Stock Market Musings

I’ve been thinking a bit about the recent United Air Line stock crash.  Is it really a bad thing, though?  In fact, is it something we should work hard to duplicate?

That might be going a little too far.  Obviously, a lot of people unexpectedly lost a lot of money a little too fast, mostly due to computer errors.

But think about it — United Airlines went from $13 a share to $3 a share and back up to $11 a share, once all was sorted out.

Isn’t it possible that the stock was overvalued at $13 a share, then?  If the market rules, then isn’t the stock currently at its true level?  And isn’t that best for the economy, for investors, for everyone?

Why not zero out the rest of the stock market?  Let’s reset all stocks to $0 and let the market dictate their new prices.  Where would Google wind up if people had to start buying it again and bidding the price up as it went along?  What if the stock market wasn’t all lottery tickets and hype marketing?

The Dow Jones Industrial Average is an arbitrary number, composed of an arbitrary number of arbitrary companies.  Being above 10,000 is meaningless, except in the psyches of small people.  So let’s start with the DJIA and zero out all their stocks.

Problem is, it wouldn’t work on this scale. Someone would develop a computer algorithm and all the stocks would return to their pre-zeroed value.

Still, it’s a fun kind of crazy talk.

2 thoughts on “Stock Market Musings

  1. To reset that much market cap overnight would result in a torches-and-pitchforks night that would make Wall Street look like anywhere in the East Bay three minutes after the Oakland Raiders lost (or won) an AFC Championship.

    Interesting idea though.

  2. Instead of playing with other people’s money, feel free to reset the readership of this blog to zero (say by starting a new blog and not telling anyone about it) to find its true level.

    There’s a cost to buying and selling, so maybe not everyone came back to the stock once moved from their inertia. As for outsiders who might then see that as an opportunity, recent turmoil and instability, whatever the cause, might be making them hesitate.

    A severe problem with your suggestion is that stock, which defines ownership in public companies, is initially issued in exchange for some sort of contribution, say man hours, ideas, money. That’s why you can’t zero out the market. It would invalidate the compensation for the real investments that were made in the past.

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