Thread: SKYW Stock
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Old 11-13-2007 | 06:05 PM
  #41  
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dontsurf
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From: A220 CA
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Originally Posted by Airsupport
anytime a company buys back stock its value goes up. the reason being is supply and demand. less common stock available, demand goes up, price goes up.
this is the part that is just completely false. not one shred of this is true. you guys act like i'm thinking you're stupid or something, but that's not it. this is just ignorance of how the markets work. 99.9% of the world doesn't understand it, so i don't blame you. but i also know that most people that i know of don't go around spouting off stuff that they pass off as "fact", when it is actually 100% wrong.

supply and demand is a great economic concept. but that concept as normally understood with finite commodities has nothing to do with the stock market. taking shares off the market through a buyback DOES NOT automatically increase demand. shares of stock are not like barrels or oil or bales of wheat or something. there is not a guy out there selling these shares that can base what he sells them on what the "demand" out there is. the only way "demand" increases is the market has to think the stock is undervalued; that is to say that they think the company's sales or prospects or strategic plan indicates the company is worth more than what it is valued at today. of course, a stock buyback for the right reasons can indicate to the street that the company has something big coming up, or their new management is on a better track than the old, or whatever, and it can certainly stimulate an uptick in the stock price. but no one that knows what they are doing sits around looking for stock buybacks, looking at nothing else (ratios, strategic direction of the company, heck even non-fundamental aspects of that stock's trading, like support levels, etc.) and blindly values such stocks higher. it just doesn't happen. well, not by professionals anyway. if that is your trading strategy, then good luck. there's a reason the house always comes out ahead.
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