Confusion is the worst kind of psychological and emotional torture. This article aims to resolve the confusion caused by the conflict over how the economy could be so bad and stock markets at all-time highs.
I have been trading the stock markets for over 13 years. Using the insights gained from an objective view of life, I found tricks and ways to succeed.
Let’s start by explaining how to determine stock market values and movements.
Markets are a weighted average of a select and very small number of firms. While there are thousands of public companies, the three major US markets listed by these companies do not represent objective reality.
The Dow Jones is based on 30 companies, the S&P is based on 500 companies while the NASDAQ uses 100 companies. Although the Dow includes only 30 of the more than 5,000 US stocks, the combined value of the 30 companies is about 25 percent of the total value of all US stocks.
They use a weighted average of only those few select companies to determine the market value.
This means that if Apple goes up dramatically in one day, while most of the other companies on the NASDAQ go down, the NASDAQ will go up, because Apple is a big company that outstrips all the others.
Apple is worth more than $2 trillion. If the combined value of all the other 99 companies is less than just say $1 trillion, then Apple alone influences market movement and value twice as much as the 99 companies combined. Similarly, if every company on the NASDAQ goes up, but Apple goes down, the market will go down.
Big companies are given “votes” so to speak, from small companies.
In August 2020, the markets were at an all-time high, however, more than 60% of public companies are still posting significant losses.
Stock markets have nothing to do with the real world market, the chosen few are all that matters.
My next article is entitled; Trading Stocks Based on Sentiment will explain another fast-paced market that leads people to bad investment decisions, and show you how to make money using a method I developed that has 95% success.
People read about the rise of the markets, so they buy shares in different companies, and these shares go down, and they are confused. “Why do my stocks go down, or never go back up again, if the markets are at an all-time high?”
Because it is not an up or down market, just a few companies. Let’s use the shopping center analogy. There is a big grocery store in the mall, and they are always busy, but the small independent shops have no business and are not making any money.
The mall owner says the mall has the highest sales ever, because the only tenant that counts is the grocery store, ignoring convenience stores.
Another example of how the rich control the markets was a joint effort between CNBC TV, one of the most watched and trusted stock market shows, and Bill Ackman, a billionaire stock trader. Since he is a great fund manager and a wealthy man, people trust and respect what Ackmann says and follow his advice.
On March 18, 2020, Mr. Ackman was allowed to go on an emotional rant on CNBC for more than 27 minutes, much longer than other people he interviewed. He went on air with such an emotional plea about the coronavirus and its deadly potential, weeping in fear for his father’s safety. Ackman named several companies and industries that he said would go bankrupt and whose share value would go to zero.
You can watch the full interview here https://www.cnbc.com/2020/03/18/bill-ackman-pleads-to-trump-to-increase-closures-to-save-the-economy-shut-it-down-now.html
As he spoke, the stock markets collapsed as investors sold all their shares in those and other companies. This was the bottom of the market crash. Soon after he finished his televised speech, the stocks began to recover.
One week later, CNBC reported that Ackman made more than $2 billion in profits that week, buying the same companies he said would go to zero and go bankrupt.
This is just my opinion but this looks like clear manipulation of the stock markets by Mr. Ackman, backed by CNBC. However, the Securities and Exchange Commission, the government regulator to protect people from this type of market manipulation, has done nothing about it. Again, the wealthy 1% get away with ruining the lives of the little people who sold it all out or were forced to sell their stocks at huge losses due to margin calls or panic markets crashing during his televised speech.
This is the kind of event that makes people distrust the stock market. But we should not give up so easily.
The lesson I would like to pass on to you is that the business world is based on greed, but you already know that. The real lesson regarding the stock market is; Accept the reality and find the ways they are trying to deceive you, and then follow their tricks.
Don’t get mad because they are liars and cheaters, that’s just your definition of what they do. They call it smart business. Right and wrong are all a matter of subjective opinions. In this world, it is the opinion of the rich that they make laws and rules based on. So play by their rules and you will win.
But please, try to be a better person with the money you make than the people who control the system.