The problem with this thought is that reality is a short term concept. Today's reality is very different from tomorrow's.
Markets DO tend toward "equilibrium", that is true, but while there is a single point of equilibrium at any single point in time, you suffer from 2 separate points that are constantly in motion. The speed, and the direction, of that point are things that are never stable.
It's something like the Heisenberg Uncertainty principle...you can know the speed or position of the quantum unit at any point in time, but you can't know both.
As such, when the NAZ was at 5000, you could have 10 reasons why it belonged there, and they were all good reasons. They may not have always made alot of sense, but they were good reasons.
The same is true of NAZ 500. All the reasons to be there will be good, not make alot of sense, but be good nonetheless.
Investor psychology is fragile, misinformed (at the best of times, ill informed at the worst), and ego-driven.
Good luck to all-as JP Morgan said about the market - "it will fluctuate". |
