doc idiot wrote:
juui wrote:
Sounds like a good investment.
Igy is fixated on the dogma that price is governed by earnings. In the long run, on average, earnings correlate with and explain some proportion of asset value. However, there is significant variability explained by other factors, not the least of which is supply and demand and human psychology. We can easily see the same thing play out with house prices. There is no fundamental reason for houses in the downtown, tony neighbourhoods of attractive cites to be worth more than the same houses in rural Iowa. And yet they are…
This seems to be a fundamental idea outside igy’s training and experience.
Of course, to Igy’s credit, supply and demand and group psychology produce non-linear, potentially chaotic relationships, which can produce bubbles and crashes…
I think it is pretty clear throughout financial history that stock prices are in the end correlated to cash flow. I find that less a matter of training, and more of function. One can explain with the rise in market valuations, while at low points that reality is revisited. Same is true of real estate.
Pretty clear psychology plays a big part. Currently an abundance of speculative buyers wanting in on the game. Finding the next Apple or Game Stop or Bitcoin. That does not mean the next week, next month, or next year there will not be an abundance of panicked sellers. Willing to dump it all for 70% less. Thereby pummeling stock and real estate prices back to where they were a decade ago. And then asking themselves “What was it all about? Who is to blame.”
Apple is perhaps the greatest companies so far. We have seen others. Has innovation stalled? Maybe. Are current Apple investors paying up for a unit of earnings? Of course they are. Is the growth in EPS in large part a function of stock buybacks? Apparently.
Just my thoughts.