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Sarmad--yes, imagine the dynamics of people waiting for the bounce, maybe buying it, then having a margin call, it is the short squeeze upside down. I tried to address a related topic -- what is savings -- which caused some confusion. Stocks are valued on the basis of the last trade -- or what you can get for them. This is what economists call a 'positional good'. Owners of nets caught on to this cause they targeted the small float stocks with stories instead of track records. The value of positional goods arises from their scarcity and raw demand (classic tulips -- also real estate, etc.) -- but they are totally illiquid if the supply can be increased (stock splits, institutional sales, IPOs) or if the demand drops (liquidity crunch, margin calls, down market). Stocks are not savings, they are claims on earnings and/or assets, and net stocks are bets on earnings with no assets, and AMZN -- how loud can you laugh on the net? AMZN can never be overvalued, or undervalued, but when the time comes to leave, you can't expect millions of people to get out that little door marked exit -- AMZN can do more than go down -- it can collapse. |
