Confusion is one of the worst mental and emotional tortures. This article is to resolve the confusion of the conflict of how the economy can be so bad and the stock markets be at all time highs.
I have been trading on the stock markets for over 13 years. Using the insights gained from an objective view of life, I have found the tricks, and the ways to succeed.
Let’s start with explaining how the stock market values and movements are determined.
The markets are a weighted average of a selected and very small number of companies. While there are thousands of public companies, the three main US markets those companies are listed on, do not represent the objective reality.
The Dow Jones is based on 30 companies, the S&P on 500 companies and the NASDAQ uses 100 companies. Although the Dow includes only 30 of the more the than 5,000 U.S. stocks, the combined value of the 30 companies is about 25 percent of the total value of all U.S. stocks.
They use a weighted average of only those few selected companies to determine the value of the market.
This means that if Apple goes up significantly in one day, while most of the other companies in the NASDAQ go down, then the NASDAQ will go up, because Apple is such a big company that it outweighs all the others.
Apple is worth over $2 Trillion. If the combined value of all the other 99 companies is only under $1 Trillion for example, then Apple alone effects the movement and value of the market twice as much as the combined 99. Likewise, if every company in the NASDAQ goes up, but Apple goes down, the market will go down.
The big companies are given move ‘votes’ so to say, than the small companies.
In August 2020, the markets are at an all time high, however, over 60{bcb10712eadb32c7e50a15bcbfb14ed4d7108a9fa2a5dcafffbff4bd1d9a4f28} of public companies are still at significant losses.
The stock markets have nothing to do with the real world market, the select few are all that count.
My next article titled; “Stock Trading Based On Emotion” will explain another market quick that leads people into poor investing decisions, and shows you how to make money using a method I developed and is 95{bcb10712eadb32c7e50a15bcbfb14ed4d7108a9fa2a5dcafffbff4bd1d9a4f28} successful.
People read about the markets going up, so they buy stocks in different companies, and those stocks go down, and they are confused. ‘Why do my stocks go down, or not go back up, if the markets are at all time highs?’
Because it is not a market that is up or down, but rather just a handful of companies. Let’s use the analogy of a shopping mall. There is a large grocery store in the mall, they are always busy, but the small independent stores have no business and make no money.
The owner of the mall says the mall has all time highest sales, because the only tenant that is counted is the grocery store, ignoring the little shops.
Another example of how the rich control the markets was a joint effort between CNBC TV, one of the most widely watched and trusted stock market shows, and Bill Ackman, a billionaire stock trader. Being such a large fund manager and wealthy man, people trust and respect what Ackman says and follow his advice.
On March 18, 2020, Mr. Ackman was allowed to go on an emotional rant on CNBC for over 27 minutes, much longer than other people who they interview. He went on the air with such an emotional plea about the Coronavirus and it’s deadly potential, crying for fear of his father’s safety. Ackman named several companies and industries that he said would be bankrupt and their share value would go to zero.
You can watch the full interview here https://www.cnbc.com/2020/03/18/bill-ackman-pleads-to-trump-to-increase-closures-to-save-the-economy-shut-it-down-now.html
As he was speaking, the stock markets crashed as investors sold all their shares in those and other companies. That was the bottom of the market crash, shortly after he finished his TV rant, stocks started to recover.
One week later, CNBC reported that Ackman made over $2 Billion in profits that week, BUYING the very same companies that he said were going to zero value and bankrupt.
This is just my opinion but that sounds like an obvious manipulation of the stock markets by Mr. Ackman, supported by CNBC. Yet the SEC, the government regulator to protect people from this sort of manipulation of the markets has done nothing about it. Again, the 1{bcb10712eadb32c7e50a15bcbfb14ed4d7108a9fa2a5dcafffbff4bd1d9a4f28} super rich get away with destroying the lives of the small people who all sold or were forced to sell their shares at significant losses due to margin calls or panic while the markets crashed during his TV rant.
This is the type of event that makes people distrust the stock market. But we should not give up so easily.
The lesson I would like to pass on to you is, the world of business is based on greed, but, you know that already. The real lesson regarding the stock market is; accept reality and find the ways they are trying to trick you, then go along with their tricks.
Don’t get angry that they are liars and cheats, that’s just your definition of what they do. They call it smart business. Right and wrong are all a matter of subjective opinions. In this world, the opinion of the rich is the one that they make the laws and rules based on. So play with their rules and you will win.
But please, try to be a better person with the money you make than the ones who control the system.