Friday, January 25, 2008


I'll start by admitting that I really am ignorant of the subject of economics. I probably need to study it since I have all these questions and ideas. Nevertheless, in spite of my ignorance, I have opinions.

When I was in junior high or high school, I think I remember learning that investing in stocks was about owning part of companies and getting dividends from companies that were doing well. You checked into public information about companies and invested in the ones that were doing a good job and making money. I don't remember a single thing about guessing which stocks were going to go up in price and making money that way. To my surprise as an adult it seemed to me that it was just a gamble/guess, and you had to sell the stock to make money.

No one seems to actually know why stock goes up or down in price. It seems like the "sheep" all run in one direction or another because they're scared of something or because they think they're going to get rich from buying stock when the market is going up. No one actually seems to notice that prices go up and then they go down. It's a crisis and everyone gets very upset when prices start going down - like it's never happened before.

Lots of people have lots of opinions about how it works, but I always want to know what their track record is - are they making lots of money from good guesses? That never seems to be shared as part of their opinion. Scary.

Then it seems that everyone thinks "the economy" is doing well when the stock market prices are going up. What is "the economy" anyway? Who decided how to define it? How do we know they were right? I equate everything to my household budget - my "economy" is doing well when I have more coming in than going out, when I have a prudent reserve and when I'm gainfully employed in some way. By that standard our "economy" has been doing lousy for a long time. Government spends tons of money it doesn't have and doesn't have a prudent reserve. Businesses routinely lie about how much money they're making so their stock will go up. No wonder things are in a mess.

I wish I had answers for this because it affects me and everyone else.

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