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Hi! This is the Market Economics Fairy! Just a quick reminder that if virtuous people selling a stock would predictably lead its profits to be temporarily pri

by Eliezer 12y ago

Hi! This is the Market Economics Fairy! Just a quick reminder that if virtuous people selling a stock would predictably lead its profits to be temporarily priced lower relative to the rest of the stock market, even a small group of profit maximizers can just swoop in and buy that stock! So this is a completely ineffective strategy for virtuous people to drive a stock price lower! And if Cuban sells the stock after the news of their move breaks, he's already locked in all of the company's expected profit from that move, because the stock will already be priced higher! Sincerely, the Market Economics Fairy!

busterarm 12y ago
He doesn't care about that. He's not looking at it from the trader's perspective but from the value investors. His actions follow through completely with his intentions here - he's signaling that the equity has lost value. This can hurt the company's value if he builds consensus, whether they lock in the short term profit or not. It's even the subtext of his whole argument: they aren't looking at the long-term consequences of their actions but are chasing short-term gains completely at the expense of their future. Edit: And as much as I align with the trader's perspective on markets, traders tend to blow up and with great frequency...much more-so than value investors.
- deleted 12y ago
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- zak_mc_kracken 12y ago
  > he's signaling that the equity has lost value. But it hasn't. If anything, such announcements are followed by a stock value increase since the savings that will result from this move will add up to the bottom line, and the market responds positively to this kind of news. Lay offs are another of these things that tend to drive stocks up.
  - busterarm 12y ago
    Edit: Rephrasing because I worded it poorly. His sell action _right now_ signals that he thinks it has lost value. What happens after that with the stock is independent of his opinion there. Sure, the stock may go up in the short-term because of all of this, but his action now agrees with his sentiment that they're doing something harmful that has effects _in the future_. What happens with the stock price isn't just reading tea leaves, but totally unimportant to the discussion. Whether you think a stock is going to go up or down isn't the only (and at the institutional level not even the most important) reason that you buy or sell a stock.
    - zak_mc_kracken 12y ago
      I think there is really no connection between moving your taxes abroad and how well the stock will fare. Maybe it will go up, maybe it will go down, but that tax optimization move will have very little impact on that in the long run. What Cuban is doing isn't a financial move but a principle one. He's unhappy with the company's decision and that's how he shows it. It's emotional, not rational.

by Eliezer 12y ago

busterarm 12y ago

He doesn't care about that. He's not looking at it from the trader's perspective but from the value investors. His actions follow through completely with his intentions here - he's signaling that the equity has lost value. This can hurt the company's value if he builds consensus, whether they lock in the short term profit or not. It's even the subtext of his whole argument: they aren't looking at the long-term consequences of their actions but are chasing short-term gains completely at the expense of their future. Edit: And as much as I align with the trader's perspective on markets, traders tend to blow up and with great frequency...much more-so than value investors.

deleted 12y ago
[deleted]
zak_mc_kracken 12y ago
> he's signaling that the equity has lost value. But it hasn't. If anything, such announcements are followed by a stock value increase since the savings that will result from this move will add up to the bottom line, and the market responds positively to this kind of news. Lay offs are another of these things that tend to drive stocks up.
- busterarm 12y ago
  Edit: Rephrasing because I worded it poorly. His sell action _right now_ signals that he thinks it has lost value. What happens after that with the stock is independent of his opinion there. Sure, the stock may go up in the short-term because of all of this, but his action now agrees with his sentiment that they're doing something harmful that has effects _in the future_. What happens with the stock price isn't just reading tea leaves, but totally unimportant to the discussion. Whether you think a stock is going to go up or down isn't the only (and at the institutional level not even the most important) reason that you buy or sell a stock.
  - zak_mc_kracken 12y ago
    I think there is really no connection between moving your taxes abroad and how well the stock will fare. Maybe it will go up, maybe it will go down, but that tax optimization move will have very little impact on that in the long run. What Cuban is doing isn't a financial move but a principle one. He's unhappy with the company's decision and that's how he shows it. It's emotional, not rational.