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 Post subject: Re: The Stock Market
PostPosted: February 15 18, 2:38 pm 
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tl;dr

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pioneer98 wrote:
tlombard wrote:
pioneer98 wrote:
TimeForGuinness wrote:
pioneer98 wrote:
The Dow is creeping back up towards 25k. Nothing to see here, everything is A OK.

Where should it be?



I don't know. It took a big drop last week. What has changed since then for it to go back up?


I'm getting closer to honestly believing that many drops are the consequence of those with huge sums of money invested in the stock market looking for any reason to sell high causing the prices to drop so they can buy back in low since they know it will creep right back up and make them even more money. Any time there is a bit of negative news about a company, they immediately dump their huge shares which then causes all of the smaller individual investors to look to dump their stock while it's still worth more than they got in for and the big guys at the top that started the panic selling turn around and buy up the cheaper shares knowing that a week later (at most) the story will have blown over and prices will go back up because the stock will be seen as a bargain.

I was going to use the Crock Pot situation as an example but I would have looked stupid. Thankfully I looked it up first and saw that their drop was more to do with a disappointing forecast or earnings report than the fictional TV show death caused by their product. The timings of both just happened to coincide and I heard about the TV show, stock price drop but not the financial report. So instead I'll use the airlines. Every time a complaint/video goes viral the price of the airline's stock drops immediately only to be back at the previous levels within a week. I'm almost positive that those with large positions in the airline stocks are the ones that immediately start the sell off and then buy right back in as soon as they think it's bottomed out about as much as it is going to.



And that's kind of what I'm getting at with my snarky post. It almost feels rigged or like it's being gamed to some extent.


Your post is what inspired my previous comment... and my even dumber comment that I just posted. But seriously, I just don't get why the stock market has so much freaking power over everything.


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 Post subject: Re: The Stock Market
PostPosted: February 15 18, 2:59 pm 
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tlombard wrote:
The only thing I can really come back to with the stock market is that so much emphasis is put on a stock price because the people who make or lose money on how your company performs have the ability to hire, fire and pay the senior executives.

Yes, exactly.

As you say, the direct impact of stock prices on the ability to conduct operations is pretty minor. In folklore, it's important because selling stock is a way for the company to raise money to finance investments, but the reality is that this doesn't really happen. Companies use retained profits, bond sales, or bank loans to finance investments. Stocks are a net drain. You sell them to cash out founders/initial investors, and companies pay out on net to stock owners via dividends and share repurchases.

A related point is that though stocks are technically a claim on future profits, their actual value is only extremely weakly related to those fundamentals. The price you pay for a stock is basically a guess about what you think other people will pay for that stock in the future. Economists think this should theoretically come down to projections of future dividends, but there's little actual anchoring mechanism as the people who you sell to are also just guessing about what other future buyers will pay. Bitcoin provides an excellent example of how little anchors to fundamentals really matter. People even justify the price on the grounds that it's valuable because people value it. That's true, but it should make us question some of the stories about the social value of financial instruments.

I recommend Doug Henwood's "Wall Street: How it works and for Whom" if you are interested in this topic.


Last edited by Arthur Dent on February 15 18, 3:13 pm, edited 1 time in total.

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 Post subject: Re: The Stock Market
PostPosted: February 15 18, 3:05 pm 
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Has an anecdote about a townie he overheard.
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pioneer98 wrote:
Arthur Dent wrote:
Gashouse wrote:
If those percentages are roughly accurate, then it begs to question to notion that small businesses drive job growth in the country.

That notion has always been wrong. Small business creates a lot of jobs because it also destroys a lot of jobs. The gross numbers are cited for their misleading propaganda value, but net job creation by small business is not that impressive.


The thing I always hear from chamber of commerce types is that most jobs come from existing businesses expanding, and not from new businesses. This is a lot more believable to me. Just like the second million is much easier to make than the first million, I bet going from 100 to 200 employees is much easier than going from 0 to 100. Or for that matter I bet going from 10 to 20 employees is easier than going from 0 to 10.



Missed this when it was posted a while ago and it's absolutely true. When I had 0 employees everything was on me and it was quite the climb to be able to afford one employee. However once I got to one, then my pure work load decreased because all of the sudden my employee was mixing concrete, moving granite, or running around doing little odd jobs. All of the sudden I could focus on growth and not survival. This meant I could try the ideas I had or new product lines. That's when growth exploded. Now admittedly when I sold out I only had four guys working for me and a couple were seasonal but I was definitely poised to keep growth going. It's just when Nic got sick I knew I had to focus elsewhere so I sold out.

The old adage about that second million is easier too. Everything has more potential when you have more money. Buying ground at 15,000 an acre seems impossible when you have 100k in the bank, but when you have 1,000,000 or more it not only seems doable but all the sudden banks want you to do it. It's easy money for them and cheap money for you. You can also buy rental property or invest in other businesses or stocks and not break a sweat about it. Those things just aren't possible at say 30k a year salary, but when you have a big chunk sitting in an account it's so easy to make it grow.


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 Post subject: Re: The Stock Market
PostPosted: February 15 18, 3:40 pm 
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tl;dr

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That's the point that these rich jerkfaces setting policy and talking about bootstraps don't get. Most of them started out at a level well above the average person, much less the poor and it was a lot easier for them to 'pull themselves up by the bootstraps' than it is for those who really need more. They think that because they didn't have to rely on a social safety net and grew their wealth exponentially that just anybody can do it and are determined to tell people to 'pull themselves up by the bootstraps' while they are actively cutting the straps off their boots at every opportunity.

Heck, just looking at a table showing the impact of compound interest starting from $1 on up to $1M is all the data you need to see in order to understand how hard it is to accumulate wealth when starting from nothing.

For example, let's just use nice round numbers and say a person starts out with $1000 and invests it in something that gets them a 10% annual return. Every year they also throw in another $1000. It would take about 48 years to get to $1M. If somebody starts at $1M thanks to a gift from daddy in that same scenario (including putting in $1000 a year) they have around $2.5M after 10 years. How exactly does the person who started with $1M get off believing that they somehow worked harder and that's why they have $2.5M after 10 years compared to the $18k the person who only started with $1000 would have in the same time frame?


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 Post subject: Re: The Stock Market
PostPosted: July 26 18, 10:24 am 
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facebook taking a hit today


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 Post subject: Re: The Stock Market
PostPosted: December 20 18, 12:15 am 
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Bump.

The stock market has tanked this year, down about 10-15% from its highs when the thread was started. In an alternate universe where everything is the same except no tax cut, I presume it's even worse. The stock market was running up against frothy P/E ratios, a tightening Fed, and some dumas trade wars, and for 2019 those headwinds shouldn't be as strong. Standard caveats about timing the market apply, but this seems like a decent time to put money into the stock market.


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 Post subject: Re: The Stock Market
PostPosted: January 18 19, 9:06 am 
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