The Most Thought-Provoking Description...

Taken from Slavoj Zizek's Essays at: http://rebels-library.org/files/zizek_welcome.pdf

Take the phenomenon of 'cutters' (people, mostly women, who
experience an irresistible urge to cut themselves with razors or
otherwise hurt themselves); this is strictly parallel to the virtualization
of our environment: it represents a desperate strategy
to return to the Real of the body. As such, cutting must be contrasted
with normal tattooed inscriptions on the body, which
guarantee the subject's inclusion in the (virtual) symbolic
order- the problem with cutters, is the opposite one, namely,
the assertion of reality itself. Far from being suicidal, far from
indicating a desire for self-annihilation, cutting is a radical
attempt to (re)gain a hold on reality, or (another aspect of the
same phenomenon) to ground the ego firmly in bodily reality,
against the unbearable anxiety of perceiving oneself as nonexistent.

Thoughts on the Stock Market

I've been looking into investing for awhile now. I'm still considering it, although my interest has waned and I'm starting to question some fundamental aspects of the stock market. The market itself was never discussed in my high school in any class, and I never took economics or any financially-minded course in university. What I'm learning now is all on my own - and I'm starting to think that might be a good thing.

IPO (Initial Public Offerings)

IPOs aren't as public as the name makes them sound. It's entirely conceivable that all available shares will already be accounted for before the date it actually becomes a "stock" traded on the NYSE or any other market. To make matters worse, there's a "lock out" period which is enforced by law. During the lock out period, any of the shares owned by employees, board members, the CEO, or anyone affiliated with the company can't be sold. This makes it entirely possible that the stock will experience a sharp devaluation at the end of the lock out period, due to a huge influx of sell orders. One might also consider this a form of producing artificial scarcity, which could artificially boost the value of the stock - to the benefit of those selling once the lock out ends.

Besides those involved directly with the company, typically the people who can actually purchase IPO shares are either "high rollers" deeply embedded into brokerage, or the brokering firms themselves. So even though Facebook's stock started at about $40 and, last I checked, had more than doubled that value in short order, it's likely very few individual, "average joe" investors were able to buy any of it and profit from it. IPOs would be a good investment in general, if they weren't some sort of old-boys club helping those who don't need help to get even more rich on the backs of retirement accounts and average investors.

The Definition of a "Stock" or a "Share"

The average individual might think by owning shares they actually own a portion of the given company. It seems to me, with what information I've been able to thoughtfully consider, this couldn't be further from the truth. Now, I'm fairly certain you CAN be one of the "top owners" of a given company's stock and end up on their board, but that doesn't mean you're going to be making any decisions. At the end of the day, you threatening to sell your shares isn't much leverage at all...and it'd be the only leverage you have, because...

What you own when you own shares has nothing to do with the company. It has to do with the collective human perception of that company (or that symbol which is a valuable way of putting it and no coincidence that stocks are associated with the term), the value the "market" (i.e. people) attribute to it, and the supply and demand of shares. If there's an excess of supply and a demand that doesn't keep up with it, it stands to reason the value of the stock will fall. This is completely independent of the actual profits of the company that stock represents. It's completely independent of that company's success or failure, its infrastructure, or its assets. It is interesting to note that even though the stock shares themselves are physically (metaphysically? symbolically?) independent, in the event a company bankrupts, its shares automatically become worthless.

Market Behavior

Given statistics and data points, people might falsely believe that because Q1 profits for X were 50% lower than expected, the stock will fall (and the stock may very well fall.) But the stock won't be falling because Q1 profits for X were 50% lower than expected. If the stock falls, it's because enough people decided they were going to sell their stock off because Q1 profits are 50% lower than expected. Not because the profits were lower - but because of a secondary activity that in some cases was because of the information.

If that's not clear enough, it might be simpler to say that stocks appear to be symbolic representations of real things - the key here is that a symbol can't exist independently of a mind to imagine it. Collectively, people involved in actual trading of stocks decide the price of a symbol by virtue of their action or inaction. They may, or may not, base their action or inaction on a given corporation's profits, quarterly reports, insider information, or any other data they can find. This is why I say a stocks value, and even the symbol itself, is completely independent of the "real" company. The most real connection is, as I said above, the fact that shares become worthless in the event of a bankruptcy. Other than that, stock symbols are collective trader fantasies. If no trader ever wanted to purchase Company X's stock, even though Company X had better profits and projections than any other company on the market, its stock value would stay completely stagnant, or fall into oblivion.

Important Conclusions

One thing I'm taking away from this is that it seems apparent that if one had a choice between predicting a company's ultimate success, mediocrity, or failure, and predicting human behavior, the latter would be far more valuable when it comes to investing. The actual company itself does influence the stock value but only indirectly through the reaction of investors to information the company releases. But the investing industry (the information industry, the media) also influences stock value by convincing people of truths, half-truths, and lies. Not to be forgotten, the advertising industry influences stock value, too - some human beings are certainly influenced emotionally by advertising, and there's no telling how many shares are bought and owned because someone personally likes Coca Cola or Microsoft.

It is troublesome to me to think that such a gigantic industry, the retirements of millions of people, and the life savings of others, are so heavily invested into something as volatile as human psychology (and herd psychology no less - the exact reason why market crashes occur in the first place.) But I suppose that's the price we pay when we pour so much physical, hard earned wealth into symbols that don't exist in physical reality.