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It seems like everybody in this thread is saying "No duh, invest in Japan right now!" The assumption is that the market will turn around, and anybody who buys
by blhack 16y ago
It seems like everybody in this thread is saying "No duh, invest in Japan right now!"
The assumption is that the market will turn around, and anybody who buys into Japanese companies stands to make a lot of money. If this is the case, then why are the prices going down at all? Are other investors really that ignorant?
- msbarnett 16y agoI think the general belief is that they are being irrationally over-pessimistic due to panic over the daiichi situation, and that this can be exploited by people whose distance affords them a more cool-headed approach. The market as a whole may be rational, but individuals in the middle of a tense situation probably won't be.
- jarek 16y agoI think part of the assumption is that people tend to trade less than perfectly when they think a radioactive cloud might be heading their way. Right now a lot of the losses are due to uncertainty, people are factoring in risks of the unknown, potential worst case scenarios etc. If you buy in expecting the market to go back up, you are essentially betting the situation won't end up as bad as feared right now.
- AngryParsley 16y agoExactly. People who make fortunes off these markets are selling. Either they're wrong or posters here are. Guess which option is more likely. I think the LessWrong post Markets are Anti-Inductive explains it well: http://lesswrong.com/lw/yv/markets_are_antiinductive/ http://lesswrong.com/lw/yv/markets_are_antiinductive/
- msbarnett 16y agoWell, it's recovered about 400 points since this was posted, so the professionals seem to have decided they were deeply into buy territory, too.
- jarek 16y agoOr this is just the optimists and opportunists buying in before it crashes again. :D
- mootothemax 16y agoExactly. People who make fortunes off these markets are selling. Only half of them are selling; you can't sell unless you can find someone who'll buy at the price you want ;)
- mattmcknight 16y agoAnother aspect is that people actually need cash in these sort of situations and sell liquid assets to get it, while others that need cash on hand are putting less in. So, the market may benefit a long term holder of securities, but people that do or might need the money soon can't afford the short term volatility.
- mikeryan 16y agoIf you are already invested in Japanese equities the "safe" play is to try to take some cash off the table to defend against what could be a bleak revenue picture in the near future. If you are not yet in that market then there might be a long term play investing when these stocks are weak. Id assume most here who advocate buying are in this boat. Both buying and selling may be the correct play depending on your current position.
- dasil003 16y agoAren't those sunk costs though? Isn't the real question whether the market's information is overly optimistic or overly pessimistic? Given perfect information in the market wouldn't we expect it to be 50/50 based on true uncertainty about the future? These aren't rhetorical questions, this is just my line of thought based on my relative ignorance of investing.
- lukeschlather 16y agoPerson A has lost 50% of assets in Japanese stock, and cannot afford to drop to 30%. Person B has money they're interested in investing long-term, and is not afraid to take a 40% hit up-front for the possibility of a long-term 20% gain. So there we have perfect information about the stocks' long-term performance, but two situations in which both buying and selling the same stock is wise, or at least understandable.
- 16y ago
- MichaelApproved 16y agoIt's easier to post a buy comment here than it is to post a buy order with your broker. I doubt many of these posters have actually put in a buy order of any substantial amount.
- syncsynchalt 16y agoPure coincidence, but I have a big order of VGTSX closing today. Couldn't be happier, I always buy stock on market drops.
- leot 16y agoI'm wondering the same thing. One estimate puts the number of houses destroyed at around 100k (http://www.msnbc.msn.com/id/42025882/ns/world_news-asia-pacific/ http://www.msnbc.msn.com/id/42025882/ns/world_news-asia-paci...). Car ownership is around 1 car for every two people in Japan, no doubt more in rural areas. So 100,000 destroyed houses might mean 80k to 140k flooded cars. I'd guess that more than 50k extra cars are going to need to be produced in Japan to replace those that have been lost (which, though a relatively small proportion of the probably 1,000,000 cars made in Japan yearly, is nonetheless significant). Another sad fact of this disaster is that it disproportionately affected the retired -- this too may well have consequences economically. Economics is in part about people having productive stuff to do. If there was a work shortage in Japan before, I doubt there is now.
- MichaelApproved 16y agoA large drop in a market usually triggers sell orders that were put in place dropping the market further which trigger more sell orders and so on. Many people who are levered don't have the capital to withstand this type of drop and get washed out causing further selling. It's a chain reaction that eventually cools off. Let's hope their fuel rods do the same!
- michaeldhopkins 16y agoUsually, eh? I assume you have bought your put options? This can be true, but remember that you don't know where the sell orders are placed. We could have already seen the trigger and the corrpesponding drop-off. Also, remember that many investors believe this, so they put buy triggers below where they think sell triggers are. Also, there are value investors who place buy triggers without regard to the existence of sell triggers. I'm not saying that the phenomenon you describe does not exist here, and I acknowledge it has happened in the past. But you need to qualify axioms like that to see if they apply to new situations. Full disclosure: I made a small-but-quick profit on the Nikkei today.
- corin_ 16y agoHappens so, so often. A great example (very YC suited!) is Apple's stock prices in January. When Steve Jobs announced his medical leave just under two months ago, the Apple (AAPL) price opened the next day (Tuesday) down 5.44% on Friday's close price. The low point on Tuesday was 6.45% lower than Friday's close price. While the price did go back up a bit that same day (the Tuesday close was only 2.25% lower than Friday's close price), it kept dropping for a few days. By the time the markets closed on Friday, AAPL's price was 326.72, down 6.24% in a week (compare that Friday close price to AAPL's lowest price on Tuesday, which was 326.00). For some reason, investors were selling Apple stock because of fears over Jobs. This seemed ridiculous to me, and sure enough, in the (nearly) two months since then, the market has shown that I'm not alone in that view. If you bought AAPL stock at that Friday closing price and sold right now, you'd be selling 8.21% higher than you bought. Even if you didn't time the buying quite as well, so didn't get it at such a low price, if you bought it at the opening price on Tuesday (the day after the Jobs announcement) you'd have made 7.30% profit, or if you bought it at the closing price on that same day and sold now, you would have made 3.79% profit. So even with pretty shit timing on when to buy, just by having faith that Apple stock would bounce back, that's a very healthy rise in value over just two months. The cause (I think) of the problem is two-fold. For starters, people are afraid that, if they buy back in too early, they will be too far ahead of the market and prices will continue to drop - obviously, they're hoping to be just a tiny bit quicker than the market, buying just before prices start going back up again quickly. The second reason is basically the same, but with a different approach. Rather than wanting to avoid having your shares devalue immediately after buying them, it's a case of not wanting to buy back in too soon because, the lower the price you pay, the bigger the return once they have bounced back.
- streptomycin 16y agoTLDR: http://www.youtube.com/watch?v=jllJ-HeErjU http://www.youtube.com/watch?v=jllJ-HeErjU
- deleted 16y ago[deleted]
- sireat 16y agoThe thing is, what if Steve Jobs couldn't return to Apple at all? So market was pricing that possibility into the price of Apple stock. There is a legitimate concern, that without Jobs to supervise things, in a year or two, the "magic" of getting the right product out at Apple would be gone. Sure, Apple would still be making money, because Tim Cook is a great COO, but the "vision" would slowly fade. Think, Microsoft over the last 10 years(stock basically has stayed put). Microsoft still makes money, but it has a lot of misses to show for its hits. Meanwhile, Apple has been hitting them out of the ballpark. Remember, when you are buying Apple stock you are paying a premium on the expected growth.
- akashs 16y agoYou're correct in pointing out that we can only be buying if someone is willing to sell to us. However, one big factor is your time horizon. For average investors like ourselves, if you're investing for the long term / retirement, you generally know that it will recover, whether it's over 1 year, 2 years, or longer. It may go down further, but will it be in the same state 30 years from now? Probably not, so it's relatively safe to buy in at a "discount". Contrast that to hedge funds, investment banks, and other investment groups that have investors to please and targets to hit in the immediate/short term. For them, their time horizon is shorter and 1) they need to free up cash and 2) they cannot take the risk of holding on because the economy is definitely impacted in the short term.
- geekman 16y ago> know that it will recover, whether it's over 1 year, 2 years, or longer Let's put this in perspective. The Nikkei is down 80% over the past 21 years. At an optimistic rate of increase of 6% from now, it will be another 25+ years before it hits 38957 again. All up, over 45 years. Have a look at Shiller's house price graph. From 1890 to 1955 there was zero real increase - and large falls in the meantime. This is 65 years. Again long term is very long term. Same in Australia by the way. The USA and Australia of the most prosperous and successful economies in the C20. Others did far worse. This "in the long run all will be well" argument just doesn't hold water. Not if you have a human life span. See for more on this "The Big Investment Lie: What Your Financial Advisor Doesn't Want You to Know" by Michael Edesess. Everything a financial planner tells you may be a self-serving lie.
- rtaycher 16y agoJust guessing but if you are doing short term trading isn't it better to sell if you think it can go down a bit more then buy at the absolute lowest price.
- seanalltogether 16y agoLearn the lesson of what happened to BP after they bottomed out. http://www.google.com//finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1299704400000&chddm=69072&chls=IntervalBasedLine&q=NYSE:BP&ntsp=0 http://www.google.com//finance?chdnp=1&chdd=1&chds=1...
- bergie 16y agoBut BP sells oil. That is inherently profitable.
- geekman 16y ago> Learn the lesson of what happened to BP after they bottomed out. By buying the panic, in effect you are selling out "of the money put options" to the rest of the market. In effect you are selling insurance policies saying things are not worse than they look. The performance characteristic of selling OOTM options is that most of the time you make money. But... Once in a while you lose your shirt. Ask Victor Niederhoffer. What is there is a catastrophic meltdown and Tokyo has to be evacuated? What will the Nikkei be worth then? What about all the people who bought dot.com stocks after they fell 50% because they were "cheap". When considering the merits of investment, it is worth asking: 1. Am I selling insurance to someone without realizing it? 2. Does my strategy amount to nothing more than leverage? Leverage works well in rising markets and works very badly in falling markets. 3. Are there hidden risks I am not aware of but someone else is? Or as Buffett puts it, have you been playing poker for an hour and still haven't worked out who the patsy is? (It's probably you). 4. Are you taking uncompensated risks like putting 1/3 of your net worth into one company when you could be diversified for no cost?
- artsrc 16y agoI completely agree with the diversification part, putting much of your portfolio in correlated risks does not need to be rewarded by an efficient market. On the other hand out of the money put options have a limited upside. Japan has had a crap economy for a generation, and this disaster may result on them being on a whole new course with massive upside.
- 16y ago
- HSO 16y agoyour perception of risk may be different from others'. but the market can only express one (money-weighted) average. also, as others have pointed out, your circumstances may differ from others'.
- MichaelApproved 16y ago"Don't try to catch a falling knife" is an important phrase to remember at a time like this.
- 6ren 16y agoHistorically, markets overreact to bad news. It depends on how bad the news really is, e.g. how damaged Japan's infrastructure actually is, as a whole. You need to judge this with facts, not on what other investors do, efficient market hypothesis notwithstanding. FWIW, I don't know enough of the facts to make a decision. I do have a feeling that the Japanese people will rebound vigorously, as they did after WWII.
- deleted 16y ago[deleted]
- Duff 16y agoPeople behave irrationally during panics. Through a little bit of cleverness on my part and alot of luck I found myself sitting on cash when Lehman collapsed. So faced with the prospect of fiscal apocalypse or (I had friends pulling money out of banks) the buying opportunity of the century, I bought a bunch of equities that were punished by the collapse, and made a bunch of money.
- kmfrk 16y agoI don't know if shorting is allowed in Nihon, but maybe someone's doing that more pervasively than those buying stocks.
- IdeaHamster 16y ago"Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful." -- Warren Buffett
- deleted 16y ago[deleted]
- EliRivers 16y agoA number of prices will be going down because of reduced dividend expectation. Companies that are about to make a big loss due to natural disasters are going to reduce dividends, so the shares are actually worth less than they were a week ago. That said, the "efficient market hypothesis" of which you speak; that is, the idea that any and all future price rises and falls have already been factored in - is false. Many investors _are_ ignorant. Many are stupid. Many are prone to panic. They are prone to everything that all other humans are prone to. Many are in fact big funds that have preset automated buying and selling positions and would happily buy and sell regardless of what else is going on. As evidence, I point to every bubble and crash there has ever been.
- kevinpet 16y agoBubbles are produced by rational small-scale behavior. That's the fascinating thing about bubbles. The "greater fool" theory is frequently a good bet. Except, of course, when there is no greater fool and you're left holding the bag. More importantly, outside events or circumstances could mean there isn't money in the right place to be able correct market price mistakes.
- math 16y agoYou're pretty much saying you think markets are efficient. Some others are pretty much saying they think there is a predictable panic sell component in current prices (and likewise in other bad news events). Maybe the latter is often true. Actually I believe it is possible for someone to have sufficiently good judgement to consistently make money from market overreactions. In this case, I personally don't have a clue - there too many uncertainties for me with this one.
- gte910h 16y agoI'm assuming a huge percentage of the people who were holding these securities live in Japan, and need cash right now to fix their broken lives.