with the American economy going to the wall, why is the DJ still making new records? is it another case of 'The Greater Fool Theory'??
surely its gotta give up the ghost soon..
2007-07-19 03:06:04 · 5 answers · asked by bluecow 5 in Business & Finance ➔ Investing
As the saying goes "It happens"
2007-07-19 03:14:57 · answer #1 · answered by jayemess 4 · 0⤊ 0⤋
1. You say the economy is going to the wall but you don't give an example while jobs and higher earnings are being reported. Stock prices are based on future earnings/dividends not current or past so investors have determined that these numbers will either increase or at least hold true. If analysts have determined this isn't true, they would be revising earning estimates and the stock prices would reflect these changes.
2. The Dow Jones Industrial Average is a price weighted index composed of only 30 stocks. An college text book will give you a good breakdown on how the index is computed.
3. If you want examples of a "The Greater Fool Theory" look at the dotcoms of the late 1990s where these companies were not making money but they were trading at unbelievable values. Remember a stock value is based on future earnings and a start up might be negative in the short run but eventually is has to: a. make money or b. be revalued at a lower price.
2007-07-19 04:26:35 · answer #2 · answered by I'm always right. 4 · 0⤊ 0⤋
The DJ is made up of only 40 companies. If the other 8,000-odd companies that are publicly traded all tank and those 40 keep going like gangbusters, most of the US could be in the unemployment line while the Dow continues to set new records.
2007-07-19 03:15:08 · answer #3 · answered by El Jefe 7 · 1⤊ 0⤋
Define "American economy going to the wall"
GDP is strong, interest rates are still near historical lows. Home ownership is at an all time high, unemployment is extremely low, most major market indicies are at or near all time highs and inflation remains low. Stock valuations are still very resonable and we are in the 5th year of a stong and healthy bull market. Business conditions dont get much better than this. Stop letting the media tell you what their opinion is and start looking at the data yourself, unfiltered.
2007-07-19 08:25:40 · answer #4 · answered by KevK 2 · 0⤊ 0⤋
the economy is fine...not too fast, not too slow...just right.
2007-07-19 13:27:16 · answer #5 · answered by zioncanyon 3 · 0⤊ 0⤋