530.417.1129 [email protected]

There is little doubt that America finds itself in a recession at the moment. Jobs are lost, and some businesses will never recover. What about the earnings of the companies that do survive? Are the earnings deferred, delayed, or vanished forever? It depends on the company. That’s why investing in individual companies at this point may be safer than investing in an index. That doesn’t mean take up stock trading on your own if you have no experience.

Some earnings will hopefully come to fruition, but they may see deferment to later quarters. Perhaps your company had already completed work but has not been able to deliver the final product. Hopefully, the company still wants, needs, and can afford to pay for the delivery. If so, the earnings or profits are just coming later in this year or next year. Because of this delay, we watch out for canceled contracts within manufacturing. Wabash National and Boeing are examples of companies where these contracts would be critical decision-making data.

Some companies will have earnings delayed. As your house wears out, some things require attention. For example, my water heater recently sprung a leak. Restricted manufacturing may delay installation. The economy’s shutdown is of no matter to the water heater. They will break on their own time, but the earnings or profits for the companies may get delayed until people can get the replacements.

The biggest concern is vanishing earnings. Simply because we didn’t go out to eat for a month, doesn’t mean I can go out to eat for an entire month in the future. Those earnings have vanished—the same for trips to Disney, concerts, events, and even most of the sporting events. There are many companies with a missing quarter – possibly more – that will not just reappear.

Oil has been the discussion this week for most professional money managers. Onlookers see the futures price down into the negative, and they scratch their heads. It’s all about timing. Oil will not stay at zero, but you have to have a place to put the oil. Nobody wants it today, and even the most optimistic and opportunistic people have no place to put the fuel they buy.

The wells are expensive to start and stop. The pipelines, refineries, and retail stores are in a pickle.  There are oil barges that have to pick up their next load contractually. The question comes down to what happens later in the year, not the price of the futures contract today or even next month.

The oil industry has parts of the complex that will have delayed earnings; some deferred, and some vanished. As you think about your retirement, ask yourself: Which companies have the best chance of survival today and the ability to thrive in the future? Resist the challenge of buying items just because they appear very cheap today.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see our Disclosure page for the full disclaimer.