Caroline, supply and demand do rule in commodities where, at least in the short run, the supply is relatively fixed. But the supply of stock shares is not fixed, being printed like crazy. For example, this time last year CTXS had just over 20 million shares. Now going up to 400 million shares, no limit to how many can be printed.
We went through this same fad a few years back with art prints, several of my friends were buying them as investments. I argued that in the long run the prints would not be worth much more than the cost to print them. The Ben Hampton prints ran up in price from $40 to $50,000 in a short time as only a few hundred of each picture were sold. The a few weeks later, the company printed thousands more copies, today you can buy them for $20 or less in yard sales.
With stocks, the company printing presses will run so long as people are willing to pay a premium for shares. CTXS is doing nothing wrong by increasing the number of shares, they are just meeting demand and will continue to do so until the price comes down to fair value. |
