Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

What to know about the stock market (2007)

betterexplained.com

Post reply on HN
Print view View original

331–340 of 372 posts

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

#331

Post by epistasis »

nickpp wrote: post #282
epistasis wrote: post #250

Earlier quoted context omitted.

Owning equities (through index funds) is one of the best ways to always beat inflation. They are the part of the economy that appreciates because of future returns, in future money, not past dollar amounts. That said, most of current CPI "inflation" is not economy wide price increases, but comes from 1) car prices, because car manufacturers massively messed up and production is way down for the past two years, and 2)…

But most of all, the insane amount of money printing that went on during the pandemic.

If that were the case that too much money was printed, then one might expect broad economy wide price inflation, but instead it's really focused only in areas that have supply bottlenecks.

But too much money printing wouldn't cause the major auto manufacturers to majorly underproduce less than they typically do, and it wouldn't cause energy to go up. Of the 5.5% "excess" points of inlfation, the breakdown of cost areas is:

2.1 vehicles (of which 1.6 is used cars)

1.8 energy

0.7 food

0.6 housing

And except for food, there are clear supply bottlenecks there. For food, beef farmers have been complaining about monopsony from meat processing plants for more than a decade. There's likely a small amount of rentierism going on there. As there is for the housing crunch. (Though housing also takes a long time to respond to changes in demand patterns, such as the one induced by the pandemic)

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

#333

Post by HPsquared »

lotsofpulp wrote: post #132
andriesm wrote: post #106

Earlier quoted context omitted.

No it can be skill. Was Warren Buffet and Charlie munger just lucky, year after year? Was Michael Burry of the Big Short just lucky to short the mortgage backed securities market, no he also side stepped the dot com crash and bought value stocks, recently he had very nice shorts on Kathy Woods ARKK... clearly he isn't just lucky, he has skill. I used to think I have skill yet my results were random for about a decade…

Buffet’s last good move was the deal he got for Goldman Sachs in 2007. Then he said he was not going to invest in tech companies because he did not invest in businesses he did not understand, then he dumped a bunch of money in IBM which obviously did terrible, then he relented and finally bought a ton of Apple in 2014 or 2015, which has single-handedly saved Berkshire and kept it relevant. I also would like to see ob…

These days Apple is not really a "growth" prospect developing something speculative, it's more of a "cash cow" collecting rents.

The former would be the kind of "tech stock" he would avoid; the Apple of today (the latter) is the kind of predictable business Buffett does invest in.

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

#334

Post by darawk »

jallen_dot_dev wrote: post #325
mosermint wrote: post #154

Earlier quoted context omitted.

Many market makers profit off speed and information advantages while providing liquidity. There are alternative market structures like frequent batch auctions that would allow better trading, lower spreads and negate the HFT speed arms race. This paper is a good overview: https://www.aeaweb.org/articles?id=10.1257/aer.104.5.418

And the reason their orders execute in front of others' is because they offer the best price. If they didn't exist I would have to pay a little bit more to buy, or sell for a little bit less. Is the full paper available without a login? Alternative matching schemes to price-time priority suffer their own drawbacks. Either there's no guarantee your whole order will fill (pro rata) or trade at all, and there can still…

The alternative schemes he's referring to are batch auctions, which don't eliminate price-time priority per se. What they do is bucket time priority into discrete chunks, which eliminate a certain class of high frequency strategy that probably isn't particularly economically productive.

The problem with batch auctions relative to continuous time trading is that that discreteness forces market makers to charge larger spreads. That's the primary trade-off. Volume would likely be dramatically reduced while achieving comparably efficient asset allocation, but at slightly higher average transaction costs. Those higher average transaction costs however would likely go along with better tail behavior of spreads in unusual market conditions, and maybe better human interpretability under unusual conditions as well.

What it comes down to is a question of how much those non-monetary benefits are worth to your economy. The longer you force market makers to hold inventory, the more they have to charge for that risk, all else equal. However, when market volatility spikes, they're also going to be less able to play certain types of high frequency games that erode liquidity when it's most needed. It's kind of a robustness/efficiency trade-off, like many things.

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

#335

Post by ClumsyPilot »

3pt14159 wrote: post #99
cehrlich wrote: post #85

This is a great article that explains markets (not just the stock market really) in an easy to understand way. The one thing I believe people should know about the stock market is: There are people with more capital, time, and knowledge than you who will consistently beat you. Picking individual investments is mostly a sucker's game. Buying tech stocks and/or crypto in the last couple of years has been a consistent e…

People keep telling me this, but I keep beating the market. It's been 20 years or so of applying very basic reasoning and getting ahead. 1. Commodities are bad long term bets because technology gets better. I remember people talking my ear off about peak oil and then the US turned into a net-exporter. Short term inelasticity, yes can sky rocket prices; but long term prices go down. 2. Physics based thinking. I knew e…

"When I saw Telsa focussing on a single car for a year I knew they would be a winner."

And they still have terrible quality of assembly.

"Telsa, Apple, Shopify, Amazon, Google."

Isn't this really just 'invest in SV scaleups? What are the forecasts for Xiaomi, or s Panasonic?

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

#336

Post by rlewkov »

koonsolo wrote: post #275
3pt14159 wrote: post #99

Earlier quoted context omitted.

People keep telling me this, but I keep beating the market. It's been 20 years or so of applying very basic reasoning and getting ahead. 1. Commodities are bad long term bets because technology gets better. I remember people talking my ear off about peak oil and then the US turned into a net-exporter. Short term inelasticity, yes can sky rocket prices; but long term prices go down. 2. Physics based thinking. I knew e…

So how do you know if all of your reasoning hasn't been calculated into the price yet? Maybe everybody knows Tesla is going to win out, therefore everybody wants it, and the price rises like crazy. And then the stock is way overpriced for what you get, and people like you still keep buying it. There is a reason why Buffet needs to look into the numbers before deciding if something is a good buy or not. You buy underp…

You can be assured that all the known public information is reflected in a stock's price at a given point in time. Which doesn't mean that profits can't be made in the market.

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

#337

Post by JacobThreeThree »

Tiktaalik wrote: post #302
3pt14159 wrote: post #99

Earlier quoted context omitted.

People keep telling me this, but I keep beating the market. It's been 20 years or so of applying very basic reasoning and getting ahead. 1. Commodities are bad long term bets because technology gets better. I remember people talking my ear off about peak oil and then the US turned into a net-exporter. Short term inelasticity, yes can sky rocket prices; but long term prices go down. 2. Physics based thinking. I knew e…

> I keep beating the market I keep "beating the market" too though I calculated my risk adjusted return and with that metric I wasn't. So really I was doing better because I'd cranked up the risk, and fortunately we've been experiencing a bull market. Hard to say whether I've really been making savvy choices or if it's just been a bull market trend that has been saving my ass.

>fortunately we've been experiencing a bull market

Exactly. Tell me how you did in 2008, not how you're doing in a bull market.

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

#338

Post by thoughtstheseus »

3pt14159 wrote: post #99
cehrlich wrote: post #85

This is a great article that explains markets (not just the stock market really) in an easy to understand way. The one thing I believe people should know about the stock market is: There are people with more capital, time, and knowledge than you who will consistently beat you. Picking individual investments is mostly a sucker's game. Buying tech stocks and/or crypto in the last couple of years has been a consistent e…

People keep telling me this, but I keep beating the market. It's been 20 years or so of applying very basic reasoning and getting ahead. 1. Commodities are bad long term bets because technology gets better. I remember people talking my ear off about peak oil and then the US turned into a net-exporter. Short term inelasticity, yes can sky rocket prices; but long term prices go down. 2. Physics based thinking. I knew e…

Commodities are bad long term bets…

Commodities are a stabilizer for portfolios… they let you take more risk in other parts of your portfolio because they are easily marketable, non-productive assets.

Equities on the other hand have unknown amounts and timing for cash flows. Hence people bid the value of stocks up, down, and all around.

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

#339

Post by gitfan86 »

sireat wrote: post #330
gitfan86 wrote: post #238

Earlier quoted context omitted.

Tesla is trading at a 50x PE (2022 consensus) and plans to grow 50%+ in 2023, 2024. I don't think that you can expect the stock to be where it is today in 2024 if the PE actually goes down to 12. You'll need to buy it now to lock in that PE of your purchase price.

It is trailing 170 P/E, obviously trailing earnings are not so useful for high growth companies but question is Tesla really a high growth company any more? The consensus is that Tesla is not priced just for cars, it is priced on some other "intangibles".

Elon has said that Tesla's advantage will be manufacturing. If he is right and the global demand for EVs continues to accelerate, TSLA's PE will be below 6 at current prices before it is no longer growing 20%+ a year.

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

#340

Post by fsckboy »

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…

i find "never try to catch a falling knife" a weak metaphor because, never try to catch a knife on the way up either.
Post reply on HN