CHAPTER 11The Earnings Game
Every once in a while, the market does something sostupid it takes your breath away.
—JIM CRAMER
In theory, the market should be driven by fundamentals, but in reality, it is driven by events. What does this mean? It means that market performance and company valuations should be determined by fundamentals, which are corporate earnings. However, the market is event-driven, which means that we often ignore fundamental progress and trade according to economic events, rumors, and speculation. This can and does cause fear that leads to panic. As a result, we sell stocks with great fundamentals that should be trading higher.
The good news about a market that is event-driven is that it creates value in stocks. Remember, when ...
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