{"id":1175,"date":"2011-08-04T21:27:34","date_gmt":"2011-08-05T01:27:34","guid":{"rendered":"http:\/\/chcollins.com\/100Billion\/?p=1175"},"modified":"2022-08-01T07:43:22","modified_gmt":"2022-08-01T11:43:22","slug":"markets-tumble-markets-rally","status":"publish","type":"post","link":"https:\/\/chcollins.com\/100Billion\/2011\/08\/markets-tumble-markets-rally\/","title":{"rendered":"Markets Tumble, Markets Rally"},"content":{"rendered":"

Originally published July 11, 2011:<\/em><\/p>\n

<\/em>Today the “stock market” was down about 1.5%.\u00a0\u00a0 Would you rush to a department store and buy clothes if they were 1.5% off?<\/p>\n

Financial gurus who subscribe to the “efficient market hypothesis” would like you to think that the stock market “knows<\/a>” at every instant the correct price of everything offered for sale in the market.\u00a0 If so, why does the price of stock vary so much on a day-to-day basis?\u00a0 How can it be that something worth $100 yesterday is only worth $98.50 today?\u00a0 What changed between then and now, other than the chemicals exchanged amongst the neurons in a stock trader’s brain?<\/p>\n

Give me a break: the “market” has no idea what any price should be.\u00a0 The market is a boat without an anchor, riding the tides.\u00a0 As sentiment rises and falls, so do stock market prices.\u00a0 Millions of people makes bets (and they are bets) based on sentiment every day.<\/p>\n

In the end, we are all “greater fool<\/a>” investors, ones who count on someone buying our asset at a higher price than what we paid for it.\u00a0 As long as we all agree on this scheme, it works.\u00a0 But if the game breaks down, if people stop believing that stock prices increase over time, then the market will crash, just as Tinkerbell’s light dimmed from lack of applause.<\/p>\n

We (along with tens of millions of others) are counting on other people’s greed to finance our retirement.\u00a0 Greed is a fairly good bet — not ironclad, but it has a long track record<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Originally published July 11, 2011: Today the “stock market” was down about 1.5%.\u00a0\u00a0 Would you rush to a department store and buy clothes if they were 1.5% off? Financial gurus who subscribe to the “efficient market hypothesis” would like you … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[59],"tags":[],"class_list":["post-1175","post","type-post","status-publish","format-standard","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/posts\/1175","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/comments?post=1175"}],"version-history":[{"count":24,"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/posts\/1175\/revisions"}],"predecessor-version":[{"id":2108,"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/posts\/1175\/revisions\/2108"}],"wp:attachment":[{"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/media?parent=1175"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/categories?post=1175"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/chcollins.com\/100Billion\/wp-json\/wp\/v2\/tags?post=1175"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}