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> HN participants still continually demand profit be the most important metric. That may or may not be true, but nothing in my comment suggested this was the c

> HN participants still continually demand profit be the most important metric. That may or may not be true, but nothing in my comment suggested this was the case. In fact, if you argued that the price-to-earnings ratio was the most meaningful metric for investment and trading decisions, my response would be the same: it can be very useful, but alone it can get you into a lot of trouble. Nobody experienced is investing/trading off of a P/E comparison that takes a fraction of a minute. > Additionally, the medium price/sales ratio for the entire market has little to do with an ultra small subset of technology companies IPOing. Trying to understand a subsection of the market without understanding the broader market is a recipe for disaster. This is especially true in today's market. For clarity: 1. There are companies that deserve premium valuations. Some of these are tech companies. 2. The Fed is driving the market today, so valuation is very, very difficult. 3. Folks who believe there are publicly-traded companies that haven't been impacted by QE and that aren't vulnerable to major moves in either direction based on changes in monetary policy are going to be hammered. > Just consider the BCG growth matrix for a few hours, think about how companies work, then come back and suggest a better metric than price/sales. If you come up with something smarter than that, I will be really, really impressed. I don't completely ignore fundamentals but I trade primarily off technicals so I'm afraid I'm not going to impress you. That said, I would offer the observation that anyone who looks at trendlines has probably made a lot more money with far less effort over the past several years than folks who are obsessed with fundamentals.

wtvanhest 13y ago
"I don't completely ignore fundamentals but I trade primarily off technicals so I'm afraid I'm not going to impress you. That said, I would offer the observation that anyone who looks at trendlines has probably made a lot more money with far less effort over the past several years than folks who are obsessed with fundamentals." Technical analysis has been repeatedly proven to not be a valid investment strategy over long periods of time. Even still, your statement is true since technical analysis requires no effort and the market has moved up dramatically, but you could also say the same thing about picking random stocks using a randomizer. Its easy to feel like a hero in this market. If you don't understand fundamental analysis, why would you comment so forcefully about fundamental analysis? [Edit] I just realized I am backing up PG, he needs no backing, he has the most successful incubator in the history of tech investing. Maybe it is worth considering what he says before assuming a ratio you haven't spent much time thinking about is not that important.
- 7Figures2Commas 13y ago
  > Technical analysis has been repeatedly proven to not be a valid investment strategy over long periods of time. Even still, your statement is true since technical analysis requires no effort... Technical analysis is not an investment "strategy." It is a technique that many market participants use to varying degrees. You're free to dismiss it, as many critics do. Regardless of whether you use fundamental analysis or technical analysis, profitable investing/trading requires a lot of other things (money management, discipline, etc.). I will say this in response to your "hero" comment: I personally don't know a technical analyst who was long US equities in late 2007 as long-term trendlines were breaking. And you can probably do the math on what short positions produced in 2008. On the other hand, for example, there are very smart folks sitting underwater on AAPL stock they bought in the $600 to $700 range who are arguing that the company is undervalued according to fundamentals. Maybe they're right, but they're not making money and they're currently paying a very high opportunity cost. In short, in my experience, technical analysis in its most basic form keeps investors/traders on the right side of the trend, and enables them to more easily identify when the trend has changed. That right there is more than half the battle. > If you don't understand fundamental analysis, why would you comment so forcefully about fundamental analysis? There's a difference between not understanding something and not relying on it. I never said that I didn't understand fundamental analysis. I argued that comparing the price-to-sales ratio at IPO of a small number of companies today to the price-to-sales ratio at IPO of a larger number of companies in 1999 is not a valid methodology for proving or disproving the existence of a bubble. > ...he has the most successful incubator in the history of tech investing. Maybe it is worth considering what he says before assuming a ratio you haven't spent much time thinking about is not that important. I respect Paul Graham and what he has done with YCombinator. And I've pointed out in the past that YCombinator is far more insulated from the "bubble" than others because it invests very small amounts of money in lots of companies at their formation. As such, YCombinator is nowhere near as exposed to valuation inflation as other investors. None of this means that everything PG says should be accepted without question. Appeal to authority arguments might sound convincing, but they're probably not going to make you money. If your own due diligence suggests that you should invest/trade primarily off of price-to-sales, I wish you the best.

wtvanhest 13y ago

"I don't completely ignore fundamentals but I trade primarily off technicals so I'm afraid I'm not going to impress you. That said, I would offer the observation that anyone who looks at trendlines has probably made a lot more money with far less effort over the past several years than folks who are obsessed with fundamentals." Technical analysis has been repeatedly proven to not be a valid investment strategy over long periods of time. Even still, your statement is true since technical analysis requires no effort and the market has moved up dramatically, but you could also say the same thing about picking random stocks using a randomizer. Its easy to feel like a hero in this market. If you don't understand fundamental analysis, why would you comment so forcefully about fundamental analysis? [Edit] I just realized I am backing up PG, he needs no backing, he has the most successful incubator in the history of tech investing. Maybe it is worth considering what he says before assuming a ratio you haven't spent much time thinking about is not that important.

7Figures2Commas 13y ago
> Technical analysis has been repeatedly proven to not be a valid investment strategy over long periods of time. Even still, your statement is true since technical analysis requires no effort... Technical analysis is not an investment "strategy." It is a technique that many market participants use to varying degrees. You're free to dismiss it, as many critics do. Regardless of whether you use fundamental analysis or technical analysis, profitable investing/trading requires a lot of other things (money management, discipline, etc.). I will say this in response to your "hero" comment: I personally don't know a technical analyst who was long US equities in late 2007 as long-term trendlines were breaking. And you can probably do the math on what short positions produced in 2008. On the other hand, for example, there are very smart folks sitting underwater on AAPL stock they bought in the $600 to $700 range who are arguing that the company is undervalued according to fundamentals. Maybe they're right, but they're not making money and they're currently paying a very high opportunity cost. In short, in my experience, technical analysis in its most basic form keeps investors/traders on the right side of the trend, and enables them to more easily identify when the trend has changed. That right there is more than half the battle. > If you don't understand fundamental analysis, why would you comment so forcefully about fundamental analysis? There's a difference between not understanding something and not relying on it. I never said that I didn't understand fundamental analysis. I argued that comparing the price-to-sales ratio at IPO of a small number of companies today to the price-to-sales ratio at IPO of a larger number of companies in 1999 is not a valid methodology for proving or disproving the existence of a bubble. > ...he has the most successful incubator in the history of tech investing. Maybe it is worth considering what he says before assuming a ratio you haven't spent much time thinking about is not that important. I respect Paul Graham and what he has done with YCombinator. And I've pointed out in the past that YCombinator is far more insulated from the "bubble" than others because it invests very small amounts of money in lots of companies at their formation. As such, YCombinator is nowhere near as exposed to valuation inflation as other investors. None of this means that everything PG says should be accepted without question. Appeal to authority arguments might sound convincing, but they're probably not going to make you money. If your own due diligence suggests that you should invest/trade primarily off of price-to-sales, I wish you the best.