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> Is this the future of retail trading? An expensive game of chicken? Isn’t this how stock markets work? Actual company performance is just a relatively minor

• endisneigh 6y ago
  Sure, but you would think reality would have more of an impact than simply speculation. To an extent the stock market is a game of chicken since prices are ultimately derived from expectations, but what happens when the expectations are no longer attached to reality? Buying a weed stock for example can be speculating on Biden's likelihood of legalizing it and the subsequent boom, but there are stock that literally have no products, a single employee and the entirety of the volatility is based on random internet musings. Pump and dump is nothing new, of course, but the internet's ability to cascade this surely will have some implications for better or worse.
  • prewett 6y ago
    Oh, reality will have an impact, sooner or later. What happens when expectations are no longer attached to reality is "irrational exuberance", aka "a bubble". We're in the mania phase of the stock cycle. It's starting to feel like 2001 again: pet supplies ON THE INTERNET!!! Big money, big prizes, big expensive Superbowl ad! Partly the problem is that we're at the tail end of the business cycle, partly the Fed has been keeping interest rates low so anyone that needs yield (pensions, etc.) has to move out of bonds into stocks, and partly retail traders have been stuck at home spending their vacation money on the Robinhood casino. And stocks are up 30% on the year and 80% from the local minimum in March, so now everyone that is short on money says "I should play the market". Give it a year or so.
• lotsofpulp 6y ago
  > Isn’t this how stock markets work? Actual company performance is just a relatively minor signal for the chicken. In my experience, actual company performance is a very huge signal. You just need to zoom out and look at longer timeframes. The stocks with the highest prices and gains over the long term are those with the highest profit and growth potential.
  • mhh__ 6y ago
    Like Tesla? Wouldn't Tesla have to have a monopoly on the entire automotive industry to realise their P/E? And as for profit they don't make any at the moment, IIRC
    • dEnigma 6y ago
      Tesla just reported its first full-year profit last month, so that's no longer true.
    • leoedin 6y ago
      Tesla is probably overvalued, but it's also not as simple as Tesla == cars. They're also one of the leading players in grid level battery storage (a market that will be huge soon). I don't think any other auto manufacturer is involved in that.
      • mhh__ 6y ago
        Tesla still has to sell something like 21x more cars to match Toyota for example who they dwarf in market cap. Tesla are putting their eggs into cars which are extremely hard, and batteries which will be a commodity long before Tesla can extract enough value.
      • valuearb 6y ago
        Probably? They grew only 22% last year and trade at over 25 times SALES.
    • bsanr2 6y ago
      IIUC Tesla's value comes in part from failed bets against it. Investors looking to make a buck off its imminent failure were instead forced to pay out, in greater proportion, hedges made on those short bets, when it survived. The same thing happened with GME, just on a shorter time scale and with the completely out-of-context event of retail traders being shut out of the buy side of market trades for several days. We do not know what would have happened had GME continued to be freely traded on a day it had reached over $500 a share premarket.