Worries - Stock market

Stock market

You know shares? You even own some?
You hope, that while you own them their value rises and that later you can sell them at the higher price so that you make profit?
Great! Because this behavior is the reason why the whole construction hasn't collapsed long ago. 'Why should it collapse?' you ask? Well, one might think that the price of a share is determined by the value of the emitting company. But this is only true at the moment when the company initially sells the shares. After the emission the price of a share is only determined by bidding and demand of the stock market. The company and its growing has no direct influence on the price anymore.

The crazy spiral begins to spin when enough people buy the share causing the price to increase. This causes more traders to buy the shares hoping that the price will continue climbing so that they can sell them later with high benefit. This again causes the price to increase even more and more and more people want to buy this shares. Suddenly something happens which causes the price to drop significantly (ie. an analysts says the share is highly overrated or the company gets slightly in conflict with law or just a bad rumor is going round). Then many, many stockholders want to get rid of their shares before the drop is hitting them, but it's too late. Nobody wants to buy them anymore (of course not, they are overrated and the price will drop. Why would anybody buy a expensive share and sell it cheap?).
And so they sit on a pack of paper which decreases in value with every breath they take. Finally the share price is far below the price at which most people bought them. Only a few people had some gain, those who sold their shares shortly before the big bang.

What indirectly also happens is, that other shares from other companies can also loose value because for example they are a partner of this one. And then a second spiral starts turning, and this could be the root of a potential stock market crash. We all know that the stock market is highly tied with almost every other market or industry.
Example: Banks also try to get profit out of shares, but if they do not acquire profit they have to roll over the costs to someone else. Anybody remember the anger when the credit rents raised last time? Be happy, you are keeping the stock market alive ;)

What I'm afraid of (and I'm sure that it will happen sometime) is such a real "Big Bang" when the stock market finally crushes and the whole economy follows.
Would be a good time to learn carving bows and arrows.

I hope people will learn not to rely on virtual value created by demand but rather on real created values from companies and industries.


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