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Sean HymanSean Hyman
Keymaster
Post count: 4540

GDP climbs slowly. Stocks can fall quickly. Stocks are the ones that close the gaps.

Yep, the news media tries to equate the economy to stocks too. But when investing, you’re buying pieces of a company or companies, but not buying the economy. And most people are only buying parts of those largest 500 companies. Yet there are thousands of public stocks. But you have to remember that the economy is also small businesses that are not public. There’s private equity funded businesses which are not publicly traded, etc.

But it’s why Buffett never tries to figure out what the economy is going to do, in order to see what stocks are going to do. If he wants to see what IBM will do, he looks directly at IBM. Not the economies that IBM deals in, etc.

Also, companies are very easy to accurately measure…economies are not quite as easy to measure. Also, the stock market can soar in bad economies and it could tank in good economies, just depending on how out of whack (one way or the other) that it is with one another.

Yep, you’re right in that novice investors look to their view of the economy to see where stocks are going to go. And they get that from watching too much financial TV. Those reporters/analysts try to compare the two too often, as if the economy = the stock market. It does not. Either can influence the other, but they don’t equal.