4 ms·
Buying a stock gets you expected earnings. Of course a lot of people bet that real earnings will grow a lot. Why do we have to tell them that they are making a
by pas 7y ago
Buying a stock gets you expected earnings. Of course a lot of people bet that real earnings will grow a lot. Why do we have to tell them that they are making a bad bet?
> If so much money flows in that your share of $X is worth less than some other investment, you're making a bad choice.
Or not. Who knows. If it were that easy to know people wouldn't do this. Stocks are fickle, but liquid and with almost no transaction price. Buying and setting up a stop loss is easy. (Even if placing the limit order has a fee.)
It's not a pyramid scheme. At best you might call it a pump-and-dump. But what's the problem with that? The people buying the share for its expected spot price rise are not dumb. They are just rich fools, with bad timing, because were they the first ones to buy and later sell, they would be very rich fools.
Who cares how an index fund performs. If the price signal gets so bad people will stop pumping money into the stock market. Just let them play their idiotic games. It's just froth. Sloshing back and forth.
The underlying economy is solid, it grows at a steady pace (minus the occasional recessions).
The problem is of course that the benefits of that real growth take an awful long time to trickle down into meaningful changes due to ... sociopolitics.
- jfengel 7y agoI think I may have appeared more anti-stock than I am. I'm an investor myself, and was just trying to give my opinion on your question about "how much is too much"? My intention was to point out the limits. The stock market can only hold so much money (for a given set of companies). Precisely how much, I can't say, and of course it's constantly growing (both from existing company growth and adding new companies. In particular I can't say if we're beyond that point or not. I do think we're getting close: the P/E ratio of the S&P 500 is over 23 at the moment. That corresponds to getting 3% interest on an investment. That's a crude measure, of course, but an indicator that new money coming into the market might be better invested elsewhere.
- pas 7y agoI haven't read it as anti-stock :) In theory the market should/will optimize, maximizing opportunities, which in turn basically turns everything into the same risk-weighted-yield-wise. (After all, if there's enough information, depth, participants, liquidity, low transaction costs, then people will go after whatever market niche they may find.) So, yes, there's a limit of how much money should be in stocks, but my belief/theory is that the investing market is very good at figuring this out (in the grand scheme of things).