Thursday, Aug 06, 2020

Why dumb pricing happens

CNBC: Jim Cramer: BP is vying for ‘dumbest action of the year’ after stock rallies on earnings

Jim Cramer explains why markets do funny things.
With BP as example when the market was good and dividend up its stocks went up 5% pre-pandemic. Post pandemic, profits down, dividend cuts, moving business to non carbon. Stock up 7.5%.
Back to housing, the market does not go up always because BoE printing press is on, Free money given to top 1% to buyout the poor. Govt giving helicopter money to keep peace. Its just the plain old stupid punter who over pays for their house (rent or buy). And that leads to others needing to pay more.

Posted by deepak @ 05:39 PM (1246 views)
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5 Comments

1. magnifico said...

Would you define a young couple desperate to set up home "stupid punters". Life waits for no-one. We don't have an unlimited amount of time to live it. Unfortunately a very powerful lobby skilled in creating and sustaining a property feeding frenzy has been allowed by successive governments to keep the young down.

Thursday, August 6, 2020 08:47PM Report Comment
 

2. deepak said...

@magnifico, No I wouldn't call them stupid but rail roaded into a bad decision. Now all their life would be miserable as they will not be together for love but for paying mortgage and interest of money that does not even exists.

But they did contribute to the higher pain for others as well. Its like picketing, if we all stayed out the bubble would burst instantaneously. As there are always a few who give up, the bubble carries on for all.

Friday, August 7, 2020 04:05PM Report Comment
 

3. deepak said...

Your comment reminded me of a BBC video a couple of years ago where they took out a half a million pound mortgage and both on 30K mortgages.

But I found the following.

Trapped by my Mortgage https://www.bbc.co.uk/programmes/p06ptclh

This should explain what is likely/going to happen.

Friday, August 7, 2020 04:14PM Report Comment
 

4. magnifico said...

Deepak you are of course right but as a society we have become very individualistic. That's why people don't join the unions. We all feel better if we can get one over each other. I wonder if the present situation with Corona will restore some community sentiments.

Saturday, August 8, 2020 08:59AM Report Comment
 

5. crash bandicoot said...

It's the prisoner's dilemma. The best possible outcome for you is if you shaft everyone else, but that relies on them doing the "right" thing. The best outcome for everyone is if everybody does the right thing. But if you do that and someone else shafts you you lose out.

I'm not a psychologist but I think this is just human nature.

Saturday, August 8, 2020 10:00AM Report Comment
 

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