Shakeout

Shakeout A change in market conditions often results in the liquidation of marginally financed companies in an industry. When the market is glutted by too many companies trying to market the same class of goods or services, and there are more sellers than buyers, there will be a shakeout and many companies will be eliminated. Many leasing companies, for instance, were shaken out in the middle eighties when there were too many of them. Speculators in the stock markets can be shaken out too, when market conditions force them to sell their positions, often at a big loss. Similarly a shakeout of inexperienced investors takes place when a bear phase overtakes the market. New and inexperienced investors watch the fall in prices with dismay, wait for some time, and when the slide continues take fright and sell at a loss. Thereafter, most of them avoid the stock market.

You can leave a response, or trackback from your own site.

Leave a Reply

You must be logged in to post a comment.

Powered by WordPress