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Fortunately for investors in public companies, you can mostly sort out the crazy people ahead of time By inspecting the growth mechanism of the company. Amount

Fortunately for investors in public companies, you can mostly sort out the crazy people ahead of time By inspecting the growth mechanism of the company. Amount of leverage, yield on investments relative to risks, assumptions about future growth, management commentary etc. Unfortunately for investors in FTX, they had no visibility or regulations/protections against their deposits being stolen

junofan 4y ago
FTX’s exchange business is regulated by the Securities Commission of the Bahamas.
- adam_arthur 4y ago
  Sounds trustworthy
- digianarchist 4y ago
  They haven't even published anything on the FTX debacle: https://www.scb.gov.bs/news/ https://www.scb.gov.bs/news/
  - digianarchist 4y ago
    Looks like they've stepped up. > FTX assets frozen by Bahamas regulator as crypto exchange fights to survive https://www.ft.com/content/c6658ce8-26a3-4580-9e64-6083a7d35eca https://www.ft.com/content/c6658ce8-26a3-4580-9e64-6083a7d35...
djbusby 4y ago
You all about the fundamentals. <3
eru 4y ago
> Fortunately for investors in public companies, you can mostly sort out the crazy people ahead of time > By inspecting the growth mechanism of the company. Amount of leverage, yield on investments relative to risks, assumptions about future growth, management commentary etc. Why waste your time like that? Just buy an index fund. > Unfortunately for investors in FTX, they had no visibility or regulations/protections against their deposits being stolen Even more important, short sellers couldn't correct the price, I guess?
- adam_arthur 4y ago
  Index funds are only as good as their constituents. Why buy index funds that hold many overvalued companies, like Chipotle at 50x PE (2% yield), or Costco at 40x (2.5% yield) when 10y at 4%. To name just a few of many Also certain sectors and companies will do better than others in this macro environment. Would rather buy things that are fairly valued. But to each their own
  - eru 4y ago
    I believe in a weak form of the efficient market hypothesis that says by the time I have heard of any news, Goldman Sachs and the hedge funds will have already traded on them. Since hedge funds are allowed to short, that includes any estimates I could make about things being overvalued. All the news are priced in by the time they reach me. > Also certain sectors and companies will do better than others in this macro environment. Definitely, but that's already priced in as far as I can tell. However, you might be more confident in your ability to spot undervalue and overvalued companies than I am. I do agree with you that less liquid markets, like private companies etc, are less likely to be efficient.
    - adam_arthur 4y ago
      Well you haven’t been investing very long if you believe the banks have any idea what’s going on. They pretty much all had 5000 price targets on the S&P for 2022 Buy recommendations on stocks with wild overvaluation that later collapsed 90%. Just look what most banks and funds were doing during the dotcom bubble
      - eru 4y ago
        Price targets and buy/sell recommendations are obviously rubbish. Regard them as PR. You need to look at what people do, not what they say. And market prices are an aggregate of the former. Btw, the efficient market hypothesis says that the current market price is basically the best 'price target' / forecast available. (Modulo an accumulation of interest and cost of carry etc.) > Just look what most banks and funds were doing during the dotcom bubble That's an interesting example to bring up! If you had bought the Nasdaq composite index during that time, you would have done pretty already today. We didn't so much have a dotcom bubble, as an irrational dotcom burst where tech stocks were perhaps irrationally underpriced for a long time. Do keep in mind that I am not saying that market prices are a perfect predictor. Just that they are the best predictor we have. In an efficient market, you would expect prices to look like a random walk. So prices going up or down isn't any evidence against EMH. (Someone consistently outpredicting the market would be evidence against EMH.)

junofan 4y ago

FTX’s exchange business is regulated by the Securities Commission of the Bahamas.

adam_arthur 4y ago
Sounds trustworthy
digianarchist 4y ago
They haven't even published anything on the FTX debacle: https://www.scb.gov.bs/news/ https://www.scb.gov.bs/news/
- digianarchist 4y ago
  Looks like they've stepped up. > FTX assets frozen by Bahamas regulator as crypto exchange fights to survive https://www.ft.com/content/c6658ce8-26a3-4580-9e64-6083a7d35eca https://www.ft.com/content/c6658ce8-26a3-4580-9e64-6083a7d35...

djbusby 4y ago

You all about the fundamentals. <3

eru 4y ago

> Fortunately for investors in public companies, you can mostly sort out the crazy people ahead of time > By inspecting the growth mechanism of the company. Amount of leverage, yield on investments relative to risks, assumptions about future growth, management commentary etc. Why waste your time like that? Just buy an index fund. > Unfortunately for investors in FTX, they had no visibility or regulations/protections against their deposits being stolen Even more important, short sellers couldn't correct the price, I guess?

adam_arthur 4y ago
Index funds are only as good as their constituents. Why buy index funds that hold many overvalued companies, like Chipotle at 50x PE (2% yield), or Costco at 40x (2.5% yield) when 10y at 4%. To name just a few of many Also certain sectors and companies will do better than others in this macro environment. Would rather buy things that are fairly valued. But to each their own
- eru 4y ago
  I believe in a weak form of the efficient market hypothesis that says by the time I have heard of any news, Goldman Sachs and the hedge funds will have already traded on them. Since hedge funds are allowed to short, that includes any estimates I could make about things being overvalued. All the news are priced in by the time they reach me. > Also certain sectors and companies will do better than others in this macro environment. Definitely, but that's already priced in as far as I can tell. However, you might be more confident in your ability to spot undervalue and overvalued companies than I am. I do agree with you that less liquid markets, like private companies etc, are less likely to be efficient.
  - adam_arthur 4y ago
    Well you haven’t been investing very long if you believe the banks have any idea what’s going on. They pretty much all had 5000 price targets on the S&P for 2022 Buy recommendations on stocks with wild overvaluation that later collapsed 90%. Just look what most banks and funds were doing during the dotcom bubble
    - eru 4y ago
      Price targets and buy/sell recommendations are obviously rubbish. Regard them as PR. You need to look at what people do, not what they say. And market prices are an aggregate of the former. Btw, the efficient market hypothesis says that the current market price is basically the best 'price target' / forecast available. (Modulo an accumulation of interest and cost of carry etc.) > Just look what most banks and funds were doing during the dotcom bubble That's an interesting example to bring up! If you had bought the Nasdaq composite index during that time, you would have done pretty already today. We didn't so much have a dotcom bubble, as an irrational dotcom burst where tech stocks were perhaps irrationally underpriced for a long time. Do keep in mind that I am not saying that market prices are a perfect predictor. Just that they are the best predictor we have. In an efficient market, you would expect prices to look like a random walk. So prices going up or down isn't any evidence against EMH. (Someone consistently outpredicting the market would be evidence against EMH.)