Financial Markets Book Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
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by Robert Hashemian

Page 126

perhaps become distorted, and that is why many investors continued to buy these stocks at high prices, pushing their prices even higher. But had the investor's expectations become distorted? Many pundits said yes. Others explained that these inflated prices pointed to the fact that the old rules no longer applied and a new set of rules now governed the stock market in which people no longer just considered a company's earnings. Year 2000 proved that investors' views of stocks had indeed become distorted and the once mighty Internet stocks finally received a swift and severe adjustment.

Whatever the case, today's investors seem no longer concerned with dividends alone, or they may be looking too far into the future potential of a company. Given this fact, the psychology factor now plays a much bigger role in the stock market than ever before. But if the stock market ever decides to revert back to the old rules of earnings and dividends, you can be certain that many of today's stock prices will plunge to a fraction of their current values even after the thrashing they received in 2000. For now, however, the market psychology is clearly operating based on a modified set of rules; some would say, no clear rule at all. Nowadays the pure idea of ownership has perhaps supplanted the consideration of dividends when people invest in stocks. In other words the means has actually become the end.

One more note about stock certificates. Just like bonds, stock certificates actually have an intrinsic face value, otherwise known as par value. But unlike bond certificates where their face values may be close to their market values, stock par values are very insignificant. Stock par values may be as little as 1/100 of one cent per share. Yes, basically worthless. But put those shares in the stock market and apply heavy demand, and they attain a perceived value. It is this perceived value that those shares are traded with. Food for thought.


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    Table of Contents Copyright and Disclaimer Foreword Money
    Bonds Futures Stocks Options
    Mutual Funds Retirement Final Words Appendix A

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