Stock Prices

A post from Mark Cuban’s blog fromhis forward to the book “The Number,” by Alex Berenson, a top financial investigative reporter for The New York Times:

Volume creates demand. Stocks don’t go up because companies do well or do poorly. Stocks go up and down depending on supply and demand. If a stock is marketed well enough to create more demand from buyers than there are sellers, the stock will go up. What about fundamentals? Fundamentals is a word invented by sellers to find buyers.

Price-earnings ratios, price-sales, the present value of future cash flows, pick one. Fundamentals are merely metrics created to help stockbrokers sell stocks, and to give buyers reassurance when buying stocks. Even how profits are calculated is manipulated to give confidence to buyers.

From Barry Ritholtz’s The Big Picture weblog
http://bigpicture.typepad.com/comments/2004/04/the_number.html