Wednesday, May 02, 2007

Bull market: I win, who loses?

A few weeks ago--just after CVS's merger with Caremark--my friend asked me if I wanted to buy a few shares of CVS's stock. He already owned some, and assured me it was a good bet, so I dug into my savings account and bought a few shares. Needless to say, he was right. Of course, everything is doing well in this market, but CVS has been especially hot, up 6% since I bought it, and 26% since my friend did, about a year ago. Yey! Free money!

But wait...Am I the only one here freaked out by the bullishness of the market? Why does it seem like the Dow goes up every day? When it comes to understanding the market, I am a real dilettante; I tend to stick to Thomas Frank's credo: when the market goes up a lot, someone on the flip side is getting screwed. That seems like reasonable logic to me. After all, prices rise when productivity increases, and we all know what productivity means: cutting wages, shipping jobs to China, pushing health care costs onto tax payers, etc. Or is this an absurd way to think about the market?

1 comment:

Superman said...

6% will not even beat inflation. You actually have Lost so far, not to mention you had transaction fees.

Increases in productivty can come from technological innovation and is not a bad thing.

When you short the heck out of CVS based on access to large amounts of capital and make ten times your money, then I think ethical concerns might come into play.

I also recommend mutual funds for you and not individual stocks. You can invest in ones with social covenants, if that will help you sleep at night.