konrad, <nowhere does it say that it is their job to keep prices up> sometimes it is their job to keep price down, temporarily... you are ignoring a whole bunch of interesting legal loopholes that make the game more profitable for specialists and less profitable for you. I tried to short a stock a few months ago at market; the price of the stock dropped 10% during the fifteen minutes it took for the order to be filled. ten minutes later, gosh, the price was up fifteen percent. This stuff happens all the time. Read the fine print in your brokerage contract, they don't have to agree to anything for any reason, they can sit on your money all day while they check your credit, they don't even have to give your money back to you. Most of the time they act in good faith.
Go and read the fine print, do it with a number of brokerages. Most specialist firms have big conflicts of interest between their retail clients and their private clients. Market volatility is huge and hides a lot of mechanisms that part the investor from his money. And remember, if you can't afford to lose your whole investment, get out of stocks. I repeat again: Go read the fine print. Stocks are risky.
Also remember (or in case you don't know this) that a stock price is not today's price, it is the price that the market expects the stock to be worth a year in the future. This includes political risk, interest-rate risk, earnings risk, profit margins, pricing pressures, competitive forces, etc etc risk. The variation in future market interest rate expectations by itself can cause a 20-30% differential in valuation of many stocks. The biggie is the profit and earnings projections, calculated out to a fraction of a penny one year in the future. I have to wonder about anybody who says they can do that. |
