LeeAbe
3183
I get that, my whole point was people also buy some stocks just because they have a tendency to go up. We have discussed this 100 times and you all have told me I am wrong 100 times.
Oh I’m not telling you you’re wrong, but I think what people are conveying is that it’s an actually different kind of investment vehicle even though it doesn’t appear to you to be. Though I certainly agree wholeheartedly that much of the stock market is a legal shell game and money printing enterprise with the veneer of reality tethered awkwardly to it.
Just imagine if people invested in the stuff that would make the world a better place instead of just what they thought would make them money.
Or if they even considered that an option.
I believe most people do. But most who have the choice to not be wage slaves until they die also invest in hope of some retirement years, which in a society with poor safety nets means money.
Scuzz
3187
One difference between investing in penny stocks is that you knew it was a long shot, and nobody was trying to tell you how it was something that was going to change the way money works. It wasn’t just an investment, it was a societal game changer.
Scuzz
3188
Most people can’t afford to give up a decent return to be a world caregiver.
We’ve been hearing praises about unicorn tech wizards for more than a decade, completely disregarding the quality of the actual product and the circumstances, so that doesn’t surprise me. Even pre-graduates were inundated with “Gates didn’t wait to finish your degree, why are you?” and “Go remake the world with code”, so, why wouldn’t a lot of us believe?
Why would I “come talk to you” when you’re talking about ignoring the company’s underlying value when investing?? Anyone can ignore a company’s value and trade based on the “line goes up” theory. It’s not something you generally needs advice on. That’s how you get things like the Dot.com bubble, where people invested in companies which eventually crashed because—spoilers—the companies’ value corrected based on underlying value.
Yes, stocks fluctuate based on people buying and selling, which happens even on days when there isn’t any news. The stock is still based on speculation on the company’s value; it just means that new people learn about stocks every day and choose to invest (or divest) based on that information.
And things like “possible new techs that might make a difference for U.S. companies” or even “owners buying and selling” are all information that could affect a company’s underlying value.
They’re based on speculation about underlying value. Sure, the stock can fluctuate based on consumer sentiment, but it’s sentiment based on some sort of fundamentals. Maybe Person A buys a stock because he saw it going up, but Persons B–E invested because of some other market report or speculation based on concrete value.
With cryptocurrency, there are no such fundamentals to prop up the price. Everyone is Person A in this scenario, speculating on what other people are doing. And eventually, once the price goes down enough, once enough people get burned by “buy the dip”, there is no news that can drive the price up again.
Who said that don’t make good pop music anymore?. You go girls throw some shade on them Cyrpto boys.
So are they dumping the boys cause there total bored with hearing about crypto, or cause they are poor now?
LeeAbe
3192
And all I have been saying all along is not everyone buys all stocks based on value, people do invest because line goes up. It’s not a rule, or something to live by, it’s just one way of doing it. Penny stocks are a good example because half the time there is very little info on the company and it’s impossible to know what is going on. If you need an example, go read /WSB. Before that, it was Yahoo Finance.
Lantz
3193
No one here thinks that there aren’t people who do that. Most of us just think that it’s a horrible idea.
To me, this is the different between investing (you’re informed by some set of priors that drive your decision) and gambling on penny stock, crypto, etc where the only prior you have is your gut.
If you want to gamble, go for it! It’s your money!
IMO it’s saying there’s no difference between penny stocks and Amway.
LeeAbe
3196
Well you can do research and invest responsibly with penny stocks. I just wasn’t doing that (and half the people on Yahoo Finance messages boards weren’t exactly doing it). It was difficult because the stocks I was in would make big moves and then two days later there would be some public news that showed why.
I would say it works for hedge funds (buying retail investment data), but half of them are doing worse then their benchmarks, so maybe not.
Sure, some people buy stocks just because the line goes up. No one is disputing that. What I’m disputing is your claim that stocks aren’t based on the company’s value. If a random stock goes up, there is still some underlying fundamental value that caused it to jump in the first place, even if a bunch of people just jumped on the bandwagon.
But with cryptocurrency, there is no underlying value. Investors are Wile E. Coyote walking off the cliff and standing in midair. Eventually he’s going to look down, realize there’s nothing there, and crash.
Put another way: what’s the crypto equivalent of the P/E ratio?
People do things. Some of those things are dumb. I’ll be the first to admit people do dumb things. But I don’t recommend you do them.
LeeAbe
3201
I didn’t say that in what you quoted, although I do think that is sort of true.
Almost every stock on the market is greatly over valued after a 10 year bull market. Tesla is really worth more than the combined US auto makers? Netflix lost half of its market value for saying it would change its name to Qwikster. Was the name really worth half of the company’s value? Sure they are based on their value, but its a really distorted value that is greatly swayed by a number of factors.
Also, their underlying value doesn’t mean much to me at some point when I invest. I lost money on Netflix when the name thing happened. I can believe in a companies product and future, but sometimes they still don’t go up and I need to consider whether it’s worth holding.
Good hedge funds work on things like volatility, or they have access to investments that you never will.
Sources:
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I’ve known Nick Patterson for years, he’s told me plenty of stories on how Renaissance Technologies used to abuse dumb things people did for money. His favorite stories involved how they would make tons of money off dentists: smart enough to have money to invest, not smart enough to invest it wisely.
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My brother in law was head of risk management for a large hedgefund that managed over 1B of Harvard’s endowment for many years. When he talked about things they were into, it was a mix of long term investments in things like powerplants that had long term high returns, or mining operations in Africa, which he had incredible distaste for. His fund didn’t trade penny stocks. I wouldn’t be surprised if they did invest in crypto, but only to make money off volatility.
Lessons from both (not surprising): invest in low fee index funds and diversify. Everything else is (more of) a sucker’s game where they are the ones harvesting the profits.
