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[Unknown Soldier]

I guess the question I would ask is why do you believe that the efficient market hypothesis does not apply to these companies? It's not like they are some hidden gems that other investors do not know about - they are some of the most widely covered stocks, and have been for a long time.

They have also traded at the prices they are at for a long time. Maybe one day they will drop to 1/10th their value. But if you are going to try and short GOOG and AMZN don't forget that the market can remain irrational longer than you can remain solvent.

 

[Mrbob]

I guess the question I would ask is why do you believe that the efficient market hypothesis does not apply to these companies? It's not like they are some hidden gems that other investors do not know about - they are some of the most widely covered stocks, and have been for a long time.

Alphabet's PE ratio is not out of line for a growth stock. The way they are crushing earnings you could argue the stock is undervalued. Amazon is another story. Their PE ratio is like 6x Google, but Amazon is also considered one of the hottest growth companies that is taking over the world. If more competition starts cutting into Amazon earnings then there is a possibility of the stock going down. Until then it's going to continue to be a growth machine. Every time Amazon has a dip money pours into it and it doesn't stay down for long.

 

[tokkun]

Alphabet's PE ratio is not out of line for a growth stock. The way they are crushing earnings you could argue the stock is undervalued. Amazon is another story. Their PE ratio is like 6x Google, but Amazon is also considered one of the hottest growth companies that is taking over the world. If more competition starts cutting into Amazon earnings then there is a possibility of the stock going down. Until then it's going to continue to be a growth machine. Every time Amazon has a dip money pours into it and it doesn't stay down for long.

Yeah, but you're not really addressing the question. All that stuff you mentioned is well-known information. If that information suggests that earnings growth will beat the market for the next N years, then efficient market theory would say that it should already be baked into the current valuation.

If you project that the stocks will beat the market, you should be able to come up with some explanation for why the market is not being efficient, and is undervaluing the stock.

 

[tokkun]

Interesting lecture by Mohnish Pabrai on the effect of commitment bias on investing:
https://www.youtube.com/watch?v=kNAuELYN5X4&feature=em-subs_digest-vrecs

The argument is that the more time you spend researching a company, the more likely you are to overvalue it.

 

[Mrbob]

Yeah, but you're not really addressing the question. All that stuff you mentioned is well-known information. If that information suggests that earnings growth will beat the market for the next N years, then efficient market theory would say that it should already be baked into the current valuation.

If you project that the stocks will beat the market, you should be able to come up with some explanation for why the market is not being efficient, and is undervaluing the stock.

I wouldn't necessarily say you can assume everything is baked in. If this were the case then shorting a stock wouldn't exist in the current market place. One person sees Google crush earnings and want to invest more. Someone else might see Google crush earnings and think it's time to short. People value available information differently and act accordingly.

If you are arguing inherent risk of single stock picking versus a broad market index like VTI, that should be pretty obvious. Always much more risk putting your money into individual stocks. But you can also get more return. Look at Tesla. I loathe that stock but it's nearly doubled in the course of a year.

I'm actually with you where I think you are trying to go. I'd rather invest most of my money in broad market ETFs than individual stocks, and I do. I leave a little money on the side to do stock picking because I enjoy the thrill of picking individual stocks and see how I perform against the market. But even now I hedge on individual stock picking by using Motif Investing. This allows me to purchase a basket of stock at X dollars, which is typically between 10 to 20 stocks total.

 

[Ether_Snake]

Welp so much for Amazon, crazy Trump going after it.

 

[tokkun]

I wouldn't necessarily say you can assume everything is baked in. If this were the case then shorting a stock wouldn't exist in the current market place. One person sees Google crush earnings and want to invest more. Someone else might see Google crush earnings and think it's time to short. People value available information differently and act accordingly.

The idea with efficient market theory is that although individuals may make irrational choices, the market as a whole behaves rationally. It's another form of crowd wisdom, which has been shown repeatedly to do better than experts in many fields.

For a market to be inefficient usually requires something like
- Lack of available public information (or false / misleading information, like Theranos, Enron)
- Mass short-term irrationality, typically caused by some big news event
- High barriers to entry (like the private equity market)

There is always *some* degree to which the public does not have all the information on a company, which is why prices are not perfectly baked in, but the idea is that it is just as likely to be wrong in either direction.

 

[Mrbob]

That's interesting but doesn't that have to assume everybody invested has to adhere to this theory? Feel like EMT is talking about active investors vs passive investors. If active investors don't believe in EMT, does that mean it can properly exist? It's an intriguing theory and one I can get mostly behind.

 

[Mrbob]

Bloody AMD. 23 stocks in my Motif, all green except for one. Ruined my perfect green day.

Welp so much for Amazon, crazy Trump going after it.

Does this mean Amazon is primed to go higher? Trump was supposed to keep winning but has he won once?

 

[tokkun]

That's interesting but doesn't that have to assume everybody invested has to adhere to this theory? Feel like EMT is talking about active investors vs passive investors. If active investors don't believe in EMT, does that mean it can properly exist? It's an intriguing theory and one I can get mostly behind.

EMT doesn't require anyone to believe in it to work. What it requires is that there is equal access to information, equal access to markets, and people acting (as a whole) in a rational self-interested manner.

Of course, all of those things are ideals that are not quite met in reality. There is not equal access to information and markets, because big investment banks have fiber links to exchanges that allow their automated trades to go through faster than you can read a news headline and place an order through a brokerage. People trade on non-public information and get away with it. It is possible for emotion to drive the larger market into periods of panic or greed.

 

[Natetan]

Although I'm investing, I think the stock market is kind of stupid. I can't wait until we are in a Star Trek like society and these money games are pointless. Reminds me of that episode where the guy frozen in space is woken up by data and he wants to see his lawyer and his investments and Picard kind of rolls his eyes.

https://youtu.be/XQQYbKT_rMg

 

[Ether_Snake]

Is it the CAD that has been rising or the USD that has been falling? Oil is crashing, I wouldn't expect the CAD to do well right now. I know BoC had been talking about raising interest rates though.

 

[Unknown Soldier]

The idea with efficient market theory is that although individuals may make irrational choices, the market as a whole behaves rationally. It's another form of crowd wisdom, which has been shown repeatedly to do better than experts in many fields.

For a market to be inefficient usually requires something like
- Lack of available public information (or false / misleading information, like Theranos, Enron)
- Mass short-term irrationality, typically caused by some big news event
- High barriers to entry (like the private equity market)

There is always *some* degree to which the public does not have all the information on a company, which is why prices are not perfectly baked in, but the idea is that it is just as likely to be wrong in either direction.

The market does not behave rationally and never has, because humans do not behave rationally and collective human intelligence as reflected in something like a stock market is the sum total of human irrationality.

 

[Captain Smoker]

Euro stop rising... plz

 

[Natetan]

Euro stop rising... plz

I'll be paid in euros with student in usd, guess I'm on the other side.

 

[Captain Smoker]

US-banks are going to have a great day today after all of them passed the FED stress test successfully.

Furthermore:

The Federal Reserve has approved plans from the 34 largest U.S. banks to use extra capital for stock buybacks, dividends and other purposes beyond being a cushion against catastrophe.

https://www.reuters.com/article/us-usa-banks-stress-idUSKBN19J2RK

 

[ClosingADoor]

America, stop pushing down my EU stocks when you open. Everything was so nice and green all day.

 

[tokkun]

The market does not behave rationally and never has, because humans do not behave rationally and collective human intelligence as reflected in something like a stock market is the sum total of human irrationality.

I agree to an extent, in that I think that the market as a whole can behave irrationally when emotions are particularly charged - particular fear and greed.

However, I tend to think the market behaves rationally in the long run. I think that EMT - while not without its flaws - is a pretty good baseline for setting your thinking. That is to say, if you don't think the market is being efficient, I think it is incumbent on you to come up with an explanation for why it is inefficient in the specific case you are looking at, rather than assuming it is generally inefficient.

I'd point to the counter-factual: If the market were inherently irrational, you should have millions of Warren Buffets out there making fortunes using just fundamental analysis.

 

[Tangeroo]

Looks like a pretty good day to buy in on the dip. Picked up some shares of $SHOP when it hit $83.96 today and it's already crawling back up. Hopefully $MU rebounds when the ER is released tonight.

 

[Ecotic]

I've been waiting for a good sell-off to buy TECL, the leveraged tech stock ETF, but we need a lot more selling than just this before I'm interested.

 

[BeforeU]

I say god damn. Today is all fucked.

 

[Parch]

Seems to me ETFs are a pretty smart way to invest now. They're something previous generations didn't have the benefit of. Mutual funds and their fees were a pretty big rip off and no guarantee of anything.

Now the low cost of ETFs make them good. Get reasonably educated and follow the sector swings and you should be able to do reasonably well. You don't have to be a financial genius or take individual stock risks when ETFs provide the diversity you need.

For the casual investor, ETFs look pretty good to me.

 

[Smiley90]

Good thing I bought a whole lotta shares yesterday, right guys?

... right

... shit

 

[Mrbob]

This USA market needs a pullback. Been running too hot.

I've been upping my allocation split between USA and International. I'm about 55USA/45 International now.

 

[Unknown Soldier]

No fuck that. US needs to go to the Moon while Europe crashes and burns

 

[Unknown Soldier]

To anybody who bought TSLA because I kept on nagging you:

Congratulations in advance on your new yacht!

 

[Mrbob]

Forbes contribute says bail out and you can always trust a Forbes contributor.

https://www.forbes.com/sites/peterc...k-on-todays-model-3-launch-news/#6c0b06516423

 

[Unknown Soldier]

Pfft

 

[ClosingADoor]

Forbes contribute says bail out and you can always trust a Forbes contributor.

https://www.forbes.com/sites/peterc...k-on-todays-model-3-launch-news/#6c0b06516423

I do love his intro: "About a year ago, I suggested that Tesla stock was too high. Now it's 67% higher."

Good call last year, this is someone I want to listen to.

Steel continuing its recovery. Only 10% more and it is into the green again for me.

I can't figure out why people are so depressed about Ahold suddenly and it doesn't recover after the major slide down some time ago. Hopefully the Q2 numbers will be OK when they get published.

 

[Captain Smoker]

DDD you piece of shit, stop falling.

;__;

 

[Ether_Snake]

DDD you piece of shit, stop falling.

;__;

Yep, I own that and SSYS, horrible stocks, but someone who would have gotten in early this year would be up almost 40%. I owned both for a long time so I'm 68 and 78% on them

One day.

 

[alejob]

I've been away for a while. My job keeps me busy enough that I haven't had time to trade for a while. I bailed out on the banks at the wrong time I really didn't "bail out", I sold for a profit and couldn't find a spot where I was comfortable jumping back in.

Anyway, now I'm taking a big risk and I'm short selling the market. Just did this morning.

 

[BeforeU]

I am just getting fucked side ways with GOOG and AMAZON

like hollyshit, it keeps dropping

 

[Natetan]

I am just getting fucked side ways with GOOG and AMAZON

like hollyshit, it keeps dropping

I put a sell order if it goes below 950 a few weeks ago. Looks like that might happen now though. I'm wondering if I should remove it, but I have a lot of money invested in Amazon and want protect my gains

Think I should cancel my sell order?

Edit: the stock price is 123?! How is that possible? And google is the same price?! Maybe there's something wrong with the iPhone ticker...

Looks like here it says it's 954

http://www.marketwatch.com/investing/stock/amzn

But other places also saying it's 123. Any idea what this means?

 

[WoodWERD]

Edit: the stock price is 123?! How is that possible? And google is the same price?! Maybe there's something wrong with the iPhone ticker...

Looks like here it says it's 954

http://www.marketwatch.com/investing/stock/amzn

But other places also saying it's 123. Any idea what this means?

Man some of you are jumpy haha. This appears to be an issue with a stock data provider...chill.

 

[SecretMoblin]

I put a sell order if it goes below 950 a few weeks ago. Looks like that might happen now though. I'm wondering if I should remove it, but I have a lot of money invested in Amazon and want protect my gains

Think I should cancel my sell order?

Edit: the stock price is 123?! How is that possible? And google is the same price?! Maybe there's something wrong with the iPhone ticker...

Looks like here it says it's 954

http://www.marketwatch.com/investing/stock/amzn

But other places also saying it's 123. Any idea what this means?

A lot of automated systems get funky when the market strays from the normal trading hours, like today when it closed early. The graphs should be (mostly) accurate even if the numbers up top aren't. Official close was reported at $953.66.

 

[cpp_is_king]

I put a sell order if it goes below 950 a few weeks ago. Looks like that might happen now though. I'm wondering if I should remove it, but I have a lot of money invested in Amazon and want protect my gains

Think I should cancel my sell order?

Edit: the stock price is 123?! How is that possible? And google is the same price?! Maybe there's something wrong with the iPhone ticker...

Looks like here it says it's 954

http://www.marketwatch.com/investing/stock/amzn

But other places also saying it's 123. Any idea what this means?

Iphone data is all screwed up. GOOG, AMZN, MSFT all say it's exactly $123.47. No idea where that number comes from but it scared the shit out of me when I looked at my phone just now and say GOOG down 86.41% and AMZN down 87.24%

 

[Natetan]

Iphone data is all screwed up. GOOG, AMZN, MSFT all say it's exactly $123.47. No idea where that number comes from but it scared the shit out of me when I looked at my phone just now and say GOOG down 86.41% and AMZN down 87.24%

Ok, whew. Scared the shit out of me too...

 

[Mrbob]

Tech is out of favor now. I expect a rebound though before the summer is over and heading into fall.

 

[Natetan]

Tech is out of favor now. I expect a rebound though before the summer is over and heading into fall.

Maybe I should cancel my 950 sell order....

 

[Angry Grimace]

edit

 

[Ether_Snake]

There's actually news articles about what happened today: Finance sites erroneously show Amazon, Apple, other stocks crashing

Still showing Amazon down 87% to me on my PC, not even an iPhone thing. Apple down 14%. That's nuts cause someone might see a stock down 5% when it's actually not at all and sell.

 

[Mrbob]

Maybe I should cancel my 950 sell order....

Depends if you are a trader or investor. Tech ran so hard to start this year I think we are in cool off mode.

 

[Unknown Soldier]

Depends if you are a trader or investor. Tech ran so hard to start this year I think we are in cool off mode.

I'm a long-term buy-and-hold investor. I was up 30% on the year at one point because of how much NVDA, GOOG, AAPL, AMZN, and TSLA was running. It was broken. This has been a pretty painful cool-down period though after seeing how much it was up. I mean it's not as if I'm losing money, I'm still up 20% on the year according to Schwab but it still hurts to watch this much damn money just evaporate from my portfolio in a matter of weeks.

This is a good lesson in understanding that unrealized gains are just that, unrealized. At the end of the day I still hold valuable equity. It will go up again, and all will be right with the world assuming Trump doesn't start a nuclear war and annihilate us all.

I actually yanked a bunch of money from my portfolio to serve as the down payment for my car. At the time I was wondering if this was a really dumb idea because I was making gains hand over fist. Now I look like a genius though, I moved money out of my account when it was near it's all-time high and some of my cool-down has been mitigated because I put that money down on my car. My taxes will still be painful this year though. Capital gains taxes suck.

 

[Natetan]

Yeah capital gains is why I don't want to sell Amazon, but basically I'm pretty deep red on all my investments except for Amazon right now and it's the one I have most invested in.

I guess I should ride the cycle out, but I'm a bit worried it will never get back up to the prices I purchased at just a few weeks ago. Sigh...

 

[cpp_is_king]

Yeah capital gains is why I don't want to sell Amazon, but basically I'm pretty deep red on all my investments except for Amazon right now and it's the one I have most invested in.

I guess I should ride the cycle out, but I'm a bit worried it will never get back up to the prices I purchased at just a few weeks ago. Sigh...

It will, you'll be fine.

 

[Captain Smoker]

My portfolio is basically Technology (Alphabet + Amazon + Facebook + DDD), so I was hit hard the last few days, but I'm still in the green.

DDD drags me down the most, while First Solar also sucks it recovered a lot in the last few months, hopefully it continues like this and I'm back in the green.


Since I'm going to have more money in the next few months I'm going to overweight MSCI World and the S&P 500 to ride out the technology dump.


On the other hand, this is a good opportunity to buy the dip?

 

[Mrbob]

Buy on the dip is an interesting concept. Different people have different levels. Some people like to buy more at a 5% dip on a stock they like, some 10%. I lean more towards the 5% crowd. One thing I try not to do when buying a stock is go all in on the first purchase. I typically buy in thirds. Normally I buy a second third on a 5% dip but with rotation happening out of tech I'm going to see if Amazon drops tog the low 900s before buying any more. That would be around a 10% haircut from it's high of 1010. Google the 5 year amazon stock chart. It's not like it goes up in a straight line but Amazon always tends to move up during the holiday season.

If this overall market is going to grow it will be tech leading the charge so I expect a rotation back in tech later in the year. If the rotation doesn't happen and tech stops growing then I think we have larger market wide problems where the entire market is going down. Unless Financials can pick up the slack and Pharmacy keeps moving up.

 

[tokkun]

I have seen some backtesting models that people put together to evaluate "buy on the dip" strategies. Generally they do not perform all that well, because your money ends up spending too much time sitting on the sidelines waiting for the dip. "Buy immediately" usually produces the highest expected returns.

 

[ClosingADoor]

I have seen some backtesting models that people put together to evaluate "buy on the dip" strategies. Generally they do not perform all that well, because your money ends up spending too much time sitting on the sidelines waiting for the dip. "Buy immediately" usually produces the highest expected returns.

Is this for just ETFs like the S&P 500, Total Market, etc, or individual stock?