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No, the real issue is that stocks have been turned into hype driven vapoe-ware. Tesla stock has a P/E of NEGATIVE 250 or thereabouts. OK, they are building a

No, the real issue is that stocks have been turned into hype driven vapoe-ware. Tesla stock has a P/E of NEGATIVE 250 or thereabouts. OK, they are building a company and maybe even an industry. I get it. Yet the problem is one of ridiculous valuations. There's huge risk. It is nothing less than legalize gambling. This coming from someone who day-traded full time for over a year. The things I experienced during that time made me decide that the stock market was nothing more than a form of gambling. Don't blame the joke or the algorithm. Blame a regulatory system that does not protect the masses from "going to Vegas" any time they touch the stock market.

JoeAltmaier 12y ago
The entire stock market is based on gambling. No, not even that. You're gambling on the value of the baseball card, not even on the value of the player. Once a company sells stock, that share value is essentially unrelated to the company except by tradition and cultural expectation. The share can vary all over the map, and only gets a reality check if it goes below book value (none ever do). Even dividends hardly matter; they are factored into the stock price near dividend time, and drop out the day after the dividend. SO no they haven't turned into anything; they always were vapor-ware.
- harryh 12y ago
  So you think it's purely a coincidence that AAPL is up 3-4x in the past 5 years while Radio Shack stock has lost 99% of it's value? It has nothing to do with the fact that Apple is making huge profits while Radio Shack lost money hand over fist?
  - JoeAltmaier 12y ago
    Within the bounds of 'book value', yes. The fact that you are convinced there is some necessary relationship (and that I am wrong) is the 'cultural' part of it. You think that somewhere there's a link between those facts, when in fact there is none. None but other people believing the same thing.
    - harryh 12y ago
      There is a link between those facts. The PE of a stock is a number signifying the rate of return and that rate of return will be compared by the market to other investment vehicles. Sure, in the short term things can get crazy. Will TESLA achieve wild success and own 50% of the auto market, or will they go out of business when Toyota clones their cars? Reasonable people can disagree on these predictions and hence the stock will be relatively volatile. But in the long run we will have the answer to this question and the value of Tesla will directly relate to it's ability to generate a return on capital just like it does for every other mature business.
      - JoeAltmaier 12y ago
        Again, you like to believe that the P/E is somehow a necessary relationship between the company and the stock. Its not. Its just a number you calculated. Take baseball cards, which are almost exactly the same thing as stock certificates except we believe different things about them. You have all sorts of stats on the back. But nobody believes they control the value of the card. That non-sequitur about TESLA predictions and the price of the stock are more of the same witchcraft. Sure I believe the stock will go up if the company is successful, but only because other people believe it too. Not because there's any cause and effect relationship other than belief.
        harryh 12y ago
        P/E is not just a number. It's a measure of return on capital. It's the same thing as an interest rate on a bond or appreciation on the value of a house. Sure, the return might not go directly into your bank account the way bank interest does but it does exist. It's either being reinvested into the business, or returned to the shareholders in the form of dividends or stock buybacks. It is a huge error in thinking to believe that a piece of stock is a baseball card. It is not. It is, in a very real sense, actual ownership of an actual business and all that represents.
        JoeAltmaier 12y ago
dheera 12y ago
I disagree. Yes it's a huge risk, but you take that risk if you believe in the vision and people behind it. It's a lot different than betting on numbers. In fact it's a lot more like angel investment, which in the case of startups without revenue have a P/E ratio of infinity.

JoeAltmaier 12y ago

The entire stock market is based on gambling. No, not even that. You're gambling on the value of the baseball card, not even on the value of the player. Once a company sells stock, that share value is essentially unrelated to the company except by tradition and cultural expectation. The share can vary all over the map, and only gets a reality check if it goes below book value (none ever do). Even dividends hardly matter; they are factored into the stock price near dividend time, and drop out the day after the dividend. SO no they haven't turned into anything; they always were vapor-ware.

harryh 12y ago
So you think it's purely a coincidence that AAPL is up 3-4x in the past 5 years while Radio Shack stock has lost 99% of it's value? It has nothing to do with the fact that Apple is making huge profits while Radio Shack lost money hand over fist?
- JoeAltmaier 12y ago
  Within the bounds of 'book value', yes. The fact that you are convinced there is some necessary relationship (and that I am wrong) is the 'cultural' part of it. You think that somewhere there's a link between those facts, when in fact there is none. None but other people believing the same thing.
  - harryh 12y ago
    There is a link between those facts. The PE of a stock is a number signifying the rate of return and that rate of return will be compared by the market to other investment vehicles. Sure, in the short term things can get crazy. Will TESLA achieve wild success and own 50% of the auto market, or will they go out of business when Toyota clones their cars? Reasonable people can disagree on these predictions and hence the stock will be relatively volatile. But in the long run we will have the answer to this question and the value of Tesla will directly relate to it's ability to generate a return on capital just like it does for every other mature business.
    - JoeAltmaier 12y ago
      Again, you like to believe that the P/E is somehow a necessary relationship between the company and the stock. Its not. Its just a number you calculated. Take baseball cards, which are almost exactly the same thing as stock certificates except we believe different things about them. You have all sorts of stats on the back. But nobody believes they control the value of the card. That non-sequitur about TESLA predictions and the price of the stock are more of the same witchcraft. Sure I believe the stock will go up if the company is successful, but only because other people believe it too. Not because there's any cause and effect relationship other than belief.
      - harryh 12y ago
        P/E is not just a number. It's a measure of return on capital. It's the same thing as an interest rate on a bond or appreciation on the value of a house. Sure, the return might not go directly into your bank account the way bank interest does but it does exist. It's either being reinvested into the business, or returned to the shareholders in the form of dividends or stock buybacks. It is a huge error in thinking to believe that a piece of stock is a baseball card. It is not. It is, in a very real sense, actual ownership of an actual business and all that represents.
        JoeAltmaier 12y ago

dheera 12y ago

I disagree. Yes it's a huge risk, but you take that risk if you believe in the vision and people behind it. It's a lot different than betting on numbers. In fact it's a lot more like angel investment, which in the case of startups without revenue have a P/E ratio of infinity.