscores a historical pattern in financial markets where periods of high demand lead to increased offerings. For instance, when investor sentiment is speculative, like during the "Relentless Bull" market that began in fall 2011, owning IPOs could be a highly profitable investment strategy. The average tech IPO from 2012, for example, reportedly saw an astonishing 170 percent increase from its offering price by 2013, adding over $111 billion in market capitalization.
The proverb also suggests that companies should be agile in capital raisings when there is strong demand for their stock. This includes raising funds when not immediately necessary, as brokers and investors are more receptive to strong companies. This contrasts with a contrarian view, which advises investors to take the opposite side when "crazed speculators clamor loudly" for a particular security, pushing valuations to "absurd extremes," suggesting it's better to be the one "feeding the ducks" than to be a "duck" yourself.
Some interpret the saying as a description of how Wall Street operates, likening it to an "elaborate petting zoo" where various types of investors ("lambs, ducks, goats, cows and pigs") are "fed pellets" by bankers and brokers until they reach a "bursting point." This highlights the often-exploitative dynamic where investor enthusiasm is met with a supply of offerings, sometimes to the detriment of the investors in the long run.
