The Market Doesn’t Always Do What We Want

Before Intel’s earnings came out I wrote, “The Street is looking for 30 cents a share which is definitely too low. I expect earnings around, 35 cents a share, but the mystery is how Wall Street will react.”
I was more right than I realized. Intel obliterated the Street by earning 40 cents a share, yet the stock fell 3.2% the next day. So if exceeding expectations disappoints, you have to wonder what the true expectations were.
There was some talk that Intel’s gross margins are now so high (67%) that there’s no way they can increase them anymore. Sure, I buy that. The company has said it’s targeting margins 61% for this year. But it in way means that Intel will be less profitable.
The point for us is how unpredictable investing can be. Even when all the fundamentals go our way, we can still lose. If the market wants to go down, it will go down. The media and analysts will attempt to seize on any bit of info to explain the sell-off. Yet, the accurate explanation for why it happened is simply unknowable.
Unfortunately, that doesn’t make for a good analyst report or news item. In the long run, stock prices do make sense. But in the short term, it might as well be astrology.

Posted by on January 19th, 2010 at 10:20 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.