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Are tech stocks now good value?

economist.com

51–60 of 90 posts

Re: Are tech stocks now good value?

#51
post #20

Earlier quoted context omitted.

They have a much better term that really captures this stuff it is, "a martingale." Edit: Just to clarify, a martingale is a bet that's equally likely to go either way and has zero expected value.

Only if you double your bet every time you lose. Otherwise it's called a dollar cost averaging.

The simplest reasonable betting strategy is to bet some fixed percentage of your available stake, which means bet bigger when you win and smaller when you lose. The Kelly criterion might help you compute the optimal amount to bet, but you can do ok just picking an arbitrary small percentage, like 1%.

This is a nice strategy if you like casino gambling and focusing on the atmosphere and experience and not going full bore on advantage play. Say you have a $20,000 marker limit. Your starting bet on a game with a reasonable house edge like a player friendly blackjack table should be $200 a hand. Then as you win or lose your bet will grow or shrink respectively. While it's possible with extraordinarily bad luck to blow through your entire bankroll, odds are very good that you'll come home with at least a decent chunk of your stake if you can play basic strategy. Even though with basic strategy on a good table the house has around a half a point of edge, last I knew comps were computed using a 2 point model. So if you value the RFB experience even a basic strategy player can come out "ahead."

Of course you should never gamble money you can't afford to lose. It's always possible you will have catastrophically bad luck.

Pretty much the same applies to any gambling, including options trading. The main difference there is you probably want a considerably larger stake that you're willing to lose than twenty grand and you need considerably more discipline than you do at a table game. That and of course you want to avoid bets where the potential downside is more than your stake, which isn't a problem that you face at a casino.

Re: Are tech stocks now good value?

#52
post #32

They have a term for this kind of article on Wall Street: Trying to catch a falling knife " stocks have been beaten up. It's time to buy now!" Like clockwork, you can count on those stories appearing after a crash.

It is true that market timing is always dubious. But that also means that there's never a wrong time to invest in the market as a whole. Individual stocks when crashing are dangerous if you can't outsmart the reason they are crashing, but in aggregate stocks will go up by a modest amount on decade long scales. I felt weird about that advice a few months ago, when the market seemed genuinely overpriced as a whole and…

> but in aggregate stocks will go up by a modest amount on decade long scales.

They have, but why must they? We’re heading into a decades long period of hyper-aging in much of the world and the commensurate rise in capital costs, an energy crisis in Europe that is far from over, the decline of East Asian mass manufacturing and associated inflation, a labor shortage in the US right when it has to massively increase domestic production, and a shortage of all raw materials where Russia or Ukraine were major suppliers. I suppose in 20 years when the markets have adjusted suppliers, the damage is priced in already, and capital supplies are recovering in the US thanks to the Millennials, it might start looking up here, but from a similar or higher base than now? That’s not obvious to me.

Re: Are tech stocks now good value?

#54
post #13

I think so. I've started buying shares every month in Cloudflare and Shopify - use their products and think they have fantastic momentum and great teams working on industry-defining tech. Disclaimer - I don't work/have never worked at either

I am skeptical of Shopify. They have a major scam problem they seem unable to deal with. (Not saying a large portion of shopify sites are scams, but a very very very large percentage of scam sites are built on shopify).

Re: Are tech stocks now good value?

#55

Earlier quoted context omitted.

I 100% believe in market timing. I usually do extremely well during market crashes, and average during market rises. I missed the dotcom crash because I didn't want to invest at all, but caught all of the 2008-2009 crash and went long on the bottom in March 2009, but was mostly average after the crash. I caught the entire pandemic drop in March 2020 and also got long at the bottom, but again was only average for the…

Have you considered opening up your own hedge fund?

No, I'm not that good. I enjoy trading very much for myself and trading with other people's money would be too stressful.

Re: Are tech stocks now good value?

#56
post #30

Earlier quoted context omitted.

And it's sort of self-fulfilling, right? If these stories have a big enough impact, a lot of people will buy the stocks and they will actually stop falling.

Ultimately the stock prices respond to economic reality: profits and interest rates and growth levels The funny thing about headlines though is that often the reverse happens. Once everyone is crying doom, stocks go up. When people say it is time to buy, stocks go down. And in a bear market the bottom usually comes when no one is paying attention anymore. As an example after the financial crisis stocks bottom March 2…

Exactly right. The bull market begins when the last seller has bailed out.

So, has that happened yet?

Re: Are tech stocks now good value?

#57

Markets can only go up so of course! /sarcasm We have lived through a few generations of unprecedented economic growth on a global scale. This has wildly skewed our assessment of market performance and its long term behavior. It is widely understood that such growth is not sustainable, and we are, on a civilization level scale, increasingly bumping into the limits of growth. It is entirely possible that at some point…

A lot of the bigger tech companies are approaching, if not at, worldwide saturation.

Re: Are tech stocks now good value?

#58
post #19

Earlier quoted context omitted.

I don't know about "any minute now" But I would echo the comment that I think they face a lot of turbulence in their future.

I agree and would posit they already are facing a lot of turbulence. As an aside it seems like Amazon is a bit of a sacred cow on hn. It's assumed it is some exceptionally well run company with an extremely promising investment future - but the reality of the past few years has exposed that hypothesis a bit. It is the first company to lose over a trillion dollars in shareholder value. Further, much of their business…

This is a common misconception. Amazon is an infrastructure company, not a retailer.

Re: Are tech stocks now good value?

#60
post #31

The main question - when, if ever, will we return to a near zero interest world.

Disclaimer: UK centric thoughts (because that's where I live)

Some projections are signalling deflation on the horizon.

Given the brutal cost of living crisis, I suspect the government and BoE have grossly underestimated how hard things are getting (and how much harder they'll eventually get) for a giant slice of the population.

I'm an absolute lay person here, but surely maintaining (relatively) higher interest rates whilst cutting government investment and raising the tax burden to post war highs during the worst cost of living crisis in a generation is an economic wrecking ball.

If my naive take is anywhere close to sensible, I'd bet on a screeching u-turn and rates lowering again to try and rescue the situation.

Side question: what are "normal" levels for interest rates? I hear people use this term all the time (usually while advocating for hawkish rises in some direct or implied way). Surely the interest rate mechanism is inherently dynamic and therefor entirely context specific, rendering the notion of a "normal" level useless.

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