Market Madness in the Pandemic

[Zorro]

Why are investors rushing to buy junk?

After all these years, Hertz is No. 1 again. Not in market share: The car-rental company is a distant second to Enterprise. But Hertz has become Exhibit #1 of the madness that has been sweeping the stock market in these times of Covid-19 — a madness that may do considerable harm, not because stock prices themselves matter all that much, but because Donald Trump and his minions treat the stock market as a measure of their success.

About Hertz: Last month the company, which is deeply in debt and has seen its business plunge amid the pandemic, filed for Chapter 11 protection. This is a form of bankruptcy that keeps a company operating by restructuring its debts.

But while companies that enter Chapter 11 often survive, their stockholders are normally wiped out. So Hertz stock should have become more or less worthless.

Sure enough, Hertz’s stock price fell from more than $20 in February to less than $1 in early June. But then a funny thing happened: Investors suddenly piled into the stock, driving it up by more than 500 percent. And Hertz — in bankruptcy! — announced plans to raise money by selling more stock.

https://www.nytimes.com/2020/06/15/opinion/coronavirus-stock-market.html

[customerserviceguy]

1. They all think

that someone else is a bigger sucker than they are.