1. Crude does affect inflation, as it raise cost, but it's minor impact, since the major cost is workers cost.
2. If products of the society increased, increasing printed money doesn't result in inflation as long as they grow at same rate.
3.AG never said he doesn't believe "new era", he was just conservative in a conclusion - " the evidences were compelling but not conclusive".
4. As for "greater fool", we can't judge only from market price to say whether it is too high or too low. To find a top you need to have extensive economic knowledge that you can predict that economy has reached its limit, that the current expectations are too high, that firms are not going to make the projected profits. Not from the fact that the market rose from 9500 to 11000 within one or two months.
Stocks price increases have two basic reasons:
people think a company will make more money therefore buy it, which is fundemantal reason;
people see the stock price going up so to expect it to go up further therefore buy it, which is psychological reason;
The "greater fool" happens in the second situation. In this situation a stock is difficult to evaluate. People may only know a stock has great potential but they can't measure how much it would be, then the "greater fool" may happen.
A company earnings drop significantly and stock cut half, still not oversold because people have fundamentals as evaluation base, the stock will not bounce much.
A company with very good earnings and stock go up 40%, still not overbought, for the same reason.
In both situations there will not be much 'great fool" because people have fundemantals to evaluate the stocks.
A company launch a web site, or a drug company get FDA approval, there are higher chance of "great fool" because people don't have a clear measure of those potential, thus may be more influnced by price change itself - if the price rise, more people buy, if the price drop, more people sell. Not that greed or fear cause that, but people can't find something else to judge.
So, what pushed the market from 9500 to 11000? The companies earnings.
The strong fundemantals. Not " great fool". I am not saying in this situation there is no profit taking, but its down side swing is relatively small. |
