>>I enjoyed reading your post. Agreed with most of it
Thank you Sir. One can not please everyone all the time.
>>One of the only things I didn't agree with is this.
When you make money in the market, somebody else lost those same dollars. Likewise, if you lost money in the market, somebody else gain the same dollars.
The market is not a zero-sum game. Just because one company grows and makes money for its shareholders doesn't mean another company somewhere else has to fail and lose money for its shareholders.<<
I am all ears, eager to learn your side.
>>That would fall under a socialist or communist philosophy that says there's only so much wealth in the world and in order for someone to have it, someone else must do without it.<<
First you misunderstand, I do not mean at all what you expressed above, in addition, I fail to see the connection between communism and my concept of the market.
My understanding of Communism is that in one of its basic principles, it postulates that the control of the means of production should be in the hands of government.
The "taking of wealth" from those who have, and then distributed among those who have not, is the way in which communists attempt to "solve" what they consider an "injustice" by the mere act of accumulation of wealth by the producers and risk takers.
Communists do not understand the creation of value, they have no idea what it takes to make a profit. All they know, is they see it and it is easy to take it (particularly if you are in a position to use force), therefore for them all it cost them is the "taking" (from those who CAN create it), and then they distribute it, among as said earlier, to those who do not have it, (also known as VOTERS).
For these people, money is "evil" because it creates in their eyes, "inequalities" that can only be solved by the "all-mighty and wise government who in its wisdom, it knows and indeed should control, how much money a neurosurgeon should earn for his knowledge and skill. Such income in their eyes should not be higher than someone who his/her responsibility is no more important than cleaning bathrooms.
They can not understand a basic concept of value and money. In order for money to be stolen/taken, first it must be created, furthermore, all money represents is a medium of exchange, nothing less, nothing more. However, for such money to become a medium of exchange, it MUST have VALUE, once the value is determined, then it can be used as an exchange medium.
To illustrate, if you perform a specific task and expect payment, should you be paid in US dollars, or in Chinese Yuan?, Japanese Yen, or Spanish Pesetas? I think I know the answer to that.
Likewise, if you invest in a specific stock, and management is knowledgeable and creates VALUE for the company hence for the shareholder, when you sell, should you sell for a higher price?
For the communists, this concept of creation of value is an impossibility, why? Because there will be NO motivation to create such value, the minute you do, it is taken away from you, by the all wise government, therefore, who wants to work to remain in the same level.
For them, everyone is equal, and effort has no value. In other words, people should work according to his/her abilities, and must be paid according to his/her needs.
The problem with this is that, who determines ability and need? The government?
This, amongst other things, is the reason that Communism failed, it was doomed to fail anyway. (as it did).
We must mentioned that President Reagan made a bet with the communists, he said: in order to defeat you, I am not going to nuke you, (that would be too painful for both sides), simply, I am going to outspend you.
Mr. Regan became convinced that the great American industrial machine would be able to do this and recuperate from certain spending extravaganza.
At the same time, he knew that the soviets would not be able to keep pace, and in addition, the Soviet Union was a forced collection of different countries, that in the first place, they did not want to be together, not to mention that Communism goes against the nature of humans.
On the other hand, the stock market is at the heart of American industry, and the stock market addresses very well indeed, human nature at its best. First, it facilitates ingenuity and creativity by funding corporations, and then, once such function is completed, then it caters to the Greed and Fear of the investing population at large.
As for the market, 1 + 1. So long people keep on bring money into the market, overall the market will continue to go up. Some issues more than others, but in general, it will go up.
The minute people say, no more money for stocks, slowly, at first, people will continue to sell for various reason, then the market will fall, and money will be lost.
Every time you buy, someone sells, every time you sell, someone buys. This has nothing to do with a company "creating value" for the shareholders, and in turn it does not have anything to do with a different company "loosing value" for their shareholders.
The creating and losing value (in the stock market), has more to do with supply and demand for the particular stock, the more demand and funds are directed to stock "A" the more valuable it becomes.
If stock "B" has more sellers (supply) than buyers, (demand) value will be lost. If you bought at the very peak of the curve, on the other side, someone "sold" (to you), and for the example, we will say that he/she sold "short". Because the stock has more sellers, it will begin to slide, (slow or fast, depending on the amount of overage between sellers over buyers), suddenly, you decide that you have lost enough, and sell, say 5 points from your basis (cost). Assume. For this example, that the person that sold you the shares, at the top, now decides that 5 points is "enough" (he is not a pig), and "buys to cover" the same shares that you sold (in disgust, as one Bill, has been known to have said.).
In broader terms, the fact that most economies around the world are on fire, (with the exception of Europe, for now, however, wait for the EMU). is the main reason that why the bond market is showing strength. All these foreign investors are buying treasuries (and stocks) because they see SAFETY here.
The above creates a surplus of cash, keeping interest at bay, and if so, this is a good environment for stocks and companies, so people keep on putting money into the market, so the general trend, ( to the amazement of many), is still up, and on the verge of turning on the turbo booster (possibly, not for sure yet).
Likewise, all these foreign markets are going down and lower, because there is an exodus of capital, (except for some "dead cat" bounces here and there)
Communism has nothing to do with this process, (in fact under Communism this process could not exist), unless there is a Cuban Stock exchange, yes?
However, I have been known to be wrong not once or twice, but many, many times, and it may be that in this instance I have, yet again, struck out!
Are you with me still?....zzzzzzzzzzzzzzzzzzzzzzz. |
