"Fair enough, but the stock market does not create wealth, the economy does."
correct. but in the LONG TERM (we are all dead ha ha), prices in the stock market reflect the value of those companies, which is a reflection of the value OF the economy. the reason why MSFT is worth many many times its stock value 1 yr after IPO is that the value of the company has grown, not merely some ephemeral opinion of MSFT's stock value.
since the economy grows, the value of the stock market grows.
stocks are a forward looking price/discovery method. they are not a zero sum game, because there is (believe it or not) a growing intrinsic value beneath the price of the stock. the PRICE swings wildly due to difference of opinion, hype, fear, whatever. That's how we TRADERs make money
. but in the long run (pull up some quarterly/yearly charts), the average stock price will plot relatively closely the value of the company.
in some sense, it is a feedback loop.; while the growing economy (and growing companies) grow, which in turn results in increased stock values, the loop works the other way, in that issuance of stock provides capital to the companies that allow them TO grow. that is why companies issue stock in the first place.
it is true that if you buy at 1, then sell to me at 2, then i sell at 3, etc. it sounds like a zero sum game. but what u don't understand is that there is underlying capital improvements/value improvements that this growing stock price is reflecting. while short term swings (a la 2000) can move prices grossly out of line with value, in the long run, price regress to a mean. the fact that prices DO regress to a mean is why contrarian investing is such a great way to make money, as is spread trading, but i digress.
a stock is priced at whatever people think it is worth. thus,. stock prices are purely opinion. however, a stock has an underlying tie to value - it is a specific percentage of a company. THAT is not debatable. if everybody agreed on the price of MSFT (efficient market theory), then the market would instantly adjust to whatever that value is/was. which is the absurdity of efficient market theory of course.
one share of AAPL is worth X% of the actual COMPANY aapl. thus, if AAPL grows wealth, as it did phenomenally since steve jobs took over (which is also why i bot PIXR on weakness and banked heavily but i digress), the stock WILL reflect that.
in the long term
it is not a zero sum game as long as stocks are tied to underlying entities (companies). companies grow wealth. the economy grows. stockprices grow. see the relationship?
contrarily, if a massive problem hits the US economy, and US companies on average lose 50% of their value (thru some catastrophic event), then it still won't be a losing game. overnight, billions of $$$ in stock value will dissapear. that's not a zero sum game either, of course.
throughout history, naysayers have tried to talk the greatness of our nation and economy down. the smart money, otoh, has benefited from the growth in our economy by taking the opportunity to own some of the greatest companies and capital developing engines ever known to man.
i suggest you do the same.
correct. but in the LONG TERM (we are all dead ha ha), prices in the stock market reflect the value of those companies, which is a reflection of the value OF the economy. the reason why MSFT is worth many many times its stock value 1 yr after IPO is that the value of the company has grown, not merely some ephemeral opinion of MSFT's stock value.
since the economy grows, the value of the stock market grows.
stocks are a forward looking price/discovery method. they are not a zero sum game, because there is (believe it or not) a growing intrinsic value beneath the price of the stock. the PRICE swings wildly due to difference of opinion, hype, fear, whatever. That's how we TRADERs make money
. but in the long run (pull up some quarterly/yearly charts), the average stock price will plot relatively closely the value of the company.in some sense, it is a feedback loop.; while the growing economy (and growing companies) grow, which in turn results in increased stock values, the loop works the other way, in that issuance of stock provides capital to the companies that allow them TO grow. that is why companies issue stock in the first place.
it is true that if you buy at 1, then sell to me at 2, then i sell at 3, etc. it sounds like a zero sum game. but what u don't understand is that there is underlying capital improvements/value improvements that this growing stock price is reflecting. while short term swings (a la 2000) can move prices grossly out of line with value, in the long run, price regress to a mean. the fact that prices DO regress to a mean is why contrarian investing is such a great way to make money, as is spread trading, but i digress.
a stock is priced at whatever people think it is worth. thus,. stock prices are purely opinion. however, a stock has an underlying tie to value - it is a specific percentage of a company. THAT is not debatable. if everybody agreed on the price of MSFT (efficient market theory), then the market would instantly adjust to whatever that value is/was. which is the absurdity of efficient market theory of course.
one share of AAPL is worth X% of the actual COMPANY aapl. thus, if AAPL grows wealth, as it did phenomenally since steve jobs took over (which is also why i bot PIXR on weakness and banked heavily but i digress), the stock WILL reflect that.
in the long term
it is not a zero sum game as long as stocks are tied to underlying entities (companies). companies grow wealth. the economy grows. stockprices grow. see the relationship?
contrarily, if a massive problem hits the US economy, and US companies on average lose 50% of their value (thru some catastrophic event), then it still won't be a losing game. overnight, billions of $$$ in stock value will dissapear. that's not a zero sum game either, of course.
throughout history, naysayers have tried to talk the greatness of our nation and economy down. the smart money, otoh, has benefited from the growth in our economy by taking the opportunity to own some of the greatest companies and capital developing engines ever known to man.
i suggest you do the same.
