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What to know about the stock market (2007)

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Re: What to know about the stock market (2007)

#51

Post by [deleted] »

pjc50 wrote: post #20
MrYellowP wrote: post #17

I have a book written by André Kostolany, which taught me one thing and I believe I've forgotten the rest, because only this one fundamentally matters: Don't hunt for rising stocks, but chase the falling stocks. Everything that goes down either eventually goes up again, or dies. While this sounds like it's not helpful, all that's required is figuring out if a company is likely going to die. Even without any manual re…

> He was able to make a profit during the decline in market prices which began at the end of 1929, having been bearish at the time. Well, yes, that might have informed his lessons from trading. There's another saying in the opposite direction, "never try to catch a falling knife". https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1545.pdf But it's not an unreasonable approach. Declines are often driven by panic. If you c…

[deleted]

Re: What to know about the stock market (2007)

#52

Post by georgeolaru »

MrYellowP wrote: post #17

I have a book written by André Kostolany, which taught me one thing and I believe I've forgotten the rest, because only this one fundamentally matters: Don't hunt for rising stocks, but chase the falling stocks. Everything that goes down either eventually goes up again, or dies. While this sounds like it's not helpful, all that's required is figuring out if a company is likely going to die. Even without any manual re…

I'm curious, what's the book name?

Re: What to know about the stock market (2007)

#53

Post by erwincoumans »

gpderetta wrote: post #44
erwincoumans wrote: post #34

Just curious: Suppose there is some difference between buying price range and selling price range. The dealer (middle man) could become temporary in-between buyer or seller and take some of the profit due to this price difference. For example this could happen at a stockbroker or at a crypto exchange. Is this behavior regulated, and if so, how?

The order flow is usually public. If a broker were to intercept a client order in flight to pocket the difference, it would be called front running and it is illegal in most places. Crypto is not regulated, so the order book could be completely fictional and there would be no recourse.

Thanks, that clarifies things.

If so, crypto exchanges such as Coinbase could make a lot of money this way.

Re: What to know about the stock market (2007)

#54

Post by headmelted »

sdevonoes wrote: post #11

Am I the only one in HN who is not into the stock market? I live in Western Europe and I would say 75% of my acquaintances don't do stock market. People I have known in the past (old people) didn't do stock market either. They all seem to have lived a normal life (decent jobs, decent house, decent family). Nothing extravagant but they got enough money to be "happy" in life.

Also Europe here, and leaving aside what others have said about how everyone is invested in the stock market whether explicitly or not (which is entirely true), this rings true for me as well - it's also backed up by data.

In the US, the majority of adults are invested in the markets (https://news.gallup.com/poll/266807/percentage-americans-own...), whereas in Europe the number of people invested has historically been lower (https://www.ft.com/content/31c4d453-498e-4cc2-b14f-d7e8b17b9...).

This makes sense when you think about it - in the past you would have built habits and understanding from relatives and your community (e.g. "Don't invest in stocks that's gambling and they always crash!"), whereas since the Internet came along people have more access to data and perspectives from more places.

All of the above said, the last few years, and especially since the lockdowns, the behaviour in the markets has been really alarming. The FT.com link above touches on this, but the rush into [stocks/cryptocurrencies/leveraged funds/options] is something I've never seen before in my lifetime. I don't think the world has ever seen anything like this level of amplified speculation. Bitcoin, Leveraged ETFs, and Options didn't exist in the 1920's. The Netherlands had futures contracts towards the end of Tulipmania, but I haven't seen anything to say that they were leveraged.

In the late 1990's it was clear and readily apparent to everyone that the Internet was a massively important step forward. We agreed on that. It wasn't a controversial or widely disputed viewpoint. The market still imploded because of the sheer amount of rampant speculation, so to think something worse won't happen to a multi-trillion dollar market based on a technology many people think only has value for running Ponzi schemes seems to be pretty irrational.

To top it off, the wall of hype seems impenetrable at this stage ("have fun staying poor!" etc), so it remains to be seen what happens when the plates stop spinning this time.

tldr; Your grandparents might be proven right after all.

Re: What to know about the stock market (2007)

#55

Post by runarberg »

sdevonoes wrote: post #11

Am I the only one in HN who is not into the stock market? I live in Western Europe and I would say 75% of my acquaintances don't do stock market. People I have known in the past (old people) didn't do stock market either. They all seem to have lived a normal life (decent jobs, decent house, decent family). Nothing extravagant but they got enough money to be "happy" in life.

Personally I have a philosophical (read marxist) reason to avoid it. Fundamentally I see the stock market as an exploitation tool which the rich use to siphon money away from workers and into their own pockets without contributing.

Every dollar you get but didn’t work for was a dollar that somebody else worked for but didn’t get. The stock market is full of transactions which yields profits for the rich while leaving workers at a loss by means of lower benefits. I refuse to participate and become a class traitor.

I’ve never worked in an industry which tries to push stocks onto you as much as software development. They keep paying me out options, giving me stock plans, etc. My strategy is to get sell as soon as I’m able, and transfer the money to a savings account in my local credit union. Don’t let them get away with not giving me my money, but don’t let them dictate how I keep my savings.

Re: What to know about the stock market (2007)

#56

Post by agumonkey »

darawk wrote: post #12
Synaesthesia wrote: post #2

You should probably get to know some critical aspects of markets too, this article just praises them. That is pretty much the norm, but I think it's a valuable educational endeavour to look at critiques of markets.

Do you have any in mind?

"market makers" ?

Re: What to know about the stock market (2007)

#57

Post by fergie »

sdevonoes wrote: post #11

Am I the only one in HN who is not into the stock market? I live in Western Europe and I would say 75% of my acquaintances don't do stock market. People I have known in the past (old people) didn't do stock market either. They all seem to have lived a normal life (decent jobs, decent house, decent family). Nothing extravagant but they got enough money to be "happy" in life.

Whether or not you care about the stock market is basically a question of whether you run a functioning business or not. If you run a function business then you are have cash sitting on accounts. Even for a fairly modest business, a reasonable operating cushion dictates that you always have 6-7 figure cash reserve. Ideally you want this money to be sitting somewhere where it generates good returns, yet can be accessed quickly and with low transaction costs. Therefore shares and funds start to make sense. These days you can actually move cash directly into funds from your corporate online bank.

Shares (and all their financial derivatives) are a good hedge for profitable limited companies, because they either go up in value (yay! profit!) or down in value (yay! tax deductable loss rolled over to next year!). So long as the company is otherwise making a profit, shares are actually pretty hard to lose out on.

Also pensions. Most pensions are backed by index funds which are generally related somehow to stocks and shares. If you need to manage a pension fund, you have to pay at least vague attention to the stock market.

Re: What to know about the stock market (2007)

#58

Post by locallost »

WA wrote: post #29
MrYellowP wrote: post #17

I have a book written by André Kostolany, which taught me one thing and I believe I've forgotten the rest, because only this one fundamentally matters: Don't hunt for rising stocks, but chase the falling stocks. Everything that goes down either eventually goes up again, or dies. While this sounds like it's not helpful, all that's required is figuring out if a company is likely going to die. Even without any manual re…

Wirecard entered the chat… I assume you have good intentions, but your post is severely lacking. One crucial thing with this strategy is time. WHEN is the time to buy a falling stock? While it is falling? Or when it is rasing again? Are we talking intraday or months? On a long enough time frame, every company will go extinct and every stock will go to zero. And your post is in direct contradiction of two other common…

I think there is no definite answer, and it's therefore only natural that common insights contradict each other. I've read Ben Graham's often recommended book, and the take there is that the market is a lot of times completely irrational, if not most of the time. A reason for a stock going down could be that it's not "sexy" and not viewed as the future big thing, but if the company has a solid business model, people will come back to it. There were plenty of examples of that. But what is a good business? Well, you need to know a lot of metrics companies publish on their earnings, debt etc. and also you need experience to see through any possible accounting shenanigans (e.g. Under Armour admitted last year they kept moving future earnings to the current quarter so it seems their current quarter was more profitable than it really was).

The reality is that it's much more complicated than any one liner, and that most normal people that invest, invest based on gut feeling. It only really works by chance. Or they invest in index or mutual funds.

Re: What to know about the stock market (2007)

#59

Post by kqr »

erwincoumans wrote: post #49
kqr wrote: post #38

Earlier quoted context omitted.

I'm not sure what you're saying, but the spread between buying price and selling price is exactly how the temporary middle man gets paid for the risk they take in matching up buyers and sellers. The size of the spread depends on how large the perception of that risk is.

Example to clarify: Buyer tells the trader to buy for (up to) 140. Seller wants to sell for (at least) 120. Trader gives 120 to seller, gets 140 from buyer, gets to keep 20 for himself.

Yes, and that's exactly how the middle man is compensated for the risk they take by buying something from someone they don't want, hoping to resell it shortly after.

Re: What to know about the stock market (2007)

#60

Post by iso1631 »

fergie wrote: post #57
sdevonoes wrote: post #11

Am I the only one in HN who is not into the stock market? I live in Western Europe and I would say 75% of my acquaintances don't do stock market. People I have known in the past (old people) didn't do stock market either. They all seem to have lived a normal life (decent jobs, decent house, decent family). Nothing extravagant but they got enough money to be "happy" in life.

Whether or not you care about the stock market is basically a question of whether you run a functioning business or not. If you run a function business then you are have cash sitting on accounts. Even for a fairly modest business, a reasonable operating cushion dictates that you always have 6-7 figure cash reserve. Ideally you want this money to be sitting somewhere where it generates good returns, yet can be accesse…

Doesn't seem sensible to invest your operating cushion in something as volatile as the stock market, especially given the corralation between a recession causing your operating margin to crash and a recession causing your business to need that operating margin

The US stock market has been ridiculously pumped from the last decade-plus of money printing, I wonder how many people think that's normal.

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