If you’re a long term investor you can make a lot of money right now. Some stocks are selling at really low prices.
[quote]and1bball4mk wrote:
PimpBot5000 wrote:
I’m starting to think so. This economic crash has seemingly destroyed any previously held rule of investing and made the stock market completely random.
Companies report huge, legitimate profits (ie: not through TARP or layoffs)…the stock price plummets
Other companies, often swimming in debt, report devastating losses…and the price shoots up.
Companies announce that they’re hugely diluting the share pool…and then go on to gain 20% in a single day!
Fundamental analysis has apparently gone out the window.
Might purchasing scratch-and-win tickets be a more sound investment these days?
These are all good questions, so I’ll try to shed some light on it (I don’t claim to be an expert on it by any means!) The prices for these stocks are already so low because of their current fiscal conditions, that is, a lot of the bad news is already cooked into the stocks. Analyst study the economic conditions of these companies and set earnings estimates for the stocks, and if a company were to meet (or beat) the analyst projected earnings then the price goes up. Sometimes analyst predict that companies are going to lose money and as long as they don’t lose more than the predictions, the price of the stock usually goes up.
Fundamental analysis still works for long term investments, it’s just that the market right now is very volatile (it’s a traders market). Once economic conditions start to get better (spending goes up, credit loosens, unemployment slows) you will see the blue chip stocks gradually get stronger and stronger over time. [/quote]
That’s a pretty good summary of how earnings announcements work.
[quote]and1bball4mk wrote:
LIFTICVSMAXIMVS wrote:
What is perfect competition? What ideas do you have about economics that makes you so certain something like that is even knowable?
Most evidence points to government as the culprit when it comes to interference in competition…if that is what you mean, though I am not so sure what is “external” about it.
It has become fairly obvious to me that you don’t know anything about economics. Speaking of bubbles that have occurred in the past, how about the Mississippi bubble? 1715.[/quote]
All bubbles are made much worse by bad monetary policy and to the extent that governments interfere that is always the case. I am sorry but It will take more than two really poorly written sentences to convince me you know what you are talking about.
[quote]Bill Roberts wrote:
LIFTICVSMAXIMVS wrote:
jimmybango wrote:
Bubbles will exist as long as humans do.
But if this were true then bubbles would have always existed. Any serious study of history would reveil this to be untrue. In fact, bubbles are a modern phenomenon only occuring in the last 100 years or so.
Why oh why do you keep posting about things of which you know nothing or nowhere near enough, making absolute assertions which are completely wrong.
You never heard of the South Sea Bubble? 1711.[/quote]
Yes, and what of the monetary policy and what of government intervention during that time? You still miss the forest for the trees.
[quote]Bill Roberts wrote:
LIFTICVSMAXIMVS wrote:
jimmybango wrote:
Bubbles will exist as long as humans do.
But if this were true then bubbles would have always existed. Any serious study of history would reveil this to be untrue. In fact, bubbles are a modern phenomenon only occuring in the last 100 years or so.
Why oh why do you keep posting about things of which you know nothing or nowhere near enough, making absolute assertions which are completely wrong.
You never heard of the South Sea Bubble? 1711.[/quote]
That was a pyramid scheme and not a bubble.
[quote]and1bball4mk wrote:
LIFTICVSMAXIMVS wrote:
jimmybango wrote:
Bubbles will exist as long as humans do.
But if this were true then bubbles would have always existed. Any serious study of history would reveil this to be untrue. In fact, bubbles are a modern phenomenon only occuring in the last 100 years or so. Bubbles can only occur when the price of credit (interest rates) become cheaper than the market would otherwise set them. This can only happen when the supply of money can be inflated or deflated. If the money supply is real high interest rates have to be extremely low or money will just sit around not being used. When they are real low there is a tendency for malinvestment because previously unattractive investment become higher priced in the market due to prices being bidded up – e.g, the stock marke in 1999 and the current housing bubble.
Most of the time, people do not act rationally, but rather make choices based on emotion.
All choices are rational choices in that they require reason. The fact that one person may be “emotional” while making the choice does not change that fact. What you are really saying is that you would behave differently under the same circumstances.
Basically, it all comes down to the fact that ALL individuals value things differently and will behave in different ways to bring the reality of their values about. It is very chaotic but when the market is stable (not being interfered with) it has a way of organizing the actions of individuals to coincide with the greater wishes of society. In a healthy environment it becomes increasingly difficult to profit off of taking advantage of people. The market will punish immorality while the government tends to (unintentionally) protect it via dimwitted regulation.
Pure laissez-faire bullshit. For this to be true then you are assuming that free markets lead to perfect competition, which simply isn’t the case due to market externalities and a host of other possible market failures.[/quote]
You are assuming quite a lot about what other people assume.
And you still have not explained how a less than perfect market needs even more distortions by the Fed.
[quote]LIFTICVSMAXIMVS wrote:
Bill Roberts wrote:
LIFTICVSMAXIMVS wrote:
jimmybango wrote:
Bubbles will exist as long as humans do.
But if this were true then bubbles would have always existed. Any serious study of history would reveil this to be untrue. In fact, bubbles are a modern phenomenon only occuring in the last 100 years or so.
Why oh why do you keep posting about things of which you know nothing or nowhere near enough, making absolute assertions which are completely wrong.
You never heard of the South Sea Bubble? 1711.
Yes, and what of the monetary policy and what of government intervention during that time? You still miss the forest for the trees.[/quote]
Just because people call every pyramid scheme a bubble does not mean it is one.
Just because the Fed causes bubbles does not mean every bubble is caused by the Fed.
[quote]orion wrote:
Just because the Fed causes bubbles does not mean every bubble is caused by the Fed.
[/quote]
Excellent point.
[quote]orion wrote:
Just because the Fed causes bubbles does not mean every bubble is caused by the Fed.
[/quote]
No, but it always comes down to interference in the market. That is no less true for the Tulip bubble either.
Besides, when compared to this last bubble the tulip bubble looks like a tiny pimple.