[ExI] Sudden outbreak of democracy baffles US pundits

Stathis Papaioannou stathisp at gmail.com
Mon Oct 13 00:04:37 UTC 2008

2008/10/13 Samantha Atkins <sjatkins at mac.com>:

>> Actually, this advice ignores the way the market is supposed to
>> function. Since everyone has access to the same information, the "bad"
>> companies will be discounted and the "good" companies will have a
>> premium,
> Not any more.  The government rewires the signals as it pleases supposedly
> for our own good.  The signals haven't been dependable since long before
> this crisis.   They are becoming less dependable by the hour.

The market takes the government's behaviour into account. If the
government increases taxes on tobacco, tobacco companies' share prices
will drop, usually as soon as the information is known, in
anticipation of lower profits. So the share price immediately reflects
all the known information, and the only way you can "beat" the market
is if you know about the tax increase coming before everyone else

Stathis Papaioannou

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