Question about the stock market

[Karl Marx's Camel]

What are we in now? Is this a period with no significant features? (neither bull nor bear market)?

And how does the price of a stock rise and decline? Or perhaps more correctly, what determines the price fluctuations?

Also... If individuals between themselves trade the stock, how can a company lose money if the stock is priced from 50 to 40 dollars?

[pusher robot]

What are we in now? Is this a period with no significant features? (neither bull nor bear market)?

It's a bull market because it has gained over each year for the past several years.

And how does the price of a stock rise and decline? Or perhaps more correctly, what determines the price fluctuations?
Like any other good or service, the price is a result of supply and demand curves. Stocks can earn value for people in two ways: (1) Dividends, and (2) increase in value. Of course, that means that the demand is partly driven by future predictions of demand, which can result in the speculative bubbles one occasionally sees.

Also... If individuals between themselves trade the stock, how can a company lose money if the stock is priced from 50 to 40 dollars?
It doesn't lose money in the sense of its cash or other tangible assets, but it does lose value and thus its ability to generate cash from the sale of stock is hurt. A company with a high stock price is valuable - people want to own a piece of it. A company with a low stock price is not valuable - people don't want as much to own a piece of it.

[Karl Marx's Camel]

Like any other good or service, the price is a result of supply and demand curves. Stocks can earn value for people in two ways: (1) Dividends, and (2) increase in value.
This is not what I am asking. Or perhaps, what I intend to ask.

Say a company called "Nevada Power Utilities" is public. Each share has a price tag of 56,00 dollars. What makes the price of the shares move 10 cents? Or 1 dollar?


but it does lose value

Why?

[Comrade Rage]

Originally posted by Karl Marx's [email protected] 16, 2007 03:03 pm

Like any other good or service, the price is a result of supply and demand curves. Stocks can earn value for people in two ways: (1) Dividends, and (2) increase in value.
This is not what I am asking. Or perhaps, what I intend to ask.

Say a company called "Nevada Power Utilities" is public. Each share has a price tag of 56,00 dollars. What makes the price of the shares move 10 cents? Or 1 dollar?


but it does lose value

Why?
Essentially anything from political crises in the mid-east, terrorist attacks, and a decrease in 'consumer confidence'.

Those are outside factors. Internal problems with the company itself can do the same thing.

[pusher robot]

Why?

Because people would rather own some businesses rather than other businesses. The ratio of those preferences is expressed in the price.

You buy a stock because you want to own a piece of that company. The more people want to own a piece, the more they are willing to pay. This pushes out the demand curve and the price rises.

The price of "Nevada Power Utilities" can be affected by many things, such as a decrease in costs making more profits a possibility, or anticipated rise in the demand for electricity, or uncertainty about the company's future. Anything that would make one more or less likely to want to own a piece.

[pusher robot]

oops, dp

[Robert]

You buy a stock because you want to own a piece of that company.

Well, yes, but only for such period of time as it is growing and paying dividends. That's probably what you meant too, but reality is that most people don't buy a stock because they approve of the company's philosophy, the treatment of the environment or the workers, or the product. They want to get rich.

There's something perverse about that, I admit, but to me it's just one more human frailty that renders illusory the image of a free communist state. The people don't want the mean of production. They want comfort, cookies, and toys. Those take money.

[Kwisatz Haderach]

Originally posted by Robert the [email protected] 17, 2007 04:38 am
The people don't want the mean of production. They want comfort, cookies, and toys. Those take money.
Part of the purpose of communism is to ensure that most people have more comfort, cookies and toys than they do under capitalism.