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Old 12-27-2012, 10:50 PM   #42
SteveEisenberg
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Join Date: Jun 2008
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Quote:
Originally Posted by Penforhire View Post
Steve, you need to hold a stock for at least a year to use the lower capital gains tax. If it doubled "this year" that is the awfully obvious reason why there is no selling rush.
Whirlpool is close to a five year high, so I'd think most people who have been holding it for at least a year are sitting on potential profits. Undoubtedly there is another just-so story to explain this, but since you can't predict future performance based on past performance, that story for why Whirlpool's price has held up will have no more validity than the story of why Apple lost thirty percent.

If there was an awfully obvious reason why a stock was going to go up or down, informed people would buy or short-sell the stock in advance of that awfully obvious move, and, as a result, there would be no awfully obvious price change inflection we could explain. Or maybe there was an obvious starting point -- the minute it was clear Congress would likely pass the legislation (Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010) setting the fiscal cliff deadline. So why didn't Apple stock go down 20-30 percent in late 2010, which it did not? Did any non-Pollyanna who reads newspapers really think in December 2010 that we wouldn't be exactly where we are today with the December 31, 2012 deadline? I don't see how.

The bulk of academic economists believe in some variation on the random walk/efficient market hypothesis. A lot of economists do criticize over-strong forms of the efficient market hypothesis, but not to such an extent as to allow for after-the-fact storymaking to explain stock market moves.

As as class, I tend to like academic economists, and to not like stockbrokers. Maybe it is a prejudice. Now what can I say to bring this back to mobile reading?

EDIT: Some reader is going to equate, in their mind, the phrase "academic economist" above with Paul Krugman. That was not the intent. Krugman's New York Times columns, for better or worse, are punditry, not economics. It's almost a coincidence he's both a Princeton economist and a pundit.

Last edited by SteveEisenberg; 12-27-2012 at 11:03 PM.
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