Crypto currency (IF banned from CA)

[DuuuncanHadaPigeon]

OMG! It’s a WEXING ladies and gents it’s a WEXING. Gather around and look and the poor corpse of @DuuuncanHadaPigeon .Yes it is common for the victim to urinate themselves before their ultimate demise.

@chicoazul can you call the hose down crew to clear this mess up.

I give you a 3/10 for that weak shout and cringe attempt to get @chicoazul involved. Try harder sir.

 

[JP5]

I said 'nearly 100%' the vast majority of price appreciation comes from the next guy buying higher. You can't do anything with your shares except hope you can find someone to buy it for higher than you paid.

Dividends account for a tiny amount of profit compared to the profits from price appreciation. Yes stock buybacks push the price higher but in order for me to extract that value I need to sell, to who? the next guy who buying higher

When you boil it all down it the only thing that moves the share price up is more people buying than selling. That is it.

Apple could sell 1 trillion iphones and have record profits and cash flows, but if no one buys or sells the stock (aside from buybacks) the price will not move...

No it doesn’t. Again you are misunderstanding valuation and the dynamics between that and market price.

Each investor makes a forecast of the expected future cash flows from each stock. There are a number of ways to look at ‘cash flows’. Some investors use dividends, some will use the free cash flow of the business etc. Those cash flows (which will assume a growth assumption for cash flows pushed out into the future), form the numerator of the equation.

That numerator is then combined with the individual investors required rate of return. This is determined by the underlying benchmark interest rate chosen by an investor and the risks (represented by various risk premia) that an investor applies to that stock. That forms the denominator.

Once combined, that helps the investor form a valuation for that investment.

That valuation is impacted by changes to each of those inputs (such as rises in interest rates or a change in expected growth of cash flows) and so each investor will have a potentially different valuation to each other.

When markets are efficient, those inputs are very similar between investors, when they are inefficient then there is a much broader distribution to those inputs.

The current price is determined by the aggregate view of all investors’ valuation. If the current price is higher than most investors valuation, they will sell (or wont buy). And vice versa.

You see quite large market moves when there is a material change to one of those inputs, particularly when it affects all investors (waves at interest rates). Those stocks that are most sensitive to that input will be impacted the most (waves at growth companies whose cash flows are far out into the future).

‘speculation’ removes that valuation process from the equation. To say that stock prices are almost entirely ‘speculation’ is untrue. There is a process to this that underpins major public markets in particular.

The best area to look at to understand is the bond market as the cash flows tend to be predetermined and there are fewer risk premia than equities.

To reiterate, if there are cash flows associated with the stock (whether distributed to investors or not), then the prices are not nearly 100% speculation.

Though when there are no cash flows at all, or if those are hard to determine, then yes, I can see an argument for speculation. Though in most cases there are other measures of valuation (such as relative measures).

 

[The Gueye Science]

I said 'nearly 100%' the vast majority of price appreciation comes from the next guy buying higher. You can't do anything with your shares except hope you can find someone to buy it for higher than you paid.

Dividends account for a tiny amount of profit compared to the profits from price appreciation. Yes stock buybacks push the price higher but in order for me to extract that value I need to sell, to who? the next guy who buying higher

When you boil it all down it the only thing that moves the share price up is more people buying than selling. That is it.

Apple could sell 1 trillion iphones and have record profits and cash flows, but if no one buys or sells the stock (aside from buybacks) the price will not move...

I suppose it shouldn't be surprising that cypto bros wouldn't appreciate the difference between equities for grownups and meme stonks, but you are still missing the point.

Yes, in order to complete any transaction you need a buyer and a seller. But unlike with crypto, which - and I don't think anybody here has ever refuted this - has value solely based on the expectation that a greater fool will one day come along to pay more it than you did, stocks also have value anchored in tangible material reality.

If Apple sells 1 trillion iPhones and sets record profits then there will realistically always be someone who will pay for their stocks. Not just because they think someone else down the road will want to pay even more for those stocks, but because they are then entitled to a share of these record profits and the promise of more to come. That doesn't mean Apple isn't currently overvalued (almost everything these days is) but the value of its stocks are nonetheless at a basic level grounded upon material conditions. Ok sure, theoretically tomorrow an asteroid or a pandemic could kill 99% of the population. Or maybe Christianity will make late-stage revival and the entire world will en masse renounce material pursuits and focus on bible studies instead TikTok. If that happens, you'd be right - Apple could no longer expect to sell 1 trillion iPhones and their stock would drop in value. But it is still a qualitatively different and inherently more valuable investment than Bitcoin or Hex or any of the competing dog-branded lines of code because its stock is legally bound to tangible assets and not just to the whims of suggestible, bored and/or ill-informed retail speculators.

 

[DuuuncanHadaPigeon]

No it doesn’t. Again you are misunderstanding valuation and the dynamics between that and market price.

Each investor makes a forecast of the expected future cash flows from each stock. There are a number of ways to look at ‘cash flows’. Some investors use dividends, some will use the free cash flow of the business etc. Those cash flows (which will assume a growth assumption for cash flows pushed out into the future), form the numerator of the equation.

That numerator is then combined with the individual investors required rate of return. This is determined by the underlying benchmark interest rate chosen by an investor and the risks (represented by various risk premia) that an investor applies to that stock. That forms the denominator.

Once combined, that helps the investor form a valuation for that investment.

That valuation is impacted by changes to each of those inputs (such as rises in interest rates or a change in expected growth of cash flows) and so each investor will have a potentially different valuation to each other.

When markets are efficient, those inputs are very similar between investors, when they are inefficient then there is a much broader distribution to those inputs.

The current price is determined by the aggregate view of all investors’ valuation. If the current price is higher than most investors valuation, they will sell (or wont buy). And vice versa.

You see quite large market moves when there is a material change to one of those inputs, particularly when it affects all investors (waves at interest rates). Those stocks that are most sensitive to that input will be impacted the most (waves at growth companies whose cash flows are far out into the future).

‘speculation’ removes that valuation process from the equation. To say that stock prices are almost entirely ‘speculation’ is untrue. There is a process to this that underpins major public markets in particular.

The best area to look at to understand is the bond market as the cash flows tend to be predetermined and there are fewer risk premia than equities.

To reiterate, if there are cash flows associated with the stock (whether distributed to investors or not), then the prices are not nearly 100% speculation.

Though when there are no cash flows at all, or if those are hard to determine, then yes, I can see an argument for speculation. Though in most cases there are other measures of valuation (such as relative measures).

I think we need to frame this argument better because I agree with a lot of what you say.

When I say speculation, I acknowledge that buying BRK is far less risky than trying to get lucky with penny stocks. To me personally I would say buying BRK or XYZ penny stock are both speculative decisions, just with different risk.

I agree that smart investors will have some method of analysis or a model to inform them of what is a good buy and what isn't. I agree that things like cash flow, dividends, performance of a company make the basis of these models.

The point I am trying to make is this. Let's say a stock satisfies the criteria of their model and they get a buy signal, what do they hope to happen. They hope/predict that the price goes up so that they can then sell that stock to the next guy who buys, leaving them in profit. They are buying so they can sell to the next guy buying.

I don't like to use the term greater fool theory because people who play the stock market well, have all the money, so they are obviously not fools, but they are relying on new money coming in so they can make a profit. This, coupled with the fact that not every model is 100% right is why I say the vast majority of profits in stocks comes from speculation - the reason the stock price went up is no more complicated than more people pressing the buy button than the sell button, no matter how smart or dumb the decision was to press that button.

This started when someone said, anyone who buys BTC is just waiting for a new guy buying so they can make money. I believe it is exactly the same for stocks.

 

[nsno-chris]

Wowzers

@JP5 is taking NO prisoners

School is in session

 

[DuuuncanHadaPigeon]

I suppose it shouldn't be surprising that cypto bros wouldn't appreciate the difference between equities for grownups and meme stonks, but you are still missing the point.

Yes, in order to complete any transaction you need a buyer and a seller. But unlike with crypto, which - and I don't think anybody here has ever refuted this - has value solely based on the expectation that a greater fool will one day come along to pay more it than you did, stocks also have value anchored in tangible material reality.

If Apple sells 1 trillion iPhones and sets record profits then there will realistically always be someone who will pay for their stocks. Not just because they think someone else down the road will want to pay even more for those stocks, but because they are then entitled to a share of these record profits and the promise of more to come. That doesn't mean Apple isn't currently overvalued (almost everything these days is) but the value of its stocks are nonetheless at a basic level grounded upon material conditions. Ok sure, theoretically tomorrow an asteroid or a pandemic could kill 99% of the population. Or maybe Christianity will make late-stage revival and the entire world will en masse renounce material pursuits and focus on bible studies instead TikTok. If that happens, you'd be right - Apple could no longer expect to sell 1 trillion iPhones and their stock would drop in value. But it is still a qualitatively different and inherently more valuable investment than Bitcoin or Hex or any of the competing dog-branded lines of code because its stock is legally bound to tangible assets and not just to the whims of suggestible, bored and/or ill-informed retail speculators.

This is literally the sole reason you make an investment in the stock market.

I do my research and find a company that is flourishing, I think in the future they will do even better. I buy their stock because I think someone else down the road will want to pay even more than what I paid for. As a shareholder of a company you can do nothing apart from hope to sell for more than you paid and maybe receive some dividends.

The hypothetical I was making was that even if a company performed amazing, if no one buys then the price can't move!

'stock is legally bound to tangible assets and not just to the whims of suggestible, bored and/or ill-informed retail speculators' - what about gamestop and other meme stonks that go up and down purely on speculation.

 

[The Gueye Science]

This is literally the sole reason you make an investment in the stock market.

I do my research and find a company that is flourishing, I think in the future they will do even better. I buy their stock because I think someone else down the road will want to pay even more than what I paid for. As a shareholder of a company you can do nothing apart from hope to sell for more than you paid and maybe receive some dividends.

The hypothetical I was making was that even if a company performed amazing, if no one buys then the price can't move!

You've overlooked everything I just said. Setting aside the question of dividends etc, there is a qualitative difference in the reasons why somebody might buy a financial instrument linked to material profits vs a financial instrument like Hex (or whatever) that exists solely for speculation. In other words, when you do your research and find a company that is flourishing there are actually tangible reasons why somebody will buy their stock from you down the road, unlike with Crypto where you are betting exclusively on whimsy and moonbeams.

Or maybe you could explain why, if Apple sells 1 trillion iPhones, its stock wouldn't find buyers?

what about gamestop and other meme stonks that go up and down purely on speculation.

Don't buy them.

 

[chicoazul]

This is a most ferocious thread and a credit to grandoldteam.com. I commend you all.

 

[DuuuncanHadaPigeon]

You've overlooked everything I just said. Setting aside the question of dividends etc, there is a qualitative difference in the reasons why somebody might buy a financial instrument linked to material profits vs a financial instrument like Hex (or whatever) that exists solely for speculation. In other words, when you do your research and find a company that is flourishing there are actually tangible reasons why somebody will buy their stock from you down the road, unlike with Crypto where you are betting exclusively on whimsy and moonbeams.

Or maybe you could explain why, if Apple sells 1 trillion iPhones, its stock wouldn't find buyers?


Don't buy them.

I agree that for most crypto the only use case is speculation, I am not trying to argue otherwise. How many times have I said in this thread BTC has utterly failed at p2p cash, it's original purpose.

You assume there are tangible reasons why somebody will buy your stock down the road, it is by no means a guarantee is it. There is that story of a monkey making random picks outperforming wall st firms. Who could have ever predicted oil would go beyond zero. You are speculating, hoping new money comes into the market and buys your bags. That's the only argument I am making.

You can throw cash flows and tangible assets at me all you like but the ONLY thing that matters is someone pressing the buy button, that is the reason I use the hypothetical apple selling 1 trillion iphones example.

'stock is legally bound to tangible assets and not just to the whims of suggestible, bored and/or ill-informed retail speculators' - don't worry I don't buy them, I am using GME as an example that stocks are not legally bound to tangible assets, whatever that means, they often do go up randomly at the whims of retail traders.

 

[JP5]

I agree that for most crypto the only use case is speculation, I am not trying to argue otherwise. How many times have I said in this thread BTC has utterly failed at p2p cash, it's original purpose.

You assume there are tangible reasons why somebody will buy your stock down the road, it is by no means a guarantee is it. There is that story of a monkey making random picks outperforming wall st firms. Who could have ever predicted oil would go beyond zero. You are speculating, hoping new money comes into the market and buys your bags. That's the only argument I am making.

You can throw cash flows and tangible assets at me all you like but the ONLY thing that matters is someone pressing the buy button, that is the reason I use the hypothetical apple selling 1 trillion iphones example.

'stock is legally bound to tangible assets and not just to the whims of suggestible, bored and/or ill-informed retail speculators' - don't worry I don't buy them, I am using GME as an example that stocks are not legally bound to tangible assets, whatever that means, they often do go up randomly at the whims of retail traders.

It means that at the very least they can be valued based on the actual things they own like buildings and computers or in the case of an iPhone the underlying parts.

 

[DuuuncanHadaPigeon]

It means that at the very least they can be valued based on the actual things they own like buildings and computers or in the case of an iPhone the underlying parts.

I agree but then you have cases like TSLA, where they are valued more than every other car company put together, speculation drove the price to crazy levels that even elon said it was too high.

 

[JimmyJeffers]

I give you a 3/10 for that weak shout and cringe attempt to get @chicoazul involved. Try harder sir.

Praise the lord he’s alive!

 

[JimmyJeffers]

Which YouTube video can I watch to become an expert in stocks and crypto pls?

 

[Daveysgingerlovechild]

No it doesn’t. Again you are misunderstanding valuation and the dynamics between that and market price.

Each investor makes a forecast of the expected future cash flows from each stock. There are a number of ways to look at ‘cash flows’. Some investors use dividends, some will use the free cash flow of the business etc. Those cash flows (which will assume a growth assumption for cash flows pushed out into the future), form the numerator of the equation.

That numerator is then combined with the individual investors required rate of return. This is determined by the underlying benchmark interest rate chosen by an investor and the risks (represented by various risk premia) that an investor applies to that stock. That forms the denominator.

Once combined, that helps the investor form a valuation for that investment.

That valuation is impacted by changes to each of those inputs (such as rises in interest rates or a change in expected growth of cash flows) and so each investor will have a potentially different valuation to each other.

When markets are efficient, those inputs are very similar between investors, when they are inefficient then there is a much broader distribution to those inputs.

The current price is determined by the aggregate view of all investors’ valuation. If the current price is higher than most investors valuation, they will sell (or wont buy). And vice versa.

You see quite large market moves when there is a material change to one of those inputs, particularly when it affects all investors (waves at interest rates). Those stocks that are most sensitive to that input will be impacted the most (waves at growth companies whose cash flows are far out into the future).

‘speculation’ removes that valuation process from the equation. To say that stock prices are almost entirely ‘speculation’ is untrue. There is a process to this that underpins major public markets in particular.

The best area to look at to understand is the bond market as the cash flows tend to be predetermined and there are fewer risk premia than equities.

To reiterate, if there are cash flows associated with the stock (whether distributed to investors or not), then the prices are not nearly 100% speculation.

Though when there are no cash flows at all, or if those are hard to determine, then yes, I can see an argument for speculation. Though in most cases there are other measures of valuation (such as relative measures).

I'm a novice and a lay person in such matters. However, would it be fair to say you are essentially saying "you are the victim in this ponzi scheme"?

In layman's.

 

[Death]

No it doesn’t. Again you are misunderstanding valuation and the dynamics between that and market price.

Each investor makes a forecast of the expected future cash flows from each stock. There are a number of ways to look at ‘cash flows’. Some investors use dividends, some will use the free cash flow of the business etc. Those cash flows (which will assume a growth assumption for cash flows pushed out into the future), form the numerator of the equation.

That numerator is then combined with the individual investors required rate of return. This is determined by the underlying benchmark interest rate chosen by an investor and the risks (represented by various risk premia) that an investor applies to that stock. That forms the denominator.

Once combined, that helps the investor form a valuation for that investment.

That valuation is impacted by changes to each of those inputs (such as rises in interest rates or a change in expected growth of cash flows) and so each investor will have a potentially different valuation to each other.

When markets are efficient, those inputs are very similar between investors, when they are inefficient then there is a much broader distribution to those inputs.

The current price is determined by the aggregate view of all investors’ valuation. If the current price is higher than most investors valuation, they will sell (or wont buy). And vice versa.

You see quite large market moves when there is a material change to one of those inputs, particularly when it affects all investors (waves at interest rates). Those stocks that are most sensitive to that input will be impacted the most (waves at growth companies whose cash flows are far out into the future).

‘speculation’ removes that valuation process from the equation. To say that stock prices are almost entirely ‘speculation’ is untrue. There is a process to this that underpins major public markets in particular.

The best area to look at to understand is the bond market as the cash flows tend to be predetermined and there are fewer risk premia than equities.

To reiterate, if there are cash flows associated with the stock (whether distributed to investors or not), then the prices are not nearly 100% speculation.

Though when there are no cash flows at all, or if those are hard to determine, then yes, I can see an argument for speculation. Though in most cases there are other measures of valuation (such as relative measures).

Good attempt Jurassic Park but you forget to use phrases such as 'diamond penis', 'to da moon' and 'Bro' every couple of sentences.

I can see you are new to the Crypto. You'll pick the lingo up eventually.