Re: Why I don't understand Wall Street
Another rather large caveat:
Share price is mostly based on confidence.
Confidence that the last statement was true, confidence in a belief that the next statement will be better - or worse - than the last.
Confidence that the rest of the market is correct about how confident to be.
That's why bubbles happen, and why they burst - confidence is lost.
The "rational market" is a theoretical fiction. As a theory it's claimed to work often enough to be useful, but rarely predicts booms or busts.