The marketplace is the real economy, not the stock market. I've said it before and I'll say it again. When it comes to investing the first thing I have to do is put my economist's hat in a drawer. The reverse is equally true. When analyzing economic conditions the first thing one needs to do is ignore the stock market. You may not like to hear it, and it may go against your every intuition, but that's the reality.
Further, the reason for the incongruity is that the stock market is a forward indicator while the marketplace reflects current and past indicators. Consequently, this is why a company's stock begins to fall way before the bad earnings report.
http://stockcharts.com/charts/historical/djia1900.html print this a large as you can, hang it on the wall. start labeling in the big stuff--industrial rev., oil, WW1, '29 buble, hitler, coldwar, computers...... think about the people who got into the market in the 40's, 60's, 80's, what was their 20-30 years like.
<think about the people who got into the market in the 40's, 60's, 80's, what was their 20-30 years like. >
I'm retired. Been in the market in some fashion since the '60s. Since I live on my investment income, you can assume I've done OK! And, hope to continue to do so. But, since I'm only in my 60s and hope to live much longer, I continue to find "walls of worry" to climb.
Not too worried about the supply of "greater fools." Pretty sure the supply is virtually limitless. My concern is that, no matter what market place we're talking about, we humans tend to act in the present only. Maybe it will catch up with us, maybe it won't. But, today is not like yesterday. Speed of information is fast. Speed of real action is not.
Competition for ever diminishing resources, including captial, is growing increasingly fierce. Not sure of the outcome. But, as a pessimist/realist, I see plenty of less than attractive ones out there.
It's the same marketplace that sets the price for everthing that can be bought or sold. It's the daily behavior of millions of people making decisions. Don't confuse the stock market mania of the late nineties with this, or even the current housing mania either. These things happen because they are part of human nature.
People bought fuel hungry vehicles because gas was cheap. Now that it no longer is that behavior will change.