Better Than Expected

Fears galore, but earnings for the second quarter came in nicely. They were little better overall than optimistic estimates, for an aggregate beat of about 7 percent. To be sure, there were some exceptional performances and a fair number of disappointments; the same as always. However, forward guidance was generally tepid.

With so much ongoing uncertainty, managements took the opportunity to lower the bar for future expectations. They like to do this anyway, since it is better psychologically to beat a lowered estimate rather than almost meet an aggressive one. It’s a game that managements have learned to play.

So far so good; we’ll see what the next quarter brings, probably more of the same. The successful should continue to be, and the weak will increasingly fall by the wayside. Unless something overwhelms the economy, the inventory correction, recession, should play out quickly. For investors, this is a reasonable investing climate. Stay steady my friends.

El Toro Solo