Do You Trust the Stock Market?

[EdwinAMartin]

Nvidia is very inflated.
For some reason, they didn't even produce anything for 2 years and their stock kept going up, and that's hokey as all can be to me.
What does Nvidia do, according to you?
I've never seen a company that produced nothing that they were supposed to for 18 months or more have their stock go up steadily like that.
There's some manipulation going on there.

I remember that at one point it was selling for over $200, and only earning 4 cents a share or less per quarter. Insane.

 

[The Duke]

I remember that at one point it was selling for over $200, and only earning 4 cents a share or less per quarter. Insane.

I would not touch Nvidia. I'll buy their products if I need one,
but I would not buy their stock, no.
AMD is about due to come out on top of what they do performance-wise and then everything gets realigned.

 

[Dorian Mode]

I remember that at one point it was selling for over $200, and only earning 4 cents a share or less per quarter. Insane.

The Internet is the worst place to take medical advice, political advice, and financial advice. Actually ANY advice. That being said, as a retired venture capitalist, following the crowd with the hot stocks that everyone is always talking about is actually very risky. The companies that make Nvidia happen, its strategic partners, are better bets because no one cares about them and they stay relatively undervalued until they finally get noticed and explode up. During my MBA one of the things that kept with me and got me into VC was this: During a gold rush you can put all your money into a hotshot miner, or you can put all your money into the companies that make mining equipment. One is a better long term strategy. The other is about as risky as playing the roulette wheel.

 

[fncceo]

Do you trust the stock market?

The stock market is a place where stocks, commodities, bonds, and other financial instruments are bought and sold in full and open disclosure.

You can mistrust the various instruments that are being bought and sold, but there is nothing to trust about a market.

You either use the facilities or you do not.

 

[Dorian Mode]

The stock market is a place where stocks, commodities, bonds, and other financial instruments are bought and sold in full and open disclosure.

You can mistrust the various instruments that are being bought and sold, but there is nothing to trust about a market.

You either use the facilities or you do not.

Markets are manipulated. Is the gold market without external influence? Are treasury bonds and the value of the USD manipulated? People are greedy and will manipulate markets as much as possible.

 

[fncceo]

Markets are manipulated. Is the gold market without external influence? Are treasury bonds and the value of the USD manipulated? People are greedy and will manipulate markets as much as possible.

The stock and other financial markets are places where instruments are traded … the prices are set between buyer and seller and made public knowledge in real time.

No one ever bought or sold a stock on an American market where the price wasn’t freely agreed between buyer and seller.

 

[Dorian Mode]

The stock and other financial markets are places where instruments are traded … the prices are set between buyer and seller and made public knowledge in real time.

No one ever bought or sold a stock on an American market where the price wasn’t freely agreed between buyer and seller.

That's obvious. What happens at the grocery store, a market, seems transparent enough, right? They set a price and you pay it, or don't. The transaction gets recorded and you get a receipt. That's the obvious stuff and all seems perfectly transparent. Do you think the grocery store, as a marketplace, is completely transparent in it's pricing strategy? Do you think the grocery store has any interest to manipulate customers and prices to cause certain preferable outcomes? Do you think the grocery store's suppliers don't influence the prices the grocery store charges with incentives? Why spend billions of dollars on advertising if everything is so obvious? Even though there's transactional transparency, everything leading up to that transaction can be manipulated. Thus, markets are constantly manipulated. Anyone who denies that may want someone else to manage their money.

 

[fncceo]

What happens at the grocery store, a market, seems transparent enough, right? They set a price and you pay it

That's actually not a good analogy. Supermarkets buy their goods at wholesale prices that aren't publicly known. You don't know how much markup the grocer puts on his eggs, his butter, or his cheese.

When a stock or bond is sold on and exchange, you know immediately the price where which it was purchased. The buyers and sellers know exactly (to the penny) the price at which the stock last traded and can make an informed decision if that investment is under or over priced based on their own analysis.

You can never make that much of an informed decision when you buy and egg and you certainly can't sell it back to the grocer if you think you can make a profit.

There are a lot of unknowns when investing ... the real versus the perceived value of the company or instrument you invest, the future of the sector, world or local events that might impact it's value, but the trade on the market is as fair and open a trading environment that has ever existed in human history.

Take, for example, the credit crisis of 2008. The value of mortgage backed securities turned out to be vastly less than what the public believed. So much so that speculative investing in MBS's ended up wiping TRILLIIONS in our household wealth.

Not because of a failure of the markets, but because people failed to do their due diligence when it came to truly analyzing the value of the securities they were trading. Most investors (including the top investors in every major US bank and investment firm) trusted the seller's evaluation of their value. Those few who bothered to REALLY look into those investments and see how worthless they really were able to profit from that collapse.

 

[Norm Paperman]

Do you trust the stock market? The reason I ask this is because of the exaggerated swings in the market based on seemingly irrational reactions to political events rather than sound financial analysis. As a result of these swings, huge amounts of money are gained or lost in short periods of time. Who are the knaves and fools playing this game?

Unless you are a day trader, the swings are irrelevant, it is the long haul that matters.

Consider this, the richest men in America have most of their wealth tied to the stock market. I suspect I will be long gone and dead before they will let it crash.

 

[Dekster]

I trust the market will continue to rise over time due to the influx of retirement investments every week. As to individual stocks, pick carefully.

 

[Dorian Mode]

That's actually not a good analogy. Supermarkets buy their goods at wholesale prices that aren't publicly known. You don't know how much markup the grocer puts on his eggs, his butter, or his cheese.

When a stock or bond is sold on and exchange, you know immediately the price where which it was purchased. The buyers and sellers know exactly (to the penny) the price at which the stock last traded and can make an informed decision if that investment is under or over priced based on their own analysis.

You can never make that much of an informed decision when you buy and egg and you certainly can't sell it back to the grocer if you think you can make a profit.

It seems to me you think Financial Markets are pure and transparent because prices are known before purchase and buyer beware exists for everything else. OK, let's look at the Gold Market on the COMEX. Has the gold market ever been manipulated and every manipulation made perfectly transparent to the buyers of gold? Does the Fed manipulate the price of gold to prop up the USD? Does the Fed ever admit it manipulates the gold market? Then the hilarious thing is many people think they are buying an ounce of gold from the exchange and they are really buying a futures contract to buy an ounce of gold. Try redeeming your futures contract for physical gold. I don't know what the ratio is today, but it was something like 100 contracts for the same ounce of gold. It probably is well over a thousand today. Markets are manipulated, any wise investor knows this.

 

[fncceo]

Has the gold market ever been manipulated and every manipulation made perfectly transparent to the buyers of gold?

Not by the exchanges, which only act as the intermediary for the transactions...

... your original question was, "Do you trust the stock market" --- and by that I assumed you meant financial markets in general as the bond market is several times larger than the stock market.

You can't conflate investors and brokers with "the market" itself, which is the mechanism by which people and institutions invest.

Individual buyers and sellers can manipulate markets only by creating surpluses or deficits.

A very smart analyst at the Bloomberg office in Tokyo in the late '90s was able to successfully predict rises and falls in the gold market by tracking the cycle of wedding seasons in China and India where the most significant buys (and the accompanying rises in price) occurred before and during those seasons. Of course, that cyclical predictability is no longer true because other factors have superseded events but it shows that even a manipulated market can be predicted if you can identify the manipulations.

 

[EdwinAMartin]

Personally for me it's the high volatility that is desirable. As for claiming it's 'investing', that just for those into deluding themselves and trying to put lipstick on a pig. The only thing Wall Street sells is debt, and when the financial sector dominates the economy, deficit spending follows as it sucks all the productivity out of the economy and strangles it under mountains of debt. An industrial economy is much better; it's based on productivity and disposable income, not rent seeking.

 

[fncceo]

The only thing Wall Street sells is debt

It's true that Wall Street does sell much more debt than equity ... but equity is still a substantial portion of what it sells.

 

[EdwinAMartin]

It's true that Wall Street does sell much more debt than equity ... but equity is still a substantial portion of what it sells.

More like the illusion of 'equity'. Loose GAAP standards have pretty much made a joke out of calculating 'equity'.

 

[fncceo]

More like the illusion of 'equity'. Loose GAAP standards have pretty much made a joke out of calculating 'equity'.

All equity is illusory ... if you own gold, the value of your gold ebbs and flows with public whim

It's the same for land, commodities, or industrial capital

Nothing in the universe is intrinsically valuable

It's value lies totally in what it's worth to you and the only value that can ever be realized is what it means to someone else.

 

[sealybobo]

Do you trust the stock market? The reason I ask this is because of the exaggerated swings in the market based on seemingly irrational reactions to political events rather than sound financial analysis. As a result of these swings, huge amounts of money are gained or lost in short periods of time. Who are the knaves and fools playing this game?

I trust the stock market as much as I trust my wife. I have to. Even if she might screw me over I have to believe she won't. And she might leave me with half of my money.

And maybe I was a fool to put a ring on it? Perhaps that's why young men aren't getting married anymore. Who wants to enter into a contract like that? That's not the only reason but does stop me from looking to get married. She better have as much money as I do and not be in debt.

I have been putting money in for years and probably on average get 10% return on all my money. In 7 years what I have now will be A LOT more. Enough I'll be able to live off the interest. But you have to pull your money out at the right time. I pray Trump doesn't start another war in 2033 when I'm ready to retire and tank the stock market for years. Then I have to wait for my stocks to go back up.

But Republicans like Hafar1014 are right. The stock market will come back eventually. It actually does pretty well under Democrats. And Democrats don't screw over the tax payers to benefit the stock market.

The stock market is not the economy. Republicans will say "you have a 401K right?" but

The top 10% of wealthiest American households own approximately 87% to 93% of all U.S. stock market wealth. The top 1% alone owns about 50% to 54% of the market. Conversely, the bottom 50% of households own only about 1% of the total stock market value.

 

[Hafar1014]

Do you trust the stock market? The reason I ask this is because of the exaggerated swings in the market based on seemingly irrational reactions to political events rather than sound financial analysis. As a result of these swings, huge amounts of money are gained or lost in short periods of time. Who are the knaves and fools playing this game?

Nothing is lost unless you sell. The market always bounces back

 

[Dorian Mode]

Not by the exchanges, which only act as the intermediary for the transactions...

... your original question was, "Do you trust the stock market" --- and by that I assumed you meant financial markets in general as the bond market is several times larger than the stock market.

You can't conflate investors and brokers with "the market" itself, which is the mechanism by which people and institutions invest.

Individual buyers and sellers can manipulate markets only by creating surpluses or deficits.

A very smart analyst at the Bloomberg office in Tokyo in the late '90s was able to successfully predict rises and falls in the gold market by tracking the cycle of wedding seasons in China and India where the most significant buys (and the accompanying rises in price) occurred before and during those seasons. Of course, that cyclical predictability is no longer true because other factors have superseded events but it shows that even a manipulated market can be predicted if you can identify the manipulations.

If you are only saying that the actual exchanges are trustworthy, then of course they are and I trust them to execute any trades. Do I think the markets for gold, bonds, stocks, mutual funds, etc. are pure and transparent, the answer is no, there is a lot of manipulation in financial investments before it ever gets to the point of the trade in an exchange. There is a reason why people have to do due diligence before buying an investment, and there are reasons why so many regulatory agencies exist. Markets are manipulated long before the trade actually happens.

 

[Cassandro]

... your original question was, "Do you trust the stock market" --- and by that I assumed you meant financial markets in general as the bond market is several times larger than the stock market.

No, I was referring to manipulation of stock prices, which can occur through fraud, deceit and insider information. Buy/sell transactions are merely the instruments by which this is accomplished.