How can a Company - without doing a thing - be worth more in the afternoon than it was worth in the morning and then be worth even less the following day?

Rache
It's very hard to explain how the share market works but as an example there can be a series of events that trigger a 'surge' in a share price and those that my cause a 'plunge'.

Take the US car industry. One morning we hear the feds won't bail them out and the market drops in anticipation that the world is going to be turned up side down, then, we hear that there may well be a relief package on the way so the market (investers) re-gain confiedence so up goes the price, then we hear that the feds offer is conditional upon......., down goes the price again.

rehctub,
I understand how the sharemarket works but the example I was giving was fluctuations when nothing significant happens.

I consider it to be the flow of money between companies by the major players as they try to influence small incremental changes that they can cash in on, at the expense of the small investor "fodder".

Rache “How can a Company - without doing a thing - be worth more in the afternoon than it was worth in the morning and then be worth even less the following day?”

Simple

“CONFIDENCE” (important that word, so I will type it again) “CONFIDENCE” in the future earning and growth potential of that company and a preparedness of people to invest their savings to share in those future earnings and capital growth.

The cause of the problems of today and tomorrow is a lack of “CONFIDENCE” in the future, thus those with savings to invest are dumping them into cash deposits and other avenues of investment, like real estate (check out how house prices moved after the 1987 crash) rather than risk the volatility of the stock market.

As for “running on credit”, the world always runs on credit, it is an expression of the “CONFIDENCE” of the lender in the borrowers ability to repay the debt in the future.

I recall the 2000 dot-com collapse was largely instigated by inexperienced day traders chasing glamour shares, one particular was the maker of a new mass storage media, the Zip-Drive, their shares were profitable but were being traded at well beyond any justifiable price indicated from their earnings projections or potential. A lot of inexperienced day-traders ended up being burnt.

We cannot expect a market to protect a fool from his own folly.

As for where did the money go, to the place it will return from once “CONFIDENCE” returns not only to investors but also to the consumers.

Robert Stigwood, the producer of the movie Grease and a through his record label RSO, a load of recording hits (he was an Aussie from Adelaide) said the two elements for success were
PMA and OPM
Positive Mental Attitude and
Other Peoples Money.
Money will always find opportunity and opportunity will always attract the money it needs. That is part of capitalism, people taking risks on dreams…

That is what works,

not governments erecting nightmares edifices to their own glory with taxes

I would not advise rushing into housing as a hedge just yet Col.
We can be assured the real impact of the stock market crisis has not yet hit home for many.
It will.
And housing has not finished its dive just yet.
Rather buy shares in blue chip miners and risk we have not bottomed yet than miss the rises sure to come in the next few years.
Willing to bet no return to last years highs will be seen for 5 to 10 years but housing is on the way down.

The housing market and the share market are quite different in the
way that they react. In shares, people are constantly thinking
6 months to a year ahead and then acting immediately, so problems
are factored in, a long way before they even happen.

The housing market kind of lags behind. When values do drop, most
people, if they can, choose to sit and wait. Right now I know of
a whole lot of people with houses on the market that nobody is
buying at the expected prices. The fact that nobody is buying
them, is then not yet reflected in the housing market.

When people have to sell, due to banks calling in loans or other
reasons, that is IMHO when we will see housing market prices decline.

Which brings me to a point that is affecting all of us and is actually
an accounting issue in America.

If houses were valued at what somebody is prepared to pay for them
tomorrow, a few people might get a shock. But it is how the
stockmarket works.

In the US they have a "mark to market" rule. That is, banks have
to value their subprime mortgage holdings at what somebody will
pay for them tomorrow. Now buyers for these mortgages are few and
far between, so banks have to value them on their books at 30c in
the dollar or thereabouts. I gather that 75% of subprime mortgage
holders are still paying their payments on a regular basis, so
the 30c would be an extremely low valuation of their real worth.

That is making some banks show huge losses, compounding the whole
problem even further. "Mark to market" valuation, is what alot
of people are complaining about. If Australian banks had to use
that accounting method, their figures might not look so healthy
either.

Any thoughts on that one Col?

What Happened to The Money

The money heard in this global market that another labour Government was elected in Australia and went into hiding: