"the market isn't pricing X correctly" (arrogant thinking)

2년 전

It's a very arrogant statement, that the market isn't pricing something correctly.

Or at least it doesn't intuit what a "market" is exactly.

Often it feels like they view "the market" as this.. thing, that has no rhyme or reason. But the number it spits out is just where the buys intersect with the sells.

Or in other words, the best guess of everyone who is intimately paying attention to it.

Since there's no limit to what any one party can bid, any glaring error or misjudgment in a price would get quickly gobbled up by whatever opportunistic person sees it first.

And this dance continues, always approaching whatever is the best guess anyone is capable of right now.

So when you buy stocks, it means it's hard to find much value that the market isn't already pricing in, but it also means it's hard to go particularly wrong too. (If you want to go buy AT&T stock you don't have to check on the balance sheet and the P/E ratios and everything if you don't want to. Whatever it's priced at builds all that information into it.)

Maybe you can intuit general trends or once in a while have a killer instinct about something. There are people who day-trade profitably; but it's a sophisticated thing that takes a lot of attention for very thin profit margin. If you're on your sofa like "ya Amazon is overvalued".. it's overwhelmingly likely that it's you missing something rather than the market is.

What is a stock anyways?

A stock is a share in a company. You literally own a tiny percentage of Coca-Cola or Microsoft or whatever stock you buy!

And with that comes its profits. (Many stocks distribute a "dividend" to its holders, where everyone gets their little piece of the pie, and the rest is invested back into the business. Others invest everything back into the business.)

So the value of the stock is predicated on how much it's currently earning (or losing) and anticipated to earn (or lose lol) in the future.

And the buyers and sellers wrestle over the details as explained in Part 1.

Have a nice night, everyone.

Keynesians plz read it 4 more times.

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