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What I'm about to say is not pleasant. It comes from working in several different parts of the industry. The greatest thing Wall Street sells is dreams. This

What I'm about to say is not pleasant. It comes from working in several different parts of the industry. The greatest thing Wall Street sells is dreams. This will never go away. Every buy carries with it the thought that this one will go higher. Otherwise people wouldn't buy. As long as Wall Street continues to allow retail investors to play in the markets, there will be people who will come along for the ride. EDIT: Don't get mad at me for saying it. I think I'm doing people a favor by pointing this out. You won't hear this from many other people.

joezydeco 17y ago
Funny thing. I can swap "Wall Street" for "Las Vegas" in what you just said, and it reads exactly the same. It boils down to this, in my opinion: 1) The market is simply random. Every stock you buy is a bet placed on a roulette table. 2) Mutual funds, derivatives, etc are just ways of hiding the randomness. (Hey, why play at one roulette table when you can play at 1,000 at the same time! Less risk!) 3) Even if you do decide to take the plunge and buy in, the system is rigged against you. Much smarter people have figured out how to get theirs and get out before you know what's happened. The house always wins.
ynniv 17y ago
Certainly not mad at your for saying that... I personally have this opinion of the markets, and thats why I don't "invest". When I go to Vegas, I have a great time, and treat money on the table as an entertainment expense. That said, society has convinced the average person that their retirement money needs to be in the market (via 401k's). As long as it is the case that uninformed people are coerced into trusting the market, I will be vocally angry when they are cheated out of their money.
- joezydeco 17y ago
  I personally have no problem with people investing their retirement in the market...if the market was directly tied to the economy and the growth of companies. But I don't see that market as being ABOUT that anymore. It's become a world of side bets and arbitrage plays. When an outsider analyst has more influence over the price of a stock than the company itself, then the market is a game, not an investment. For example: a company can show growth, real POSITIVE growth...but ohmygodholyjebus if it's not EXACTLY what the analysts predicted then the stock is toast for the quarter. What the hell is that all about? Why do we play quarter to quarter instead of decade to decade? Because Wall Street is now about churn. And churn makes commissions.
  - BrentRitterbeck 17y ago
    What you are talking about is market efficiency at work. You can't accept some things about the market and not accept others. The market can be viewed as a machine that takes information and turns it into a stock price. Previous information, such as an analyst's predictions, do influence the price of a stock. If the company releases their earnings, a new piece of information, it is only natural that the price would adjust to reflect that. What many people fail to understand, is that an earnings announcement carries with it much more information than just how the recent quarter was. Now, with that said, I will say that I don't believe the markets are 100% efficient. No matter how many papers Sharpe, Fama, French, and others publish, I will never change my mind. Globally, the markets are extremely efficient, but there are local inefficiencies. Identifying and exploiting the local inefficiencies are what makes one really good at making money off of the markets.

joezydeco 17y ago

Funny thing. I can swap "Wall Street" for "Las Vegas" in what you just said, and it reads exactly the same. It boils down to this, in my opinion: 1) The market is simply random. Every stock you buy is a bet placed on a roulette table. 2) Mutual funds, derivatives, etc are just ways of hiding the randomness. (Hey, why play at one roulette table when you can play at 1,000 at the same time! Less risk!) 3) Even if you do decide to take the plunge and buy in, the system is rigged against you. Much smarter people have figured out how to get theirs and get out before you know what's happened. The house always wins.

ynniv 17y ago

Certainly not mad at your for saying that... I personally have this opinion of the markets, and thats why I don't "invest". When I go to Vegas, I have a great time, and treat money on the table as an entertainment expense. That said, society has convinced the average person that their retirement money needs to be in the market (via 401k's). As long as it is the case that uninformed people are coerced into trusting the market, I will be vocally angry when they are cheated out of their money.

joezydeco 17y ago
I personally have no problem with people investing their retirement in the market...if the market was directly tied to the economy and the growth of companies. But I don't see that market as being ABOUT that anymore. It's become a world of side bets and arbitrage plays. When an outsider analyst has more influence over the price of a stock than the company itself, then the market is a game, not an investment. For example: a company can show growth, real POSITIVE growth...but ohmygodholyjebus if it's not EXACTLY what the analysts predicted then the stock is toast for the quarter. What the hell is that all about? Why do we play quarter to quarter instead of decade to decade? Because Wall Street is now about churn. And churn makes commissions.
- BrentRitterbeck 17y ago
  What you are talking about is market efficiency at work. You can't accept some things about the market and not accept others. The market can be viewed as a machine that takes information and turns it into a stock price. Previous information, such as an analyst's predictions, do influence the price of a stock. If the company releases their earnings, a new piece of information, it is only natural that the price would adjust to reflect that. What many people fail to understand, is that an earnings announcement carries with it much more information than just how the recent quarter was. Now, with that said, I will say that I don't believe the markets are 100% efficient. No matter how many papers Sharpe, Fama, French, and others publish, I will never change my mind. Globally, the markets are extremely efficient, but there are local inefficiencies. Identifying and exploiting the local inefficiencies are what makes one really good at making money off of the markets.