@cicerone imposter,
Well, I went back and read the last couple of pages, and it seems you agree with me, then agree with Shiller, the Yale economist. Starting with this post:
au1929 wrote:Much of the money or wealth coming from wall street is based on the manipulation of money. When a stock is bought for say $10 and sold at $15 the profit is as you say a manipulation of money not real value added.
Then you said:
cicerone imposter wrote:That's correct; but the price of stock has to have some relationship to the equity and earning potential of the company. Did you know that most speculators lose money?
Then you quote Shiller:
"Robert Shiller, an economist at Yale, puts it bluntly: The notion that you lose a pile of money whenever the stock market tanks is a “fallacy.” He says the price of a stock has never been the same thing as money " it’s simply the “best guess” of what the stock is worth. "
I agree with your previous post, ci, that the value of a stock, when it goes up, generally indicates the company is worth more, due to a number of possibilites, they are making a higher profit, they have developed more technology, they have discovered something valuable, they have built something that is very profitable, or they have become more efficient, there are a whole host of possibilities so that the company has indeed increased in value, not a manipulation of money as au1929 said. So if the stock market tanks, it probably means that the companies are now not as profitable, they are perhaps losing ground to competition, maybe oil reserves are declining if they are an oil company, or perhaps their feedstocks to a manufacturing or processing plant are more expensive, a whole host of possibilities. So I am merely pointing out that I think Shiller is wrong when he says the notion of losing a pile of money when the market tanks is a logical fallacy. I think it is not a fallacy, it is a reality.
I admit that some action of the market is due to manipulation and emotional factors of investors, but eventually, the overall price of the market will indeed be captive to real world factors, the approximate value of the stock, as determined by the value of the companies, not merely speculation or manipulation. Short term fluctuations of course include speculation, but over time, real world factors will determine the approximate price of a share of stock in a company.