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My pet theory why stocks have stopped reacting to real world fundamentals is simply because the main sector changed. Currently that's technology, which happens

My pet theory why stocks have stopped reacting to real world fundamentals is simply because the main sector changed. Currently that's technology, which happens mostly on the internet globally. I can't really imagine a real world event big enough that would shake up Google, Amazon, Apple, etc. all at once. Sure, individually they can be threatened by innovation, but generally everything on the internet feels very "detached" from real world events. If possible even russia would still use those services today.

shimmy568 5y ago
I mean if Facebook losing %0.01 (or whatever it was) of it's users is enough to drop it's share price by 40% I think that anything could pop this bubble at this point, people investing in these companies are expecting growth that isn't realistic imo All these companies have hit their saturation point and are just fighting over the same shrinking pie at this point. Just look at how many social media sites have implemented tik tok functionality. That alone to me screams "too much capital and not enough growth"
- onlyrealcuzzo 5y ago
  It didn't matter that they missed user estimates for 1 quarter. It mattered that their growth forecast went from close to 30% to 3% (over a medium term horizon). Your P/E drops precipitously when your future growth drops precipitously.
- tomrod 5y ago
  A report showing negligible effectiveness of online advertising via social media could be enough to shake the input if the market is shaky.
- thunkshift1 5y ago
  That is because facebook ‘sells’ stuff people can easily live without… its not the same for the other companies
deserteagle_pwn 5y ago
https://www.swpc.noaa.gov/phenomena/geomagnetic-storms https://www.swpc.noaa.gov/phenomena/geomagnetic-storms https://en.wikipedia.org/wiki/Geomagnetic_storm https://en.wikipedia.org/wiki/Geomagnetic_storm https://www.ready.gov/space-weather#:~:text=To%20begin%20preparing%2C%20you%20should,water%20expands%20as%20it%20freezes https://www.ready.gov/space-weather#:~:text=To%20begin%20pre....
pogorniy 5y ago
> I can't really imagine a real world event big enough that would shake up Google, Amazon, Apple, etc. all at once https://en.wikipedia.org/wiki/Carrington_Event https://en.wikipedia.org/wiki/Carrington_Event Now you can
cm2187 5y ago
Or because the fed is still printing money like there is no tomorrow. It is kind of puzzling to read Powell claiming he is worried about inflation while still printing huge amounts of QE at the same time.
- dragonwriter 5y ago
  > Or because the fed is still printing money like there is no tomorrow. It’s not. > It is kind of puzzling to read Powell claiming he is worried about inflation while still printing huge amounts of QE at the same time. QE stopped around the same time as the rate hike, and quantitative tightening (going from stop to reverse on QE) has been announced as upcoming.
  - cm2187 5y ago
    as far has I can tell the size of the Fed balance sheet is still growing every week. So yes they are still printing massive amount of money right now, at a similar pace than QE2 and QE3, and they have done for most of 2021, when inflation was already picking up significantly. https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
sudden_dystopia 5y ago
Easier than that. Classical stock valuation methods only make sense when the market is composed of financially educated, rational investors who use similar valuation methods. That is an outdated model of the markets though. When you add in algorithm driven trading and a sea of retail investors who are anything but rational, we can see how stock market valuation actually plays out: simple supply and demand. I mean just look at GameStop. Apes wanted bad stock, drove price up and then caught the shorts with their pants down. That was simply supply and demand mechanics. The same can be said for Tesla or a litany of other “overpriced” stocks.

shimmy568 5y ago

I mean if Facebook losing %0.01 (or whatever it was) of it's users is enough to drop it's share price by 40% I think that anything could pop this bubble at this point, people investing in these companies are expecting growth that isn't realistic imo All these companies have hit their saturation point and are just fighting over the same shrinking pie at this point. Just look at how many social media sites have implemented tik tok functionality. That alone to me screams "too much capital and not enough growth"

onlyrealcuzzo 5y ago
It didn't matter that they missed user estimates for 1 quarter. It mattered that their growth forecast went from close to 30% to 3% (over a medium term horizon). Your P/E drops precipitously when your future growth drops precipitously.
tomrod 5y ago
A report showing negligible effectiveness of online advertising via social media could be enough to shake the input if the market is shaky.
thunkshift1 5y ago
That is because facebook ‘sells’ stuff people can easily live without… its not the same for the other companies

deserteagle_pwn 5y ago

https://www.swpc.noaa.gov/phenomena/geomagnetic-storms https://www.swpc.noaa.gov/phenomena/geomagnetic-storms https://en.wikipedia.org/wiki/Geomagnetic_storm https://en.wikipedia.org/wiki/Geomagnetic_storm https://www.ready.gov/space-weather#:~:text=To%20begin%20preparing%2C%20you%20should,water%20expands%20as%20it%20freezes https://www.ready.gov/space-weather#:~:text=To%20begin%20pre....

pogorniy 5y ago

> I can't really imagine a real world event big enough that would shake up Google, Amazon, Apple, etc. all at once https://en.wikipedia.org/wiki/Carrington_Event https://en.wikipedia.org/wiki/Carrington_Event Now you can

cm2187 5y ago

Or because the fed is still printing money like there is no tomorrow. It is kind of puzzling to read Powell claiming he is worried about inflation while still printing huge amounts of QE at the same time.

dragonwriter 5y ago
> Or because the fed is still printing money like there is no tomorrow. It’s not. > It is kind of puzzling to read Powell claiming he is worried about inflation while still printing huge amounts of QE at the same time. QE stopped around the same time as the rate hike, and quantitative tightening (going from stop to reverse on QE) has been announced as upcoming.
- cm2187 5y ago
  as far has I can tell the size of the Fed balance sheet is still growing every week. So yes they are still printing massive amount of money right now, at a similar pace than QE2 and QE3, and they have done for most of 2021, when inflation was already picking up significantly. https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

sudden_dystopia 5y ago

Easier than that. Classical stock valuation methods only make sense when the market is composed of financially educated, rational investors who use similar valuation methods. That is an outdated model of the markets though. When you add in algorithm driven trading and a sea of retail investors who are anything but rational, we can see how stock market valuation actually plays out: simple supply and demand. I mean just look at GameStop. Apes wanted bad stock, drove price up and then caught the shorts with their pants down. That was simply supply and demand mechanics. The same can be said for Tesla or a litany of other “overpriced” stocks.