Myths That Must Die: When The Stock Market Does Well, Everyone Does Well!

[ColbertWatcher]

Please.

I am watching the breast tube (cleaned up for the children) and it is telling me that the stock market rallied 400 points!

The implication, of course, is that there is no sub-prime mortgage crisis, no one is unemployed, social security will last as long as John McCain's Iraqi Adventure (maybe longer!) and one little medical problem won't put any one in the poor house ever again!

What bunk!

I don't have a link, but I recall sometime ago hearing news that some giant corporation fired thousands of people then the next day, the stock market showed the company doing great.

This crap about the stock market as some indication of how good everything is going has got to stop.

ON a side note, I might make "Myths That Must Die" a regular feature.

[HereSince1628]

1. Would dollar devaluation also lead to increases in the market indices?

Seems like a company (which is in the rest of the world) could be doing nothing better and its stocks cost more just due to the value loss of the dollar.

[ColbertWatcher]

2. Never thought of that!

It might!

That's funny, because it's just another reason not to use the stock market as a way to measure America's financial well-being.

All of America's well-being.

[demobabe]

10. Potentially, and inflation can also devalue a company

Say a company raises it's prices because of higher transportation and oil costs, and maintains the same volume of sales, then their revenues will go up. But their costs go up, too - so they may be making more but because the stock EPS (Earnings Per Share) stays the same, the stock price will stay the same.

However, if there is a higher profit per share, then the stock will go up, regardless if it's because the company is overall more profitable or because the dollar is worth less.

In 2007, the dollar devalued by something like 16%, so if your company's stock was up by 10% last year, you still lost money.

[Pale Blue Dot]

3. Please note my earlier related thread.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=3090720&mesg_id=3090720

Check out today's economic headlines.

[ColbertWatcher]

4. I think this was the inspiration...

...not your post necessarily (there are so many threads!) but the "optimism" that the stock surge is working!

[soothsayer]

5. What's good for Wall St. ain't good for Main St, and vice versa

[ColbertWatcher]

6. Well said...

...which is why I would like to see this myth buried.

[nichomachus]

7. The stock market is not an indicator of economic health

Most entities in the stock market react to short-term news or short-term expectations. The investors look at a company's current profit.

So, if Company A fire 10,000 workers, or closes a plant, their short-term profits will increase. This will lead people to buy their stock. The stock market goes up. However, firing 10,000 workers is bad for the future of the company and bad for the economy.

You see companies today that have round after round of firings. This makes their profit picture look better and better, as the company moves closer and closer to the edge of the cliff.

[Lydia Leftcoast]

9. I've noticed that for years

Some major corporation lays off thousands of workers and moves production to Honduras, and the stock market zooms up.
Yet all the idiots in suits on TV talk about how great the economy is doing.

[EVDebs]

8. The Myth Of The Populist Stock Market from csmonitor

http://www.csmonitor.com/2004/0108/p09s01-coop.html

also read Thomas Frank's book One Market, Under God.