“As a discounting mechanism the market is constantly digesting the flow of information and deciding on the likelihood of its impact on business. Investors, portfolio managers, analysts, brokers, financial consultants, traders, strategists, and financial planners are all involved in the continuous guessing game that shapes the daily, weekly, and monthly movements of both the equity and fixed-income markets. Their opinions, judgements, aspirations, fears, and greed are reflected in the pricing of securities. The market trend is the sum total of all economic, fundamental, and quantitative research and thought. The trend is the melting pot and the meeting of the minds in pursuit of profits. There are the positioners and the traders, the speculators and the investors, the informed and the gamblers.”   Michael Gayed

Mr. Gayed, in his book Intermarket Analysis and Investing, names the many actors who, in determining at what price they’re willing to buy or sell a share of stock, determine the price of a share of stock.

Imagine the myriad methodologies—the work, the measuring, the calculating, the thinking, the processing, the guessing involved in determining the price of a share of stock. Then consider the fact that after all available information is processed by all those players, there remains, for every transaction, one who believes it’s a good time to buy, and one who believes it’s time to sell.

The final trades of last Friday priced the stocks that make up the Dow Jones Industrial Average some 150 points below where they placed that index at the beginning of the day. I suspect that some of the end of day buyers figured—given the lack of an obvious catalyst for Friday’s profit-taking—that heads would cool over the weekend and Monday would be met by opportunists looking to exploit Friday’s decline. They were wrong. Monday saw more sellers offering up their shares to a market void of eager buyers. Thus, the stocks that comprise the Dow traded lower to the tune of 166 points. I.e., the patient buyers who waited just a few more hours were rewarded with noticeably lower prices by the trading day’s end. By the end of the day tomorrow, today’s buyers will either pat themselves on the back for their patience if the market rallies, or they’ll kick themselves for their lack thereof if the selloff continues.

To the extent that Friday’s, and today’s, buyers happen to be those long-term holdouts who’ve been painfully waiting for an opportunity to join the market at a level somewhere below the major indices’ all-time highs is anybody’s guess.

And while you can spend from now till bedtime tonight reading any number of online financial news sources, listening to Bloomberg radio’s replays of the day, or watching videos on CNBC.com to glean for yourself the whys of the past two days of selling, at the end of this very long day, you’ll have, at best, formulated an assumption based more on your own personal experiences, fears, desires and quirks than on any revelations offered up by the “experts” who are simply offering up the data that supports their own experiences, fears, desires, and quirks—and, not to mention, the current positioning of the portfolios they manage. I.e., the fully-invested bulls will present the data that supports their positive bias, while the all-cash, or short, bears will show the stuff that proves they know what they’re talking about.

Plus, to confuse matters even more, looking back to Gayed’s list of actors, each, by definition, has distinct objectives, and/or pressures, that will profoundly impact his/her view of the world.

Generally speaking:

Investors look to allocate their money among reasonably valued stocks that they believe have strong long-term growth prospects. Their personal objectives: retirement, college education for their children, etc., is their motivation. Those who prefer not to go it alone work with trusted financial/investment advisors.

Portfolio managers look to outperform some popular benchmark year in and year out. Keeping their jobs is their primary motivation. When the market turns against their theses, they are pressured to figure things out (make bigger guesses) in a hurry.

Analysts look to analyze companies, the macro and the micro of the world, and predict where things go from here. Add here the final two sentences found in my description of portfolio managers.

Brokers look to buy and sell securities on behalf of their clients. Hopefully with their clients’ best interests at heart. Add here the final sentence, and, in some instances, alas, the final two found in my description of portfolio managers.

Financial consultants, when it comes to the market, look to make sound, pertinent recommendations to their clients. This one sentence suffices for the good ones. For the not good ones, add the final two sentences in my description of portfolio managers.

Traders look to make fast money: Professionals, on behalf of their employers/clients. Individuals, on behalf of their own portfolios. They generally aren’t concerned with long-term fundamentals. Being quick, sometimes very quick (think high frequency), they bring important volume to the market (I distinguish volume [for lack of a better term] from liquidity to circumvent a potential debate with any readers who may be high frequency haters).

Strategists, hmm… I guess any of the above could call themselves strategists.

Financial planners. Add here the description of financial consultants.

My point? To barely (and I mean “barely” in the minutest sense) scratch the surface of what goes into the pricing of a share of stock. And, as always, to stress that your best shot at long-term investment success is to be, well, a long-term investor…