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It may sound incredible, but it's true. And all too many small investors are playing the market with an equal dearth of knowledge. Sooner or later they pay for their ignorance.
Understanding the market, its functions and what makes it go up and down are the utmost importance to anyone investing his funds in securities.
On no other common meeting ground is it possible to find the combined opinion of millions of trained and untrained minds throughout the world as in the stock market. The cumulative opinion of these millions is what makes the market advance or decline. And it is this combined opinion of millions of stockholders scattered throughout the four corners of the world that makes the stock market the amazing barometer of the business conditions that it is.
Only once in the last hundred years has the stock market failed to signal an approaching major change in conditions affecting the economic life of the nation. That one exception to its sagacity came at one of the worst times, for it was 1929.
If the market had lived up to its reputation as a barometer of business conditions, stock prices would have been declining all through 1929 instead of advancing to dizzy heights. Apparently its failure to anticipate the approaching business depression was the result of the feverish speculation that had the nation in its grip. Elevator boys and stenographers were pouring their savings and what they could borrow into the golden maws of the market and even shrewd businessman forgot that prices couldn't keep going on up indefinitely.
An almost imperceptible decline in the industrial production which was started in midsummer was dismissed as a mere seasonal slackening until the rude awakening that fateful day in October.
But, right or wrong, it is the cumulative affects of security holders that will continue to sway the course of the market.
Excerpt from
"How and When to Buy and Sell Securities"
by Todd Wright, 1940
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