4 ms·

Facebook is about 4x over fair value, so it's a pretty decent sale. It's too bad for the public investors that bought that shit up though. There should probably

Facebook is about 4x over fair value, so it's a pretty decent sale. It's too bad for the public investors that bought that shit up though. There should probably be a basic financial test that people should have to pass before they get access to a brokerage account. At some of the prices I'm seeing stock clearing, it's obvious that the buyers have not actually read any financial reports. Something like a basic written comprehension test on a random 10-K filing would efficiently and cheaply filter out those who are, and aren't, qualified to manage their own money. In fact, I'd wager that it'd probably reject a whole bunch of finance/eco/accounting majors as well. If you don't know your balance sheet, from your income statement, from your FCF, from your capex, then you probably don't have any business buying or selling financial assets. To anyone who says that this is an unfair statement, I have no knowledge of airplane mechanics, and hence, I probably have no business repairing airplanes. The same reasoning applies to investments.

MarcusBrutus 13y ago
Bogus analogy. You have no business repairing airplanes because you may endanger lives. People should be free to squander their money in their folly if they so choose. Otherwise outlaw lottery, gambling and horse-racing as well.
- confluence 13y ago
  Why not outlaw lottery, gambling and horse-racing? People misallocating capital is just as dangerous as an airplane mechanic misplacing a bolt on a Cessna. Both actions end up, in the long run, with people dying.
  - rwmj 13y ago
    Most societies do try to control gambling because of the social problems it causes. However this has nothing much to do with misallocating capital (after all, if they're misallocating it in gambling, why do you think they'd be smart enough to do any better if not allowed to gamble?) If you truly want to try allocating that capital better than the former owners of the money, buy shares in gambling companies.
- UweSchmidt 13y ago
  Society already outlaws or regulates many things to prevent people from hurting themselves. People are not capable of fully understanding all possible choices in a fully unregulated system, and even less able to consistently act rationally in their, or anyone's best interest. It is the responsibility of any lawmakers, engineers, experts etc. to design our systems to be safe, transparent and to set the occasional boundary where reasonable.
cdf 13y ago
So what if you know your balance sheet, income statement, FCF, capex, when you are analysing Enron or Lehman Brothers? If you are so sure Facebook is overvalued, how big is your short position? Guaranteed win right? Can you guarantee Microsoft won't swoop in to buy Facebook at 5x over "fair value"? I think we have reached the point where is conventional wisdom that "professional" fund managers struggle to outperform index funds, so you can mock the financially illiterate, but I hope your investment returns regularly outdo monkeys throwing a dart.
- confluence 13y ago
  I own puts. Outdoing index funds is easy. Investing is just like any other job. You do something cheaply than sell it for more. If the vast majority of fund managers are below average, than so to are the vast majority of doctors, lawyers and engineers. Investing isn't a special industry. Most surgeons are actively bad for their patients as compared to the average. Most engineers are bad for their projects compared to the average. Most lawyers are bad for contracts compared to the average. That's just how the world works.
josephagoss 13y ago
This sounds like protecting people from themselves. I disagree and believe people should have easy access to buying shares, if its a disaster only themselves are to blame. Also it is not the same as repairing an Airplane. If you lose all your money you only hurt yourself and your family. (And thats the way it should be, people should loss if they are stupid with their finances.)
- resu_nimda 13y ago
  "Who cares if millions of people take bad loans that they have no chance of repaying? That's their own fault, they should know better." And yet, look at how deeply the entire world was affected. People need to be protected from themselves for the well-being of society. Also, are you Ayn Rand or something? Your only point of argument here is that people should be given more opportunity to ruin the lives of their family at the hands of a system that has most likely willfully manipulated and taken advantage of their lack of experience (including convincing them that it was a good idea in the first place). Have some compassion.
  - josephagoss 13y ago
    You make an interesting counterpoint. I was assuming the person led themselves to buying shares of their own free will and not enticed by a bank or other power with malicious intent. I think in your example the banks should really have been punished more as it was their doing that caused the crisis by misleading millions of people.
    - ams6110 13y ago
      The banks were pushed to do it by the feds.
  - MarcusBrutus 13y ago
    It's so much comforting to know that the unwashed masses can look up to people such as you or the "experts" to protect them (with compassion) from themselves or from those who seek to manipulate or take advantage of them, such simpletons that they are. Makes it a better world.
powertower 13y ago
I get what you are saying, but I think your analogy would rather be this (to remove the flaws in the parallel) - > I have no knowledge of airplane mechanics, and hence, I probably have no business flying in airplanes.

MarcusBrutus 13y ago

Bogus analogy. You have no business repairing airplanes because you may endanger lives. People should be free to squander their money in their folly if they so choose. Otherwise outlaw lottery, gambling and horse-racing as well.

confluence 13y ago
Why not outlaw lottery, gambling and horse-racing? People misallocating capital is just as dangerous as an airplane mechanic misplacing a bolt on a Cessna. Both actions end up, in the long run, with people dying.
- rwmj 13y ago
  Most societies do try to control gambling because of the social problems it causes. However this has nothing much to do with misallocating capital (after all, if they're misallocating it in gambling, why do you think they'd be smart enough to do any better if not allowed to gamble?) If you truly want to try allocating that capital better than the former owners of the money, buy shares in gambling companies.
UweSchmidt 13y ago
Society already outlaws or regulates many things to prevent people from hurting themselves. People are not capable of fully understanding all possible choices in a fully unregulated system, and even less able to consistently act rationally in their, or anyone's best interest. It is the responsibility of any lawmakers, engineers, experts etc. to design our systems to be safe, transparent and to set the occasional boundary where reasonable.

cdf 13y ago

So what if you know your balance sheet, income statement, FCF, capex, when you are analysing Enron or Lehman Brothers? If you are so sure Facebook is overvalued, how big is your short position? Guaranteed win right? Can you guarantee Microsoft won't swoop in to buy Facebook at 5x over "fair value"? I think we have reached the point where is conventional wisdom that "professional" fund managers struggle to outperform index funds, so you can mock the financially illiterate, but I hope your investment returns regularly outdo monkeys throwing a dart.

confluence 13y ago
I own puts. Outdoing index funds is easy. Investing is just like any other job. You do something cheaply than sell it for more. If the vast majority of fund managers are below average, than so to are the vast majority of doctors, lawyers and engineers. Investing isn't a special industry. Most surgeons are actively bad for their patients as compared to the average. Most engineers are bad for their projects compared to the average. Most lawyers are bad for contracts compared to the average. That's just how the world works.

josephagoss 13y ago

This sounds like protecting people from themselves. I disagree and believe people should have easy access to buying shares, if its a disaster only themselves are to blame. Also it is not the same as repairing an Airplane. If you lose all your money you only hurt yourself and your family. (And thats the way it should be, people should loss if they are stupid with their finances.)

resu_nimda 13y ago
"Who cares if millions of people take bad loans that they have no chance of repaying? That's their own fault, they should know better." And yet, look at how deeply the entire world was affected. People need to be protected from themselves for the well-being of society. Also, are you Ayn Rand or something? Your only point of argument here is that people should be given more opportunity to ruin the lives of their family at the hands of a system that has most likely willfully manipulated and taken advantage of their lack of experience (including convincing them that it was a good idea in the first place). Have some compassion.
- josephagoss 13y ago
  You make an interesting counterpoint. I was assuming the person led themselves to buying shares of their own free will and not enticed by a bank or other power with malicious intent. I think in your example the banks should really have been punished more as it was their doing that caused the crisis by misleading millions of people.
  - ams6110 13y ago
    The banks were pushed to do it by the feds.
- MarcusBrutus 13y ago
  It's so much comforting to know that the unwashed masses can look up to people such as you or the "experts" to protect them (with compassion) from themselves or from those who seek to manipulate or take advantage of them, such simpletons that they are. Makes it a better world.

powertower 13y ago

I get what you are saying, but I think your analogy would rather be this (to remove the flaws in the parallel) - > I have no knowledge of airplane mechanics, and hence, I probably have no business flying in airplanes.