Posted 5 months ago on Sept. 7, 2018, 8:52 a.m. EST by agkaiser
from Fredericksburg, TX
This content is user submitted and not an official statement
I've never subscribed to Oscar Wilde's pejorative definition of a cynic. The Philosophy of Cynicism can be reduced to the demand for honesty even if brutal. But, "A man who knows the price of everything and the value of nothing," does describe a wannabe elite investor, who is actually a fool.
Consider the price of stocks in the market compared to the real value of the issueing entity. When a stock is issued, an investment is made and the issuer receives the capital, which adds to the value of existing assets.
When a stock is subsequently traded, the issuer receives no further material wealth from the transaction, presuming that the entity is not a party to the deal. So can today's stock price really be said to reflect the value of Apple or Amazon or any other stock issuer? Are they worth $trillion or are they worth the value of their material assets and cash minus their liabilities? Are the mass of stock traders really so savvy that they know the difference between price and value or take such into account when they bid up the price of those stocks? I think not! By the way, this discussion applies to the real estate market too.
I think the cyclic boom and bust of the markets is evidence of the foolishness of most participants. I think the all time winners buy stocks when they are at their low, often at the IPO. The average fool in the market starts buying as the prices rise. When they're high enough the big operators start a panic and the fools sell out, often lower than they bought in. When the price is low enough, guess who buys and starts the cycle one more time. Is there a factor that limits how many times the con can be played? I'll leave the answer of that to your imagination and your estimation of the wisdom of the all time losers that bid up the price of stocks and real estate. .