Why is it the more look into the stock market the less I am impressed with it.

Iceman · Jul 11, 2006

I know I am going to get ridiculed for such a bold statement but the stock market to me seems alot about LUCK.

Now I have a beginners knowledge of the market but isn't the price set totally by peoples perception of a stock. In reality why does the price have anyhting at all to do with the actual companies earnings (I know it does) but isn't it just basically supply and demand and if that is the truth than why does a stock HAVE to go up

If more people want to buy this stock than want to sell it, than the price goes up. Unlike sports where there is a winner and loser on a actual event, the stock market don't really make sense.

Just seem total gambling to me. You see these so called analysts on these shows every nite and they are highly educated people who are trying to guess if more people want to buy than sell or whatever they are trying to do. What makes them any different than a sports tout.

I just can't get a real grasp of this and I am becoming less and less convinced this isn't mostly a complete gamble.

I would love if someone can really convince me and change my feelings. I have about 10k in the market (mostly mutal funds) and am thinking of getting out (I know it goes up long term and I still think it will).

I 100% beleive sports wagering is a way more skilled profession. At least I can see the reason for my winning wager.

Iceman · Jul 11, 2006

SSI,
this is in no way a shot on what you are doing in the financial forum. That is very interesting and you seem very astute on the subject. Best of luck with it, I will be reading every day:toast:

zee · Jul 11, 2006

Iceman, I completely agree with pretty much everything you said. I also hold a firm believe that the stock market is more open to abuses & insiders trading than ANY gambling event. Stock market is basicly for people who do not have the whole infromation and try to outplay other people who are in the same situation. I do think there is skill involved, but it's nowhere near as vital as in gambling and in the end the only sure winners are those who KNOW what will happen and have acted BEFORE it happens. Basicly, those that act pre-news, not react to them.

DrunkenHorseplayer · Jul 11, 2006

The biggest advantage of the stock market is that it's a positive-sum game whereas most forms of gambling are negative-sum games.

Iceman · Jul 11, 2006

To sum up what I am saying is "Isn't the price totally set on people perception of that particular stock?" Billions of dollars on perceptions!!

I keep thinking I am missing something here, if I am than please explain.

Seems like one big guess from people and people go to school for years to try and figure this out.

I know most will say it is the same as setting a line in sports betting with supply and demand with a price, but at least you play out the event to see if the game wins or loses.

Iceman · Jul 11, 2006

Drunken Horseplayer said:
The biggest advantage of the stock market is that it's a positive-sum game whereas most forms of gambling are negative-sum games.

good point, never thought of that.

Anti-liberal · Jul 11, 2006

When you buy a stock, you're buying an investment at retail price. When a company is trading publically, the money has already been made. Bill Gates became the richest man in the world by selling stock, not buying it.

You are also an outsider in the stock market, as opposed to insiders and market-makers on Wall Street who are the real movers-and-shakers. It's hard to make $$$ when you're on the outside looking in.

There is no way to really know what is going on with a company. You don't know if the CEO is fueding with the Board of Directors. You don't know what creative accounting they're using. There were stock market EXPERTS who valued Enron in billions one day, when it was found to be insolvent the next.

And if you are lucky enough to make money in the market, it is taxed at a high rate...29% I believe.

I'd much rather own real estate with a positive cash flow, get some write-offs and maybe catch some appreciation, as well as enjoy a type of leverage that isn't too risky.

zee · Jul 11, 2006

Iceman, that's a bit wrong. If, and I mean IF you assume that all the information offered by the companies trading on the market is correct, than price is set rather on numbers and PROJECTIONS and not expectations. The problem I have with the market is, that IMO, NOT All the information is correct and that there is ALWAYS somebody who has the information before it's publicly announced. A stupid comparison:

In an NFL game, the difference between knowing that Vick doesn't start on Tuesday morning, and knowing it 45 mins pre-game time.

You are also an outsider in the stock market, as opposed to insiders and market-makers on Wall Street who are the real movers-and-shakers. It's hard to make $$$ when you're on the outside looking in.

That's the part I have a problem with. I agree with it and I can't risk money when I feel I'm in that position.

DrunkenHorseplayer · Jul 11, 2006

Obviously there are things that can be manipulated but if you don't put all your eggs in one basket, you know what you're doing and you stay in it for the long haul then your chances of success are extremely high; just take a look at all the markets' values over the last 10, 20 and 30 years.

Wrigley · Jul 11, 2006

Your tax at 15% if you hold on to the stock for a year before selling

TTinCO · Jul 11, 2006

Drunken Horseplayer said:
Obviously there are things that can be manipulated but if you don't put all your eggs in one basket, you know what you're doing and you stay in it for the long haul then your chances of success are extremely high; just take a look at all the markets' values over the last 10, 20 and 30 years.

Very sharp opinion.

Diversify & reinvest. You'll win in the long run. Balance your risk level vs. the amount of time that you can leave the money alone.

Like most things in life, it's crooked to an extent-but that doesn't mean that you can't make money off of it.

gbogo · Jul 11, 2006

unfortunately you need to stay in stocks that are larger and that funds can invest in and analysts can recommend

because those are the only companies held accountable for their actions.

if you buy smaller companies no matter how good they are many large players cant invest in them and while the rest of the market goes up many of these are left behind.

i dont enjoy the stock market personally

Iceman · Jul 11, 2006

zee said:
Iceman, that's a bit wrong. If, and I mean IF you assume that all the information offered by the companies trading on the market is correct, than price is set rather on numbers and PROJECTIONS and not expectations. The problem I have with the market is, that IMO, NOT All the information is correct and that there is ALWAYS somebody who has the information before it's publicly announced. A stupid comparison:

In an NFL game, the difference between knowing that Vick doesn't start on Tuesday morning, and knowing it 45 mins pre-game time.

That's the part I have a problem with. I agree with it and I can't risk money when I feel I'm in that position.

but why is price based on numbers and projections offered by companies?

If a compnay has a great year and great projections, does that GUARANTEE a stock is going to grow and go up? I say no not really. One piece of bad news (even though a company is rock solid) can send a price way down. That is what baffles me, its not like the company is going to go under.

GreenDoberman · Jul 11, 2006

Prices are based on future projected earnings and growth rates.
You do own a piece of the company if you own their stock. By and large, you own such a small proportion that you are not subject to knowing what is going on in a large company.

Let's say you and a partner started a restaurant. You eachare issued 50 shares and both own 100% of the company. At some point, you wish to sell your shares to a third partner. Even in a simple example like this, you would not know everything that goes on in 1 restaurant. (An employee could be stealing, managers could be giving free foods or kickbacks, kitchen help could be spiking the food, etc.). Multiply this by 1000's and millions and you will get a sense of what goes into the company.

Iceman,
I admire the fact you are using this forum to ask questions and gain knowledge. I hope that you do soak in the information and make yourself more successful in the future. None of us ever have all of the answers about anything.

TTinCO · Jul 11, 2006

Ice, the market overreacts.....and you're also thinking way too short term-which will bury you in the stock market.

Getting rich quick in the stock market works for probably 2% of those who try it. The rest get buried.

Long term, think long term (unless you're a day trader, but that's a totally different animal).

Iceman · Jul 11, 2006

Very good points both of you (TT and GD). I am not down on the market, I just don't see why/how it enamores people so much.

Maybe I feel sports wagering just don't get the same respect and that bothers me. I am sure there are millions of people involved in the stock market who look at us sports bettors and shake their heads.

Green Doberman,
Caught a lucky break in life about 5 years ago with a low six figure job that I love and it has given me oppurtunity to look into some things in life (financially speaking) and possibily pursue them.

Just nice having a forum like this that has people who have most of the same thoughts and interests on these interesting money making ideas. Life is a big game and I LOVE playing it. Believe me getting on the RX and tossing some thoughts and ideas out there is very mind stimulating to me and I like hearing people thoughts. I really enjoy hearing everyone out, espically people with expierence.

I can't imagine coming home from work and having zero interests or passion for anything besides TV, bar, sleep, etc... Sort of sad (IMO). If you don't have dreams in life than what is life worth or all about?

Romanowski · Jul 11, 2006

Prices are based on future projected earnings and growth rates.

Very little to do with projected earnings imo...

more about simple supply and demand

sean1 · Jul 12, 2006

The price of major stocks is really set by major banking institutions like Goldmans, Citi, Fidelity, ML, etc...

It can fluctuate a little bit based on peoples' perception, but these major banking companies are interested in earnings and dividends...

peskypup · Jul 12, 2006

The single biggest reason to be in stocks is that they pay dividends to stock holders. So it is a positive sum game as profits and dividends flowing from companies to holders are positive in the long term and also tend to beat inflation. Essentially you are making a bet that over the next 20 to 60 years the Western capitalist system as we know it will more or less remain in place. If it does not do so you will probably have a great deal more to worry about than your stock prices, hence being in the market is a no-brainer for anyone with spare cash.

The next question is how to go about investing your spare cash:

1. It is perfectly possible to beat the market in a sustained fashion and I have done so over the past 12 years or so. Warren Buffet has done so for 40 plus years. Market insiders are often too caught up with rumours and gossip to avoid punting on daft stocks and ramps. If you think you can beat the market then invest directly.

2. Numerous studies have shown that fund managers of all sorts generally fail to beat the market by wide margins. On top of that they charge a lot for that failure. Unless you think you have the expertise to pick an upper quartile fund manager this sort of investment is not worth a candle.

3. Which leaves you with low-cost index trackers, the place where 90% plus of rational investors should put their money and forget about it for 5 or 10 years minimum.

nimue77 · Jul 12, 2006

Much easier to win at the sports market.

Iceman said:
I know I am going to get ridiculed for such a bold statement but the stock market to me seems alot about LUCK.

Now I have a beginners knowledge of the market but isn't the price set totally by peoples perception of a stock. In reality why does the price have anyhting at all to do with the actual companies earnings (I know it does) but isn't it just basically supply and demand and if that is the truth than why does a stock HAVE to go up

If more people want to buy this stock than want to sell it, than the price goes up. Unlike sports where there is a winner and loser on a actual event, the stock market don't really make sense.

Just seem total gambling to me. You see these so called analysts on these shows every nite and they are highly educated people who are trying to guess if more people want to buy than sell or whatever they are trying to do. What makes them any different than a sports tout.

I just can't get a real grasp of this and I am becoming less and less convinced this isn't mostly a complete gamble.

I would love if someone can really convince me and change my feelings. I have about 10k in the market (mostly mutal funds) and am thinking of getting out (I know it goes up long term and I still think it will).

I 100% beleive sports wagering is a way more skilled profession. At least I can see the reason for my winning wager.