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Re: Stock market totally befuddles Roy and Homer (was Re: Trolls)

In article <m04mk.59397$nD.53374@pd7urf1no>,
 thufir <hawat.thufir@xxxxxxxxx> wrote:
> > No, their market cap went down by $90 billion.  Why does it not surprise
> > my the neither of you understand the most elementary things about how
> > stocks work?
> 
> 
> "As owning stock represents owning the company, including all its assets, 
> capitalization could represent the public opinion of a company's net 
> worth and is a determining factor in stock valuation."
> 
> 
> http://en.wikipedia.org/wiki/Market_capitalization
> 
> 
> So, its perceived net worth decreased by 90b?  Sounds like "microsoft 
> loses 90b" is a fair title -- which was the title of the *slated.org* 
> article.

Suppose a company has a a given amount of liquid assets, certain 
physical property they own, products on the market producing a certain 
amount of income, and expenses like payroll, facilities costs, taxes, 
production costs, and so on.

When their stock fluctuates, even by a large amount, causing large 
changes to their market value, that does not change their liquid assets, 
the property they own, their income from the products, or their various 
expenses.

To say that the company has lost (or gained, if the fluctuation is up) 
money just isn't very accurate.

These fluctuations CAN affect a company if they are large enough.  For 
example, if the stock price goes way down, the company can become a 
takeover target.  That occasionally happens.  In fact, it has sometimes 
happened that the market value of a company has gone below the value of 
its physical assets, so someone could profit by buying up all the stock, 
and then liquidating the company.

Anyway, back to the Microsoft $90B drop in market value.  That reflects 
a drop in the stock price from around 36 to around 26 dollars/share.  
What Roy and Homer overlook, of course, is that the stock was around 28 
this time last year.  It ran up to 36 in November, dipped to 33, ran 
back up to 36 by January, then dropped to around 29 through June, then 
to 26.

So, preceding that "loss" of $90B, there was a gain of $72B.  That drop 
from 29 in June to 26 now seems to reflect general market movement, as 
other tech stocks fell similar amount then.

Net result: late last year, Microsoft market value ran up about $70B.  
After the Yahoo stuff, it came down around that amount.  Then it came 
down some more as the market in general came down.

Hence, my assertion that Roy and Homer don't know anything about stock.  
They ignore whenever MS fluctuates up on speculation, and then when it 
fluctuates back down if things don't work out like the speculators 
expected, and ends up back where it started, they proclaim that 
Microsoft is dying.


-- 
--Tim Smith

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