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14,217 Posts.
123
19/05/09
22:14
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governments create inflation with gov spending and credit creation
stocks are valued on the basis of earnings going forward
business will maintain margins
even if there is no real value being created and it is all inflation profits will go up
profits drive prices
technical analysis will always reflect fundamentals
the degree to which depends on whether you think price equals value
if price equals value tech analysis is as good as fundamental analysis
price = value
when price and value get out of synche technical analysis becomes less valuable as a tool
price is more a refleciton of emotion and market forces
I personally think price and value walk in lock step
that means that I think technical analysis is as good fundamental analysis for the most part
the minute price is out of synche with value then fundamental analysis becomes important
thats my take on it
earnigs drive price
assets that are scarce will go up in value
b
it comes down to the efficient market hypothesis
you either think price and value are in a one to one relationship
or you think they are out of synche
if price reflects value that is it is in a one to one relation then technical analysis and fundamental analysis is as good as each other
if however price and value are out of synche then functional analysis would be more valuable than technical analysis.
price wouldn't equal value
value is measured on earning going forward
at this point price is not so important all that matters is real business value
that is all you have got. price is not based on real value but sentiment and other irrational thought
fundamental analysis will always reflect value
ie
earnings going forward
inflation will occur due to gov spending and credit creation
but business will always maintain margins
prices should reflect value
if inflation affects real value prices will follow
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