I’ve posted Entry #109 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Stock Market Is the Only Market in Which Buyers Cheer Rising Prices.
Juicy Excerpt: Say that you were going to buy a used car. And say that you were not willing to spend any time negotiating. You were going to walk onto the lot and pay the price asked for the model you sought. Would you be raped?
You would not be raped. You would overpay. The dealer sets the asking price by assuming that negotiations will follow. So those who can’t be bothered pay more. That’s fair, isn’t it? Negotiating with car dealers is a pain. Those of us who negotiate deserve a price break over those who don’t.
But the overpayment would only be a few thousand dollars. Dealers don’t dare to set asking prices more than a few thousand over what they expect to be the selling price because to do so would drive away potential customers. An asking price that is $10,000 above the expected selling price sends a signal to possible buyers that this dealer is not to be trusted.
It doesn’t work that way with stocks.