I've posted this before a while back. Here it is again:
Stock prices reflect the composite opinions of speculators, yet it amazes me how difficult this concept is for most investors to grasp, or at least how little importance they place on it. If you have ever listened to a stock recommendation from a professional analyst, they will name a dozen reasons why such-and-such stock is a good "buy," with every one of their reasons being tied to company fundamentals. "This company shows consistent earnings...," or "We feel that its stock is under valued compared to its earnings," or "They have good, strong management" are common remarks. Not one of these analysts ever considers the most important factor of all, which is how the crowd will speculate on the stock. Yet, it is the speculation of the market that drives the stock up or down in the first place. Certainly, company fundamentals (earnings, growth, management, etc.) play a part in all of this, but only because the speculators think so. In other words, a company's earnings are reflected in its stock price only if the speculators believe that it should be. Again, it is all speculation, regardless of any other company condition. My point is that all the factors that analysts think are important are all secondary to the most important factor of all, which is the human factor of speculation.
Taken from:
Low Stakes Power Trading © 2010 Garsworld, Inc. All rights reserved.
Replies:
News 
Market Data 
Discover 
AI
