6 ms·

Sorry, but this is an extremely myopic take on financial markets. > They didn't know about ml, gaming and crypto. Or they do and they ask those questions to s

by mbesto 9y ago

Sorry, but this is an extremely myopic take on financial markets. > They didn't know about ml, gaming and crypto. Or they do and they ask those questions to see if the company selling those products understand how important the markets are. I work in a profession (due diligence) where asking the simple questions (e.g. why do your GPUs need fans) is far more important than the complex ones (e.g. what is the thermal resistance threshold before a chip melts?). People are pretty harsh on MBA types on HN, but they aren't stupid people; in fact, usually the opposite. > Wall Street is too oriented on the next 3 months, not the next year. So then why are Facebook, Amazon, Netflix and Google PE Ratios so ridiculously high? Lastly, if you're so confident about your assertions, this is a great example of where you can truly "putting money where your mouth is".

kurthr 9y ago
A myopic but quite profitable take on financial markets would be ms high-speed trading. It's actually much easier for analysts to get quarter by quarter financial information from companies' customer/supplier and frontrun the stooges who listen to earnings calls, but you don't have to guess at business fundamentals. If you're buying from pure DD, you'd either better know something special about the targets financial situation, know some synergy or externality you can exploit, or know the business better than management (be careful, sijnce that's often only possible because their MBAs are ignorant). You're looking for a fool, and if you can't spot him, it's you. Why are the P/Es of FANG so high? Because the market hopes they are monopolies.
- mbesto 9y ago
  > If you're buying from pure DD What does this mean exactly? > You're looking for a fool, and if you can't spot him, it's you. Ok? > Because the market hopes they are monopolies. Which implies they aren't just looking at quarterly performance....
  - deleted 9y ago
    [deleted]
  - kurthr 9y ago
    > What does this mean exactly? Pure DD are the Due Diligence details of an acquisition (cashflow projections, product roadmap, receipts/debts, IP value, employees) . If you are buying on those details (e.g. what the company says about their own views of the market/products/customers/suppliers) without looking more broadly (e.g. macro tech or econ etc) outside of what the company selling that business (and for whatever reason doesn't want it) believes then you're in a fools game. Not only are they incentivized to sell you on the highest price with cherry picked numbers/concepts, but they are the VERY MBAs who couldn't make that business work. They are looking for a fool too, and you better know why they think they're doing better than you! I assume you know this since you're in the DD business for the long haul, but there are plenty of people who "just want to get the deal done", because that's how they get paid, ABC (always be closing). >Which implies they aren't just looking at quarterly performance.... In contrast to saying that smart money was looking at quarterly performance (only the poor CFOs and retail investors do that), you will see my reference to supplier/customer pipelines, as well as, HFT. So yes, smart money has priced FANG as monopolies, which is a much larger view than quarterly revenue/profits and likely influenced more by private insight than public announcements.
skellera 9y ago
Their PE ratios are so high because, like the other person is suggesting, everyone is buying into index funds and robotraders. They are auto buying into these companies without considering financials or anything else. When someone buys into those funds, money is automatically allocated into those shares. The next crash is going to be pretty heavy because if a large portion of people those those funds try to pull out their money, it's going to pull the entire market down.
- pembrook 9y ago
  Everybody is not buying index funds with roboadvisors. Passive is still far less than half of the market. It just seems that way to you because the people on the websites you visit have(smartly) all gone passive. The combined value of all assets held by roboadvisors is still under $50 billion, whereas the combined value of the worlds Capital Markets is around 115 trillion. Also, there was never a time when retail investors were looking at balance sheets and estimating future cash flows. Index funds fix the problems of inefficiency created by retail fools like the guy above who thinks a professional NVIDIA analyst doesn’t know about cryptomining.
  - skellera 9y ago
    I think you misunderstood. I said index funds AND robo, just passive in general. ETFs alone are growing past $4 trillion.
    - loeg 9y ago
      $4T is a far shake from even half of $115T.
  - deleted 9y ago
    [deleted]
- jldugger 9y ago
  Index funds are market cap weighted. The bigger the company, the more you buy proportionally. According to your hypothesis, Apple's PE should be the highest, and yet it's clearly the lowest, at 16.
carlmr 9y ago
>I work in a profession (due diligence) where asking the simple questions (e.g. why do your GPUs need fans) is far more important than the complex ones I find the same to be true in engineering. Often simple questions sound stupid, but they lead to improved communication. Because more often than not everybody thinks they're on the same page. Especially experts on some topics tend to this kind of thinking. However a lot of the things they think "everybody knows" are not known by others. Simple questions bring this to light.

by mbesto 9y ago

kurthr 9y ago

A myopic but quite profitable take on financial markets would be ms high-speed trading. It's actually much easier for analysts to get quarter by quarter financial information from companies' customer/supplier and frontrun the stooges who listen to earnings calls, but you don't have to guess at business fundamentals. If you're buying from pure DD, you'd either better know something special about the targets financial situation, know some synergy or externality you can exploit, or know the business better than management (be careful, sijnce that's often only possible because their MBAs are ignorant). You're looking for a fool, and if you can't spot him, it's you. Why are the P/Es of FANG so high? Because the market hopes they are monopolies.

mbesto 9y ago
> If you're buying from pure DD What does this mean exactly? > You're looking for a fool, and if you can't spot him, it's you. Ok? > Because the market hopes they are monopolies. Which implies they aren't just looking at quarterly performance....
- deleted 9y ago
  [deleted]
- kurthr 9y ago
  > What does this mean exactly? Pure DD are the Due Diligence details of an acquisition (cashflow projections, product roadmap, receipts/debts, IP value, employees) . If you are buying on those details (e.g. what the company says about their own views of the market/products/customers/suppliers) without looking more broadly (e.g. macro tech or econ etc) outside of what the company selling that business (and for whatever reason doesn't want it) believes then you're in a fools game. Not only are they incentivized to sell you on the highest price with cherry picked numbers/concepts, but they are the VERY MBAs who couldn't make that business work. They are looking for a fool too, and you better know why they think they're doing better than you! I assume you know this since you're in the DD business for the long haul, but there are plenty of people who "just want to get the deal done", because that's how they get paid, ABC (always be closing). >Which implies they aren't just looking at quarterly performance.... In contrast to saying that smart money was looking at quarterly performance (only the poor CFOs and retail investors do that), you will see my reference to supplier/customer pipelines, as well as, HFT. So yes, smart money has priced FANG as monopolies, which is a much larger view than quarterly revenue/profits and likely influenced more by private insight than public announcements.

skellera 9y ago

Their PE ratios are so high because, like the other person is suggesting, everyone is buying into index funds and robotraders. They are auto buying into these companies without considering financials or anything else. When someone buys into those funds, money is automatically allocated into those shares. The next crash is going to be pretty heavy because if a large portion of people those those funds try to pull out their money, it's going to pull the entire market down.

pembrook 9y ago
Everybody is not buying index funds with roboadvisors. Passive is still far less than half of the market. It just seems that way to you because the people on the websites you visit have(smartly) all gone passive. The combined value of all assets held by roboadvisors is still under $50 billion, whereas the combined value of the worlds Capital Markets is around 115 trillion. Also, there was never a time when retail investors were looking at balance sheets and estimating future cash flows. Index funds fix the problems of inefficiency created by retail fools like the guy above who thinks a professional NVIDIA analyst doesn’t know about cryptomining.
- skellera 9y ago
  I think you misunderstood. I said index funds AND robo, just passive in general. ETFs alone are growing past $4 trillion.
  - loeg 9y ago
    $4T is a far shake from even half of $115T.
- deleted 9y ago
  [deleted]
jldugger 9y ago
Index funds are market cap weighted. The bigger the company, the more you buy proportionally. According to your hypothesis, Apple's PE should be the highest, and yet it's clearly the lowest, at 16.

carlmr 9y ago

>I work in a profession (due diligence) where asking the simple questions (e.g. why do your GPUs need fans) is far more important than the complex ones I find the same to be true in engineering. Often simple questions sound stupid, but they lead to improved communication. Because more often than not everybody thinks they're on the same page. Especially experts on some topics tend to this kind of thinking. However a lot of the things they think "everybody knows" are not known by others. Simple questions bring this to light.