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Assuming Away The Can And

David Moenning profile picture
David Moenning


  • There is an old joke in economic circles about a chemist, a physicist, and an economist stranded on an island with a can of beans.
  • My take on the stock market rally is traders are simply assuming away the virus/economic problems.
  • This challenge will be with us a while.

Originally published May 4

There is an old joke which pokes fun at economists that I think applies to the current state of the stock market. It goes something like this...

An economist, a chemist, and a physicist are stranded on an island with nothing to eat but a can of beans. The chemist says, "Hey, there's a small tide pool of salt water over there. If we set the can in it the salinity will cause the can to rust/disintegrate and we can eat the beans." The physicist laughed and said, "You moron, by the time the salt eats through the can, we will have died of hunger. We must make a fire with that dried grass and wood over there. We can heat the can until the pressure builds and it will explode, allowing us to eat the beans." At this, the economist laughed, "You're a moron too, if the can explodes, the beans will shoot everywhere and we'll have none to eat." So, the physicist and the chemist, both tired and hungry asked, "Ok, if you know what to do, please tell us." To which the economist replied, "It's simple really, we assume away the can and eat the beans."

Putting this into context, I feel like the stock market is assuming away the virus, the likely protracted damage to the economy and industries, and simply looking ahead to better days. You know, when things get back to normal.

How else can we "esplain" the fact that the S&P 500 was down less than 10% on the year at the end of April? Or that the QQQ actually sported a GAIN of +3% in 2020 as of the end of last month.

This despite the reality that until a vaccine/drug therapy is widely distributed to the populations

This article was written by

David Moenning profile picture
David Moenning is founder and Chief Investment Officer at Heritage Capital Research, a Registered Investment Advisor. Heritage is an independent, privately owned, investment management firm located in the Denver area. Mr. Moenning has more than 33 years of portfolio management experience and focuses on a risk-managed approach to capital markets via modernized portfolio development and dynamic adaptation to ever-changing macro environments. Most recently Chief Investment Officer for a $1.3 billion RIA firm.

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