4 ms·

I think this was much more true in the long ago era of regulation, (mostly) autarky, and limited market info/trading barriers. I've looked at "Security Analysi

I think this was much more true in the long ago era of regulation, (mostly) autarky, and limited market info/trading barriers. I've looked at "Security Analysis" and it's very much a historical piece - railroads and (practically) buggy whips. Things change relatively faster these days. Yesterday, Kodak was the bluest of chips; today, pretty much a joke. Heck, look at Buffett in the last decade - I'll bet he fully Grahamitized IBM, which didn't make it any less hollow. That sort of analysis, or even certainty (a false premise by definition) just isn't worth the effort for the average ownership span.

ethbr0 5y ago
In times of plenty, where money flows and pools drives stock prices. In times of poverty, fundamentals drive stock prices. We've been in a time of plenty for a historically abnormally long period.
- Apocryphon 5y ago
  And the time of plenty is primarily driven by monetary policy, is it not?
  - JumpCrisscross 5y ago
    > plenty is primarily driven by monetary policy Short-term market cycles are always driven by credit, which is in turn driven by monetary policy.
kortilla 5y ago
Kodak is a terrible example. That company had a long decline into irrelevance. Big companies have been doing that forever.
- pinewurst 5y ago
  It's a good example because it shows the gulf between organizational/innovational rot and impeccable bookkeeping. Kodak's signs of decay were visible at least as long ago as the late 70s vis a vis the Polaroid patent infringement case (and the cheesiness of Kodak's own knockoffs).
JumpCrisscross 5y ago
> this was much more true in the long ago era of regulation It's still true. We just haven't had, in close to a generation now, the sort of bear market that permits the enforcers of fundamentals to re-emerge: liquidation and bankruptcy against overvaluation; M&A against undervaluation.
- nostrademons 5y ago
  Will we? The trend has been for countries to protect their big losers, those underperforming companies that are too big to fail. Started in Japan in the 80s, then Europe in the 2000s, and the U.S. since 2009. Arguably communist countries have always functioned this way, with state-owned enterprises. The result is a coupling between between the fate of the nation and the fate of its major employers, with loose monetary policy, regulatory capture, and explicit fiscal bailouts to protect it. Then instead of the deadwood being cleaned out, the whole country becomes deadwood, and you get lost generations and social unrest as the only way to throw out ways of doing business that aren't working is to throw out the people in power.
WJW 5y ago
> just isn't worth the effort for the average ownership span. There's no rule that says you need to hold stocks for the same average period that the rest of the market does. Analyzing securities and purchasing those that are undervalued is still an extremely profitable activity at many hedge funds and prop trading desks. The fact that the average investor is more FOMO-driven these days only makes sound analysis more valuable, just like playing poker with a drunk newbie will have higher variability but better expected value.
- pinewurst 5y ago
  I don't disagree - just want to note a difference between sufficient analysis and overthinking the problem (IMHO).
- alasdair_ 5y ago
  This is true up until the point where your logically sound short of GME comes up against “apes together stronk”
  - WJW 5y ago
    That's why I wrote: > higher variability but better expected value. If you put all your money into shorting GME then yes, you will have a bad time when WSB gets excited again. If you have a widely spread portfolio of shorts in overhyped companies with weak fundamentals and longs in underhyped companies with strong fundamentals, having a few trades go against you is not the end of the world.

ethbr0 5y ago

In times of plenty, where money flows and pools drives stock prices. In times of poverty, fundamentals drive stock prices. We've been in a time of plenty for a historically abnormally long period.

Apocryphon 5y ago
And the time of plenty is primarily driven by monetary policy, is it not?
- JumpCrisscross 5y ago
  > plenty is primarily driven by monetary policy Short-term market cycles are always driven by credit, which is in turn driven by monetary policy.

kortilla 5y ago

Kodak is a terrible example. That company had a long decline into irrelevance. Big companies have been doing that forever.

pinewurst 5y ago
It's a good example because it shows the gulf between organizational/innovational rot and impeccable bookkeeping. Kodak's signs of decay were visible at least as long ago as the late 70s vis a vis the Polaroid patent infringement case (and the cheesiness of Kodak's own knockoffs).

JumpCrisscross 5y ago

> this was much more true in the long ago era of regulation It's still true. We just haven't had, in close to a generation now, the sort of bear market that permits the enforcers of fundamentals to re-emerge: liquidation and bankruptcy against overvaluation; M&A against undervaluation.

nostrademons 5y ago
Will we? The trend has been for countries to protect their big losers, those underperforming companies that are too big to fail. Started in Japan in the 80s, then Europe in the 2000s, and the U.S. since 2009. Arguably communist countries have always functioned this way, with state-owned enterprises. The result is a coupling between between the fate of the nation and the fate of its major employers, with loose monetary policy, regulatory capture, and explicit fiscal bailouts to protect it. Then instead of the deadwood being cleaned out, the whole country becomes deadwood, and you get lost generations and social unrest as the only way to throw out ways of doing business that aren't working is to throw out the people in power.

WJW 5y ago

> just isn't worth the effort for the average ownership span. There's no rule that says you need to hold stocks for the same average period that the rest of the market does. Analyzing securities and purchasing those that are undervalued is still an extremely profitable activity at many hedge funds and prop trading desks. The fact that the average investor is more FOMO-driven these days only makes sound analysis more valuable, just like playing poker with a drunk newbie will have higher variability but better expected value.

pinewurst 5y ago
I don't disagree - just want to note a difference between sufficient analysis and overthinking the problem (IMHO).
alasdair_ 5y ago
This is true up until the point where your logically sound short of GME comes up against “apes together stronk”
- WJW 5y ago
  That's why I wrote: > higher variability but better expected value. If you put all your money into shorting GME then yes, you will have a bad time when WSB gets excited again. If you have a widely spread portfolio of shorts in overhyped companies with weak fundamentals and longs in underhyped companies with strong fundamentals, having a few trades go against you is not the end of the world.