The stock market is not the economy -- PT 2

Continuing the post about the stock exchange and stock expectations.

To read the first part click here

You can have very serious problems when that expectation is wrong. And if your expectation is that the scenario is improving and the stock market is falling, that's not necessarily a bad thing.

The price dropped 80%, is that bad? It depends.

For those who were buying, yes it is bad. But if it was worth 5 times what it really should be, whether for any reason, including government distortions, cheap credit for example, then that's good.

If the government gives a lot of money to banks, or low interest rates, or starts to buy a lot from some companies via debt loan money, these companies will appreciate, or even the bank that receives the money will appreciate, that makes the stock market falsely appreciates.

It's not that there's more demand, or people are richer, but the government is printing money and buying things arbitrarily and that creates an illusion of future wealth and the stock market goes up.

The drop would mean that the stock market is realigning the real expectation of the economy.

In Brazil, we had a classic example recently, years before President Dilma was impeached, the stock market was falling, as investors did not believe her, she was making mistakes after mistakes, and so the expectation was of a country going towards bankruptcy.

When they started to think about and actually perform the impreachment, the stock market started to rise. The country was the same, the economy was the same, but the expectation of improvement was shown through the rise in the stock market.

That way, in addition to the stock exchange, you can analyze all your assets in the same way. Do not tie the value being sold to the actual value of the asset. It is an expectation of what token holders believe it is worth.


Posted via proofofbrain.io



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Short content but a lot is embedded in it.

A better understanding of these will surely change people’s mindset and point of view about rise and fall in crypto currency and other valuables.


Posted via proofofbrain.io

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