Sound Advice

Disconnect As we move along through this virus-infected year, it is becoming clear that several critical oppositions are developing.   Prime examples include big companies versus small companies; employed versus unemployed; and the stock market versus the economy. The enormous financial stress of the pandemic has fallen hardest on those with the leanest resources.   That’s true for both companies and families.   The biggest companies with the most substantial resources are well positioned to weather this storm.   Smaller companies, however, tend to have limited reserves, which means that many will not survive.   Although others will someday replace them, it will take time, which suggests that the big companies will get even bigger and end up net ahead. The situation for families is more complicated.   Less affluent families must survive since there will be mouths to feed.   Temporary fixes, whether for a few weeks or months, will not be e...

Vaccine In Sight? Why do stock prices change?  Over extended periods, the main reasons are changes in underlying profits.  That's what Wall Streeters call fundamentals. When companies make more money, their shares rise . . . over time.  And vice-versa. But on a day-to-day basis, fundamentals are often meaningless.  So on days when the Dow Jones Average rises or falls 5% or more, you can be sure that there's no corresponding change in fundamentals. What's going on when this happens?  It's all about fear and greed, the polar opposite forces that rule the short term.  And now, once again, a tidbit of apparently good news has investors working on a big one-day lift-off. The news is from Moderna , a Cambridge, Massachusetts company that has had encouraging results from a Phase One trial of a new vaccine for Covid-19.  This vaccine uses messenger RNA, or mRNA, to stimulate production of neutralizing antibodies. The initial test included only 45 par...

Reality Check On the heels of the market plunge of late February and most of March, investors did a sharp about-face in April, bidding up shares at one of the fastest rates in recent history.  Although this recovery probably provided at least temporary comfort from the plunge, it would be unreasonable to view the rebound as a sign that things are all better.  They are not. For one thing, we are now in the midst of earnings reason, when companies report their quarterly results.  Some may have good news for the March quarter, but as we move through the current calendar quarter, only a few will be able to show continuing improvement.  Against the broad backdrop of U.S. business history, the months just ahead will almost certainly prove to be among the worst, from the standpoint of year-to-year comparison. With more than 30 million people filing claims for unemployment insurance, it would be difficult to expect anything other than bad economic news.  Who...