Share prices fall.... and your point is?
01/10/08 23:03 Filed in: Personal
OK. I really want to spell something out here.
Shares are not real.
They are banking world equivalent of betting slips 5.15 a Claptown - Apple 4-2 etc etc. It's the way speculators value the bet on a companies performance to profit in order to attract buyers to purchase shares in that company.
The bottom line is that if enough people say a company is duff... people sell their shares, the share price drops. But here's something... the company isn't affected. Because share price and day to day trading HAVE NOTHING TO DO WITH EACH OTHER. I'll repeat that... THEY HAVE NOTHING TO DO WITH EACH OTHER.
That is, unless, you're trying to raise capital. If that's the case, then banks value your company on it's current performance on the balance sheets and a certain percentage indicator on the stock exchange.
What a examples? Well take Yahoo. When the dot com bubble burst it shares plummeted down to next to zero. But they are still in business 8 years later. Why? Because their business model of paid advertising in listings and secured listings was sound. Hell, look at Google. They stole the idea and are not cash rich. Are their shares falling, yes. Are they any less richer? Nope.
The bottom line is that every single day the media bombards with you with the shares going up and down and IT'S ALL COMPLETE SHIT.
The reality is this.
The big banks, and by which I mean the REALLY BIG banks, those that lend directly to the high street banks all decided that they were going to cut off the practically credit. Suddenly mortgage companies that had de-mutualised found themselves in the situation of not being able to quickly turn over mortgages (their main source of income) and with shortfalls on their books. Now normally that would be OK. Because if a bad debtor forcloses on the loan, hell you can get a new tenant in. But as no new credit was available and the oil price was rock high it meant that an increasing number of US lenders couldn't meet payments and nobody could replace them.
Once the housing markets starts to slump then it starts hitting all the other industries related to it and sure enough a panic hits the stock market and economy in general.
So did too many people get too greedy? Well, while it's true to say that 110% mortgages had disaster written all over them, it was the lure of cheap money and then the suddent removal of it that caught the majority out. I'm talking about the banks here, not the people. After all, if you lend money to somebody who can't afford it... who's the idiot in this equation?
Then I started to think that all this sound very familiar. Like I'd heard something like this happening before... and sure enough I had. From Social and Economic History, all those years ago in college. 1907 US Banking Panic. I'd not bother with the Wikipedia article, if I were you. Looking at the history it's been filleted.
Instead, turn to this lengthy and accurate documentary The Money Masters.
What was it Garfield once said "He who controls the money supply of a nation controls the nation". You bet your ass.
Shares are not real.
They are banking world equivalent of betting slips 5.15 a Claptown - Apple 4-2 etc etc. It's the way speculators value the bet on a companies performance to profit in order to attract buyers to purchase shares in that company.
The bottom line is that if enough people say a company is duff... people sell their shares, the share price drops. But here's something... the company isn't affected. Because share price and day to day trading HAVE NOTHING TO DO WITH EACH OTHER. I'll repeat that... THEY HAVE NOTHING TO DO WITH EACH OTHER.
That is, unless, you're trying to raise capital. If that's the case, then banks value your company on it's current performance on the balance sheets and a certain percentage indicator on the stock exchange.
What a examples? Well take Yahoo. When the dot com bubble burst it shares plummeted down to next to zero. But they are still in business 8 years later. Why? Because their business model of paid advertising in listings and secured listings was sound. Hell, look at Google. They stole the idea and are not cash rich. Are their shares falling, yes. Are they any less richer? Nope.
The bottom line is that every single day the media bombards with you with the shares going up and down and IT'S ALL COMPLETE SHIT.
The reality is this.
The big banks, and by which I mean the REALLY BIG banks, those that lend directly to the high street banks all decided that they were going to cut off the practically credit. Suddenly mortgage companies that had de-mutualised found themselves in the situation of not being able to quickly turn over mortgages (their main source of income) and with shortfalls on their books. Now normally that would be OK. Because if a bad debtor forcloses on the loan, hell you can get a new tenant in. But as no new credit was available and the oil price was rock high it meant that an increasing number of US lenders couldn't meet payments and nobody could replace them.
Once the housing markets starts to slump then it starts hitting all the other industries related to it and sure enough a panic hits the stock market and economy in general.
So did too many people get too greedy? Well, while it's true to say that 110% mortgages had disaster written all over them, it was the lure of cheap money and then the suddent removal of it that caught the majority out. I'm talking about the banks here, not the people. After all, if you lend money to somebody who can't afford it... who's the idiot in this equation?
Then I started to think that all this sound very familiar. Like I'd heard something like this happening before... and sure enough I had. From Social and Economic History, all those years ago in college. 1907 US Banking Panic. I'd not bother with the Wikipedia article, if I were you. Looking at the history it's been filleted.
Instead, turn to this lengthy and accurate documentary The Money Masters.
What was it Garfield once said "He who controls the money supply of a nation controls the nation". You bet your ass.
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