A look at the differences between how stocks and groceries are bought and sold.
Now that computers are taking the place of brokers on the floors of stock exchanges, it is time to think about the way stocks are sold. Stocks and bonds are sold in standardized markets for the most part. They are usually listed on the same exchange so that if you want to buy one share of Intel, you purchase it over the NASDAQ exchange where the price for Intel is quoted. Occasionally, companies have dual listings where they have one share of stock available for sale in two different exchanges so that you could buy the same share of stock in an American exchange or in an exchange in another country. However, if you want to buy a box of Oreo cookies, you can go to many places. And the prices you would get would be different as well. And the market value for Oreo cookies and many other groceries doesn't fluctuate very much like stocks. Sometimes, however, a store has a sale and the price of Oreos is much cheaper at one store than another. Then customers usually start buying more and if it goes real well, the competiton might do the same thing. If these were stocks instead of groceries, people would try to buy in the cheaper store and resell in the other store. With the Oreos, people most likely just buy at the cheaper price and consume them rather than resell. With stocks, however, people resell because it is easy and relaviely low risk. To buy a bunch of Oreo's and resell them would take some effort and might be difficult to resell. If the government were to impose a 100% tax on this activitiy of say buying and reselling within a month, it would stop and then Oreos and stocks would look more similiar. People would buy the stock on sale at the one store and hold it or (consume it Oreos.) And, when the price of Oreos goes up, most people probably stop buying. And, you don't have technicians who look at the price of oreos and decide that it is time to buy Oreos. People aren't thinking about selling, they are just thinking about consuming and being good consumers. Take the same thing with stocks, though, and you get an entirely different picture: with stocks, if the price of a stock goes up, some technicians may start buying the stock not because they are thinking of holding the stock, but because they think the trend may continue and are thinking of selling. When thinking of selling, greed, and emotion come into play and probably help to increase the stock price some more. And, the result is probably more volatility in stock markets than grocery markets. Why can't people treat stocks like a box of Oreos. Another thing, if Oreos were like stocks, to many people, (poor researchers) the Oreos don't look the same all the time. As the price of Oreos goes up or down, the perception would change as to the quality of the Oreo's. To these people, the Oreos are covered up and cannot be seen. So, they assume that if the price is less, the Oreos must be messed up and if it is high, it must be of high quality.
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