Sunday, October 23, 2016

VISIBLE PRICES ENABLE MARKETS TO WORK

Englewood Staff post (222 October) on Englewood Daily HERE
"Turbulent Week Ends, How Did This Stock Fare: Eastman Chemical Co. (NYSE:EMN)"
“Stock indexes closed mostly lower on Friday as the telecom sector bore the brunt of selling. The S&P 500 was also lower on the day, but pulled off a one point gain on the week, while the Nasdaq ended 0.6% higher for the week.
Globally, the FTSE fell 0.1%, the Nikkei gained 0.1% and the Shanghai Composite added 0.2%.
Eastman Chemical Co. (NYSE:EMN) closed at $66.87 after seeing 1385388 shares trade hands during the most recent session.  This represents a change of 0.78% from the opening.
The closing price represents the final price that a stock is traded for on a trading day.  It’s the most up-to-date valuation until trading begins again on the next day. However, most financial instruments are traded after hours, which means that the the closing price of a stock might not match the after-hours price.  Regardless, closing prices are a useful tool that investors use to quantify changes in stock prices over time.  The closing prices are compared day-by-day to look for trends and can measure market sentiment for any security over the course of a trading day.
Stock exchanges work according to the invisible hand of supply and demand, which determines the price where stocks are bought and sold.  No trade can occur until someone is willing to sell a stock at a price that another is willing to buy it at.  When there are more buyers than sellers, the stock price will rise because of the increased demand.  Conversely, if more individuals are selling a stock, the price will decrease.”
COMMENT
A VERY CLEAR ARTICLE EXPLAINING AN ON-GOING MARKET PROCESS BY MEANS OF VISIBLE PRICES
Every student from ECON 101 understands this. Every participant in a market knows this - they can look at current VISIBLE prices and can make a judgement: do they want to stick or twist (metaphor alert!). 
Professional market watchers follow VISIBLE price trends and can follow their clients instructions or can act on their own judgements wthin their skill sets both within or outwith ‘office hours”. Newspapers and emails scan VISIBLE prices to which market investors can choose to act or get somebody else to act for them.
That is how markets work using the VISIBILITY or prices and their possible movements. Even computer programs that track VISIBLE prices and can initiate action or inaction to buy or sell in a market.
There is absolutely no role for the metaphor of “an invisible hand” and Adam Smith wrote nothing to say there was such a real entity at work. 
He used the metaphor to help to describe how the motivated actions of a particular merchant (what today we would call his ‘risk aversion’) caused him to invest locally and in doing so he added his capital to ‘domestic revenue and employment’. This consequence of  his intentional local investment happened unintentionally to benefit the public good.

Likewise, Smith noted on multiple occasions in his Wealth of Nations how the motivated intentional actions of other merchants could be a disbenefit to the public good, such as when merchants clamoured for the government to restrict imports - even ban them altogether - which intentionally restricted compertition and intentionally raised domestic prices and their profits. And, of course, lowered the profits of other merchants.

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