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16 million US citizens filed for unemployment in the last 3 weeks. That's roughly 10% of their entire workforce. Stock market performance is never a reflection of the wealth of the average person. https://twitter.com/realDonaldTrump/status/1248574029289619458
My entire life, all I have ever done is investment banking.
You know what's crazy? When the stock market is hot (a raging bull market), the average person doesn't actually benefit.
When the stock market gets fucked, you know who gets hurt the most?
... the average person.
You know what's crazy? When the stock market is hot (a raging bull market), the average person doesn't actually benefit.
When the stock market gets fucked, you know who gets hurt the most?
... the average person.
One reason why the average person doesn't get rich when the market is hot, is because they aren't paid in company stock & comp is usually independent of the profit a company makes.
Company does okay? you earn X
Company does well? you earn X
Company does badly? You earn 0.5X
Company does okay? you earn X
Company does well? you earn X
Company does badly? You earn 0.5X
One of the biggest reasons the stock market doesn't really reflect the actual economy is the disconnect in valuation multiples.
Simply put, people pay faaaar more for a piece of a company than the company may ever make.
Tesla hasn't turned a profit... but it's worth $105bn.
Simply put, people pay faaaar more for a piece of a company than the company may ever make.
Tesla hasn't turned a profit... but it's worth $105bn.
Investors believe at some point, Tesla will be worth something. They're betting on the future earnings growth profile of the company.
A week ago, Tesla was $470... it's now $573. In ZAR terms in 5 days you could have made R1,800.
Exciting, right?
... but it's still loss making
A week ago, Tesla was $470... it's now $573. In ZAR terms in 5 days you could have made R1,800.
Exciting, right?
... but it's still loss making
You have a faint idea of when it will turn a profit but until then, you're playing in a casino.
You run a few excel calculations, read some broker notes, call up some investment banking friends but you're still guessing.
You own a piece of a company that has negative earnings.
You run a few excel calculations, read some broker notes, call up some investment banking friends but you're still guessing.
You own a piece of a company that has negative earnings.
Here's the fun part, what if you don't actually give a fuck whether it will make a profit. What if you just buy at $573 and sell at $873?
I mean, at one point it was at $900.
Congrats! You're officially part of the bubble club. Once enough people think this way?
Big Problems!
I mean, at one point it was at $900.
Congrats! You're officially part of the bubble club. Once enough people think this way?
Big Problems!
Now you don't care whether this company is profitable. The investor textbook is out the window.
You just want to find an idiot who will buy the stock from you.
Remember the guys who bought Bitcoin at $19k? (It's barely $7k now)
You're become a speculator, not an investor.
You just want to find an idiot who will buy the stock from you.
Remember the guys who bought Bitcoin at $19k? (It's barely $7k now)
You're become a speculator, not an investor.
If you're still reading, congrats. Most people find this dry, I find it sexy.
Irrational behaviour, speculation, asymmetric information, a lack of liquidity, unfounded optimism all lead to the market being inefficient.
It never accurately reflects the man on the street.
[END]
Irrational behaviour, speculation, asymmetric information, a lack of liquidity, unfounded optimism all lead to the market being inefficient.
It never accurately reflects the man on the street.
[END]
I need a whiskey now.
