A major problem with the stock markets is a result of the fact that dividends are taxed much higher than retained earnings. As a consequence, many people who buy stock expect to profit largely by an appreciation of their stock's value, rather than by the receipt of dividends. Such expectation severely undermines the usefulness of price as a means of allocating resources. In a properly-functioning marketplace, low prices will entice people to buy, and high prices will entice them to sell. It may be possible for a momentary spike in demand to cause prices to rise to irrational levels, but in a properly-functioning marketplace, rising prices will be a red flag to would-be purchasers. Unfortunately, bull markets' reactions to such red flags are often the opposite of rational market reactions.
Many people seem to think that the value of a stock is substantially affected by its current market price. It's not. While stock prices may affect a company's ability to raise capital, and that may in turn affect the company's health and thus affect the value of the stock, I would suggest that every stock should be considered as having a "par value" which equals the present cash value of all future payments to which a person would be entitled if they held one share forever. Someone who buys a stock for less than par value or sells it for more than par value makes money. Someone who buys a stock for more than par value or sells it for less than par value loses money. Someone might buy a stock for more than par value and sell it for more money still, but such a transaction simply means the second purchaser lost more money on his transaction than the first did, and the first was able to take pocket for himself that extra money lost by the second purchaser. Note that if the stock changes hands many times at prices that go further and further above par value, what's happening is not that the stock's value is increasing, but rather that each person loses more money when buying a stock, which all but the last person recoups on the sale. The earlier people aren't profiting because the stock has become more value, but rather because each one managed to find a bigger sucker than himself.
To be sure, determining the par value of a stock for a company that's still in business would require a perfect crystal ball to know what dividends or other payments it would produce. On the other hand, if one defines "expected par value" to be the expected present cash value of all payouts from a stock that's held forever, the observations that are true about par value are generally true about expected par value.
As a parting note, I've sometimes seen "market capitalization", meaning the per-share market price of a stock times the number of shares outstanding, mentioned as though it were a meaningful figure. It isn't. The fact that AcmeCo has 500,000 shares of a stock outstanding, the fact that today's market price is $10/share does not mean that those shares are worth a total of $5,000,000. If there's no the company's assets could produce a combination of present and future payments whose present cash value is more than $1,000,000, then the total value of the shares can't be worth more than $1,000,000. If the per-share price drops from $10/share to $2/share, investors won't lose money when that happens. All they'll have lost is the ability to find someone else willing to take the loss for them.
I read the entire article and still have no clue the premise or what it was trying to say.
I read your entire post and found it perfectly clear and readable and fully understand exactly what you said.
I wish you had written the article. Maybe I would understand it.