Timeline for Why does the stock market consistently overreact to the business cycle?
Current License: CC BY-SA 3.0
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| Aug 31, 2011 at 20:30 | comment | added | user4127 | @dsimcha - Some of the companies that positioned themselves well proir to and during the financial collapse are the ones that are growing and capitolizing on that in this down period. CAT was trading at around $25 in 2008 (Undervalued but it was) its up around $100 now and its business is growing. JD Rockafeller said he preferred to invest during a down economy as it was cheaper to grow the business then. | |
| Aug 31, 2011 at 20:26 | history | edited | George Marian | CC BY-SA 3.0 |
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| Aug 31, 2011 at 20:09 | comment | added | George Marian | @dsimcha I'm not just talking about the Nikkei, I'm talking about the entire economy. Read up on Japan's deleveraging and deflationary issues. As to your second comment, read up on being a contrarian. When people are panicking and selling, that is typically a good time to do some judicious buying. | |
| Aug 31, 2011 at 20:01 | comment | added | dsimcha | Also, your point about more selling because people need the money is a good one. This would imply that if you don't need cash, it's a good buying opportunity. | |
| Aug 31, 2011 at 20:00 | history | edited | George Marian | CC BY-SA 3.0 |
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| Aug 31, 2011 at 19:59 | comment | added | dsimcha | Good counter-example on Japan, except that given the P/E ratios the Nikkei was trading at in the late 80's, its collapse was arguably more about a bubble bursting than a reaction to a downturn, and the bubble bursting probably caused the downturn, not the other way around. The same thing could be said about the NASDAQ in the early 2000s bear market. Anyhow, such situations are the exception not the rule. | |
| Aug 31, 2011 at 19:54 | history | answered | George Marian | CC BY-SA 3.0 |