It's not supply and demand, it's a bunch of assholes messing with commodity prices and creating bubbles.san4 wrote:
That sounds right. Basically supply and demand determine the price of a stock. But that doesn't mean there's anything wrong with short selling unless there is also something wrong with buying. If I go out and buy a million shares of a company, and there are no other contributing factors, the stock price will go up, regardless of the real value of the company. Neither buying nor short-selling are inherently manipulative, they're just bets in opposite directions.Scorpion0x17 wrote:
No it won't.san4 wrote:
But when a short seller eventually buys the stock to cover the short sale, the transaction will have a virtually identical and opposite effect on the stock price.
OK, I as the short seller, borrow stock from you. I sell it at current market value. At this point to value of the stock hardly changes - because I sell at market value. But then, due to other factors, the value of the stock falls. And I then finally buy the stocks from you - but, crucially, at a lower value than I sold them for - and that is key - you have to remember that the value of a stock is largely based on what price everybody holding/wanting them is willing to sell/buy them at. By buying at a lower value to what I sold them at, my contribution to that perceived value is downwards - because I'm saying "sure, I'll sell at 15c per share, 'cos they're only worth 10c!".
Exactamundo. There's the theory behind what makes the prices go up and down. Then there's the way the markets and traders actually work. It's the latter that causes crashes, not any inherent fault in the system. And it is in this context that short-selling becomes bad - as we have seen recently, falling values cause panic and so more and more people sell, driving the value of the market ever downwards.ATG wrote:
It's not supply and demand, it's a bunch of assholes messing with commodity prices and creating bubbles.san4 wrote:
That sounds right. Basically supply and demand determine the price of a stock. But that doesn't mean there's anything wrong with short selling unless there is also something wrong with buying. If I go out and buy a million shares of a company, and there are no other contributing factors, the stock price will go up, regardless of the real value of the company. Neither buying nor short-selling are inherently manipulative, they're just bets in opposite directions.Scorpion0x17 wrote:
No it won't.
OK, I as the short seller, borrow stock from you. I sell it at current market value. At this point to value of the stock hardly changes - because I sell at market value. But then, due to other factors, the value of the stock falls. And I then finally buy the stocks from you - but, crucially, at a lower value than I sold them for - and that is key - you have to remember that the value of a stock is largely based on what price everybody holding/wanting them is willing to sell/buy them at. By buying at a lower value to what I sold them at, my contribution to that perceived value is downwards - because I'm saying "sure, I'll sell at 15c per share, 'cos they're only worth 10c!".
Booms are the opposite effect - they're caused by miss-placed confidence.
The previous crashes took many years to recover - video:
http://finance.yahoo.com/tech-ticker/ar … IC,SPY,DIA
http://finance.yahoo.com/tech-ticker/ar … IC,SPY,DIA
JIM LEHRER- "And I'd just toss in one little quirk that would make it different this time, and that is, it's been 26 years since we've had really bad economic times in this country.
We had a couple of downspins in '91 and then after 2001, but we've had essentially 26 years of low unemployment, low inflation, low interest rates.
And people have come to take those as a matter of course, as a norm."
And that's why this is much more serious. The fear is incredibly strong, the blame game and search for guidance and leadership is just overwhelming for most people.
We had a couple of downspins in '91 and then after 2001, but we've had essentially 26 years of low unemployment, low inflation, low interest rates.
And people have come to take those as a matter of course, as a norm."
And that's why this is much more serious. The fear is incredibly strong, the blame game and search for guidance and leadership is just overwhelming for most people.
Last edited by TheAussieReaper (2008-10-12 21:03:45)
Question: Would it be as bad and would we be seeing such kneejerk reactions (in the US at least) if it weren't a Presidential election year?
Some could argue that the "crisis" has been exacerbated by the candidates (and their respective parties) crying gloom and doom and trying to "save" us.
Some could argue that the "crisis" has been exacerbated by the candidates (and their respective parties) crying gloom and doom and trying to "save" us.
“Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.”
― Albert Einstein
Doing the popular thing is not always right. Doing the right thing is not always popular
― Albert Einstein
Doing the popular thing is not always right. Doing the right thing is not always popular