Stocks move up or down on a daily basis for any number of reasons. But in the long-term, only two factors account for most stock losses:
Something happens to reduce earnings growth expectations.
The market believes that the company is in danger of running out of cash, and may file bankruptcy.
Most analysts and individual investors concentrate on number one and don’t worry much about number two.
For proof, look no further than energy trader Enron Corporation’s spectacular implosion in late 2001. Despite numerous warning signals, and a plunging stock price, most analysts continued advising buying until a month or so before bond-rating agencies downgraded Enron’s bonds to junk status, crippling the debt-laden company and ...