> In looking at the stock market, for example,
> or any speculative market for that matter,
> if your claim that "events don't cause
> trends" is correct, then what causes
> trends to reverse direction?

Robert:

First, let me clarify... I don't say "events don't cause trends" and leave it at that. I say "Events COMPOUND to cause trends."

Without being pedantic - and nit picking every littling thing and reverse analyzing it to find a single solitary "event," which can end up being linked back to fire if you go back far enough like I did in my other post - each thing an indivudual does COMPOUNDS with the things other individuals do, to create a visible trend.

Yes, there had to be a first person to "do it" or "buy it" or "wear it" or whatever. And yes, if it wasn't for the "manufacturer" the garment wouldn't even have been avaiable. And if it wasn't for the textile designer... and so on.

People think they are individual, but they are more herd-like than they imagine.

Personally, I like Stetson style hats. Search the archives here and you'll see my prediction about them. I based my prediction on the fact that *I* like them and want one. I know others... maybe of my generation, maybe not, will also be thinking like me and want one. Together, our want and taking action to satisfy that want, creates a trend.

Once our want has been satisfied, we stop buying. Less demand eventually creates less supply. Less supply creates less availability. Which removes the item from people's mind and so they want it less. Around and around we go. But the downward trend began when DEMAND was met and stopped increasing.

The same with speculative things, like stocks...

I am NOT what you would call "Stockmarket savvy". Put options, call options, shorts, etc., have minimal meaning to me. Basics of the terms I may know... the details which fill the thick books are not a part of my knowledge.

Nevertheless, from my observations of the stockmarket, it is based on DEMAND.

The initial DEMAND gets the ball rolling. I believe these people are called the "early adapters."

The next segment, whatever they are called, see what the first-comers have (or have received by way of return) and start to jump on board.

The third segment... the largest... now wakes up and gets in on it too. DEMAND is still there.

The early-adapters and the second segment stay "in the market" because DEMAND is driving the market UP.

As DEMAND starts to dwindle - because the third and largest segment has bought as much as they will buy - the early adapters and second segment people start to "get out" of the market and offload their stock.

Dwindling DEMAND now encounters OVER-SUPPLY just as the last segment of "buyers" comes on board only to be burnt. And the stock now starts to go down.

The thing with the early-adapters leaving the market is, they do it "around" the same time but not AT the same time.

Some early-adapters get out earlier than others. But seeing as there are many many of them all doing the same thing, the stock price drops because of sudden oversupply.

Can this type of thing be caused by a "single event"? Yes and no.

Yes: Whenever Kerry Packer (Australia's richest man) sells stock in companies he owns stock in, all the people who buy into whatever he buys into also sell their stock. And the price drops. So in a sense, Kerry Packer's decision to sell - that single event - seems to cause what then followed.

No: Other elements came into play to cause Kerry Packer to sell the stock in the first place - poor company performance, he needed the money to launch a new venture of his or bolster his other companies, bad hair day, or whatever.

But basically, it all comes down to DEMAND and SUPPLY.

At the moment, property where I live is going up Up UP. And its value will continue to rise, in my opinion, as these things happen...

1: Baby boomers begin to retire and move here.
2: They move here from the higher-priced cities.

I live on The Gold Coast, where they have the Indy race (in October).

Real Estate is cheaper than in Sydney - Australia's largest city.

What happens is, people sell up in Sydney, then move up here and buy. They end up getting bigger and newer houses with the same amount of money, and still have money left over.

But as there are only a limited number of these houses, demand and price goes up.

Does that help or just make it more confusing? :o)

Michael Ross


The idea you have been looking for could be here.