Yes indeed you can sell ten shares while I buy but one. The point is that for every buyer there is a seller and vice versa. There can be no buyer if there is no seller. Sometimes the buyers out there want to buy more than there is to sell. At that point in time, the market is not in equilibrium, until the price goes up enough to dissuade enough buyers from buying, so that once again there is exactly as much to sell as the quantity people want to buy. When price has stabilized, the market is said to be in equilibrium. However, all this happens so fast and changes with every piece of news and new input, that is why we say the markets are efficient.
In addition, I would argue that the trends always regress to the mean. By definition, trends regress to the mean. If they didn't then (a+b)/2 would not equal (a/2)+(b/2) and what a world we'd live in then. :)
Your statement that prices track something other than price trends more strongly is accurate. I think we all agree that price trends track earnings growth pretty strongly. What it tracks (or correlates to) most strongly, I don't know, because I don't have all the data at my finger tips with which to run a regression analysis. However, earnings is a good bet. I think we all believe that the world markets will expand over time, if for no other reason, because technologies build on each previous layer to make more complex and valuable products that make our lives easier and more productive. If we can agree that the human race has advanced steadily over the long haul, then we can agree that market prices will also advance steadily over the long haul. If we don't believe in the market or the dollar, then both will collapse. But because we believe in them, they exist. As such, they will go up as the human race progresses. Demand will always slightly outstrip supply causing an ever uppward push on prices, which is how you and I will continue to make a profit on our investments. |
