Wharton Grad Donny Flubs the Basics of the Stock Market
This morning, Lord Donny Tweeted the following:
If the person Tweeting this was just some regular person whose 401(k) had just lost about 10–15% and they were having a bit of deja vu thinking about 2008, a Tweet like this could be excused. Most people don’t understand the stock market because most people aren’t invested in it. The fact is, the richest 10% of Americans own 84% of all stocks; people are less dependent on retirement accounts and the stock market than was the case the last time the economy went belly-up, so the average American knows little to nothing about how the stock market works, and that’s okay. I didn’t participate in the launch of the Falcon Heavy yesterday, so I know little to nothing about the aeronautics involved in making that thing work.
However, this is not just the alleged “president,” but a guy who got to his position by touting his incredible business skills. How can anyone be such a big deal in business and know so little about how markets work? For that matter, he claims he graduated with a degree from Wharton; do they just graduate dolts who don’t even understand basic supply and demand from that school? If so, why is it so prestigious?
This is a guy who has been bragging on the stock market’s upward movement for the last year, after President Obama left him with a fully functioning economy. Whereas anyone with half a brain knows that the stock market indicators are only an indicator of the current value of a few individual stocks in the stock market and NOT a barometer on the state of the economy, apparently, Lord Donny and his minions have no idea. You see, a stock market crash (and what happened on Friday and Monday was not one of those) can foretell an economic crash, like the canary in the coal mine, but a rising market doesn’t serve as a barometer of anything, except that people are investing a lot of money in stocks. When a market takes a bit of a dive, there can be many reasons for that. In most cases, it’s because stockholders decide to take some of the profits they have earned out of the market. In some cases, it’s because they think the stocks are valued too high, and they want to take the money out before they lose it. It may be because the industry they’re invested in isn’t doing so well… in other words, there are many reasons why people sell off stocks and the market indicators drop.
And while a lot of “experts” in the area are more than willing to give us a reason for a sudden drop, the fact is, no one really knows why markets drop. It’s not about “good news” or “bad news” at all. In fact, what you and I consider “bad news” is often seen as “good news” by investors; it depends on the stock and the value.
The bottom line is this; the stock market is the epitome of “supply and demand” and “market economics.” Like everything else in the economy, the value of a stock is based on what someone is willing to pay for it. That’s all. When Apple started selling huge numbers of iPhones and iPads, their stock soared because the dividend was liable to go higher. When Enron was no longer able to sell electricity at exorbitant prices, its stock tanked. Anyone who thinks that what people say on CNBC or in Barron’s or the Wall Street Journal says determines whether the stock market as a whole will go up or down has no clue how this works. And the fact that Donny thinks “news” does that calls into question whether he actually has a business degree and whether or not he has a functional IQ, for that matter.
I’d also like to know what the hell he considers “Good News.” There hasn’t been that much ‘good news” lately. In fact, the best news we could hope for is a series of Trump indictments and an impeachment and conviction. Will that drive the stock market really high? I don’t know, but it would be worth a look.
Originally published at PCTC Blog.