Sometimes I just don't know where the time goes... well, I do. If you haven't figured it out yet, I've got a lot of health problems. Most of my time has been spent in doctor's offices or traveling to them.
This piece is (possibly) one in a series of pieces looking at different sides of the economic recession. I know that the Recession has been extensively covered by the news media, but I feel that they have left out or chosen to ignore some very important factors that have greatly contributed to it.
Today's topic? The stock market.
Now, for those of you that don't know, here's the best explanation of the stock market I could put together: A stock is the capital (money) raised by a corporation through the issue of shares entitling holders to an ownership interest. (equity) Now here's one of the crazy things: A stock actually has two factors that determine price: What you can buy it for (Your bid), and what you can sell it for. (Your ask) Both are the "real price," because buyers and sellers each have a price in mind. When they match, a sale is made. Basically, you want to buy low, sell high. Could they make it any more confusing?
Anyways, one of the big problems with this approach is the fact that the stock buyer's emotions can run the stock up or down. Take GM for example. News comes out that it's not doing well and may fail. What's the stock buyer's first thought? Sell, sell, sell! This drives down the cost of GM's stock, and adds to the hysteria that GM may fail. This drives more people to sell their stocks. Quite the vicious cycle.
The other main problem with the stock market is the fact that it is used as an icon of economic stability. How on earth can it be used as a basis for economic stability if it's run by emotions? Has anyone looked at some long term numbers rather than short term? Or have all of these people gone absolutely mad?
-Meredith
Questions or Comments? Contact purplepineappletown@hotmail.com
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