I once (about 17 years ago or so) attended a speech by German stock market guru Andre Kostolany (1909-1999). So many years later, the only thing I still remember (apart from his self-confident appearance) was his analogy on how the stock markets and the real markets correlate. He said that one can compare both with a dog and his master going for a walk. The dog runs forward and backwards but the net forward or backward movement is the same as the master's. The dog, he said, is the stock market and the master the real business market environment. I thought it was a nice comparison, although it has not made me a guru myself in stocks. Now, looking at last week's tech stock market development, Kostolany's comparison seems to be more true than ever. With one addition, I would say.
Changes in businesses are now reflected on the stock market instantly and literally in real-time, to use a technology phrase. If you look at how practically all tech stocks this week got either a boost or a knock down depending on their quarterly performance, this becomes evident. I guess the explanation is also more technical than anything else. The IT systems, internet information spread and also online trading for private people makes these super-fast movements possible. If a tech company announces great quarterly results, the info is spread instantly and institutional and private investors alike go online to sell or buy.
So what do we learn from that, other than that life and markets move fast? Let's close with two quotes from Mr. Kostolany: "Wer viel Geld hat, kann spekulieren; wer wenig Geld hat, darf nicht spekulieren; wer kein Geld hat, muss spekulieren." (Who has lots of money CAN speculate, who has little money CANNOT, who has no money MUST speculate"). And the other quote: "Aktien kaufen, Schlaftabletten schlucken und sich nach ein paar Jahren über einen hübschen Gewinn freuen." (Buy shares, swallow sleeping pills and be happy about a nice gain in few years). The latter is probably still true as well, as long as we have a growing world market, which is the case thanks to China and others.