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There is no contradiction between stocks going up and things being mediocre due to focus on short-term profits.
by layer8 1y ago
There is no contradiction between stocks going up and things being mediocre due to focus on short-term profits.
- WalterBright 1y agoLooks like a contradiction to me. If you're sacrificing the long term for the short term, your stock isn't going up.
- layer8 1y agoWhy not? You’re still profitable, just with mediocre stuff.
- WalterBright 1y agoYour competitors will eat your lunch.
- layer8 1y agoI don’t see that happening in practice, because the competitors are focusing on the short term as well. Another reason is that it is easy to deceive customers about the relative qualities of a product as long as it is cheaper than the competition. So it’s rather the short-termists that are driving a race to the bottom (or at least to mediocrity).
- warkdarrior 1y agoWhen you have a market for lemons and all competitors aim for "good enough", then it is no longer a business threat.
- CamperBob2 1y agoThe most successful companies, in my experience, are not successful because they're so much more awesome than everyone else. They are successful primarily because of luck... the luck of having competitors that suck total ass. Microsoft, for instance... or in more modern times, Tesla. I wouldn't put Boeing into that category, though -- it took more than just a lack of good competition to accomplish what they did, back in the day.
- bumby 1y agoDepends on the time horizon of investors.
- ncruces 1y agoThe short term spanning multiple decades undermines the argument.
- WalterBright 1y agoThe value of a stock is based on long term results. If the investors catch wind of the company sacrificing the long term for the short term, the stock price will go down accordingly.
- bumby 1y agoNot really. It’s based on expected future results. Sometimes that’s based in reality, sometimes it’s hopes and dreams. How else do you explain companies that have never made money being having any positive stock price? There are no “results” just projections. We probably agree that the stock will eventually reflect value. I think we’d quibble about how long that takes. As the saying goes, the market can remain irrational longer than you can remain solvent. In other words, don’t bet on the market always reflecting reality.
- lesuorac 1y agoI dunno, stock prices seem pretty volatile despite no material change in the company. The value of a stock is all pure speculation about how much you can sell it for later.
- kjkjadksj 1y agoSo what is your thesis on GME? Long term play? It is literally a brick and mortar selling physical video games in an era where consoles are increasingly shipping without the ability to play physical media. And yet…
- dowager_dan99 1y agowhy do the companies with the shortest planning horizons have the highest P/E ratios then?
- dowager_dan99 1y agostock markets are indices of successful companies; you need to look at the composition. The metric I would look at is the age of the companies in the S&P 500 or similar, and that IS increasingly skewing young, which shows both a focus on the short term and increasing markets
- MSFT_Edging 1y agoThat assumes the stock market is by and large logical. In a way it is, its logically a machine that makes money. The actual business doesn't matter if it's making money. It's a long form rug pull, where you make money until the company no longer can and you hope you're not holding the bag.
- intalentive 1y agoBuybacks sacrifice long term investment for short term stock price gains.
- lotsofpulp 1y agoBuybacks do not do that any more than dividends do. Buybacks merely allow publicly listed stock owners to precisely time their capital gains tax events. Surely, there is some amount of income that a business’s owner is allowed to pocket without bad intentions, which may or may not come at the cost of long term investments. Especially in stable/declining businesses.
- azemetre 1y agoNo, buy packs are pure market manipulation. There is a reason why they were banned prior to 1982. It's a SEC rule that can easily be reversed too but the rich love their ability to manipulate markets for their benefit.
- nullhole 1y ago> Buybacks do not do that any more than dividends do. There's at least a clear relationship if the dividend is reinvested. If the dividend is spent, though, eg by someone in retirement, then they're different. Under buybacks, the retiree would have to sell some shares to get cash, and would eventually run out. Under dividends, the retiree would be able to continuously pocket money.
- s1artibartfast 1y agoso sell some shares? you can still make the math work out the exact same. if the stock goes up 10%, sell 10%. The value you hold is the same.
- ruszki 1y agoGameStop teaches us, that there is no causality link between performance and stock prices.