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View Diary: Dow 11,000 Ends the Right-Wing Obama Bear Market Myth (37 comments)

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  •  And very few investors used those formulas (0+ / 0-)

    Stock has essentially become a commodity; bought and sold primarily on the basis of demand for the stock as if it had inherent value. A handful of serious investors use fundamentals, Warren Buffet chief among them, but the vast bulk of them follow and try to beat the market as quasi-speculators.

    They'd be fools not to. They recognize that the market is not a mechanical construct where everything is a function of real world activities, but that it has a semi-independent existence ruled by psychology. If anything, this psychological dimension appeals to these guys' narcissism, that they've got something (will, balls, etc.) that those scaredy-cat eggheads who invest by the book don't have, and that they can get richer than people who limit themselves to the rules could ever hope to be. Warren Buffet is one of the richest men in the world because he invests on fundamentals and the long-term, but if anything, he's the exception that proves the anti-rule since most people who invest like him aren't as rich as he is.

    I'm hungry for some "giant vampire squid" sushi.

    by Visceral on Tue Apr 13, 2010 at 12:02:31 PM PDT

    [ Parent ]

    •  You're underestimating the importance of math (5+ / 0-)

      I'm not sure who your image of the mythical investor is.  A lot of money in the stock market is in 401ks and mutual funds.  Although the individual investor might not read financials, they trust their money with people who do.  Another huge chunk is pension funds and university endowments.  Again either the investor or the investor's investment manager certainly "does the math."

      The people who don't do the math are usually small individual investors, day traders and traders at brokerage houses who trade on psychology and rumors.  But that psychology and those rumors are set by the big institutional investors who actually set the prices.

      Even if someone invests just by looking at what Warren Buffet is doing, that still reflects the underlying economic reality of the company.

      •  I personally think (0+ / 0-)

        the current rally has to do with people getting in while the market was bottomed out. People always like to buy low and sell high. All that new demand has caused stock prices to go up. Stock prices are not going up because companies are posting record profits.

        •  I blame it on the government (1+ / 0-)
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          Deep Texan

          I think this rally is entirely caused by the influx of public money to replace the seized-up credit markets. Banks are loaning only because they've got a government lifeline - both for themselves and for the other banks that they're both in debt to and have loaned enormous amounts of money to - and they're loaning to the Wall Street-themed casino in the hope of getting real money back as quickly and cheaply as possible.

          I'm hungry for some "giant vampire squid" sushi.

          by Visceral on Tue Apr 13, 2010 at 01:18:02 PM PDT

          [ Parent ]

        •  People always like to buy low and sell high. (0+ / 0-)

          Key word: "like." But we know that market behavior isn't always logical, so how often does that really happen?

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