Re: Nanny psychology revealed!

On Mon, 04 Jun 2007 20:40:42 -0400, Joe LaVigne wrote:

Alex W. wrote:


"Joe LaVigne" <jlavigne@xxxxxxxxxxxxxxxx> wrote in message
news:f405k6$nr5$2@xxxxxxxxxxx
Bart Goddard wrote:


You buy Stock in Texaco at price Y. Gas prices go throught the roof.
Texaco makes record profits. Your stock is now worth 2Y. The "losers"
are all the people who paid inflated prices for gas, because Texaco
is more beholden to you than to people who buy their product.

Not at all. People do not pay a higher price for gas (or any product)
because of shareholders. They pay it because of supply and demand. If
people really wanted prices to go down, they would curb their driving
habits, and find way to economize. As the demand for the fuel goes down,
so will the price.

Which will have the perverse effect of disincentivising Big Oil from
investing the billions needed to expand refining capacity which caused the
bottleneck and high prices in the first place ....

No, environmentalists created the problem in the first place. By protesting
every possible expansion of oil companies, and running of "Not in My
Backyard" campaigns, they have made it very difficult to build new
refineries.

Besides, what incentive does big oil have to do it now? They raise prices,
keep supply at a steady level, and profits double or triple. If they got
an inkling that people wouldn't be willing to pay the higher prices, the
only way to increase profits would be to increase the supply, thus
increasing sales. Less profit per gallon, but more profit overall.



The shareholders are simply the people that are smart enough to invest in
the product knowing that the American people will continue to buy the
fuel at the higher price.

Most shareholders don't really care about the product of the stock they
invest in. They wear Nikes but hold Adidas shares, own Texaco stock but
fill up at an Exxon station, and don't really care one fig about the ins
and outs of Adobe software.

They invest in products that they think they can make money on. They
don't "care" which product it is, but they do care about earning potential.
Thus, it makes sense to invest in big oil knowing that record profits are
at hand.

Good investors/traders distinguish the stock from the company. In some
cases a great company will have a poor stock, and a poor company will have
a great stock. In general investors care more than traders about the
products produced by the companies in which they own shares because
products affect long-term corporate performance more than short-term
performance. Of course there are counter examples such as certain product
releases. As a trader I care very little about the products produced by
the companies in which I trade. I try to buy "good stocks". I have my
personal boundaries, but I understand they are MY personal boundaries and
do not attempt nor counsel others to accept my beliefs regarding acceptable
investments.

--
Demonick
.

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