It's somewhat amusing to see Apple throw away market leadership now, just like it did in the 80s

[Jon Miller]

I have heard of a surprising number of people who make a living off the stock market.

I think it is possible to 'beat the market', as an individual trader.

For various reasons, not all are going to start working for some hedge fund or mutual fund.

The private ownership of stocks/etc is still over 30% (if I remember the data I posted in a recent thread I started), so it isn't all mutual fund/etc out there.

JM

[Al B. Sure!]

Don't worry, Kuci's not well-versed in this either. Actuarial studies do not lend themselves well to the dynamic real-world aspects of the stock market. Kuci's pretty damn good when the world is all about reliable statistical models and data tables, but he's proven again and again whenever there's human dynamics involved (as in the stock market), he only ever sees half the picture.

Kuci and KH have long demonstrated excessive faith in Homo Economicus. Behavioral finance and behavioral economics wouldn't exist if EMH were a given.

[Kuciwalker]

You're pretty ****ing bat**** crazy here, Kuci.
I'm saying I think the stock is overvalued, and I'm saying I think the people buying AAPL are idiots at this price.

And I'm saying that that your opinion is unjustified because the best possible estimate available to you is the market price.

I made no universal qualifiers about there being a reliable method for anyone to determine the true value of a stock.

And yet somehow you are able to determine the true value of AAPL.

No, Kuci. I don't think you understand stock market dynamics at all. Have you ever met a daytrader? Have you ever talked to traders, even, at most investment banks?

People who actively trade stocks are pretty ****ing far from rational, in the general case.

The general case is irrelevant. What matters is the intelligence and knowledge of the smartest and most knowledgeable participant in the entire market. If even a tiny fraction of traders are smarter and more knowledgeable than you, the market price is your best possible estimate of the correct price.

[Kuciwalker]

Kuci and KH have long demonstrated excessive faith in Homo Economicus. Behavioral finance and behavioral economics wouldn't exist if EMH were a given.

You misunderstand the EMH and attribute it powers far beyond it claims. Moreover, it's not particularly important whether the EMH is "true" (it obviously is not), it's important that no theory that rejects the EMH can be useful. Any useful theory of asset prices that rejects the EMH would necessarily have investment implications - and once such a theory became known, it would immediately become untrue as people started using it to pick stocks.

[Kuciwalker]

I don't think I want to go down this road since I'm not well-versed enough but this whole efficient market stuff that Kuci is positing isn't necessarily a given and there's quite a bit of literature, especially over the last two decades, casting doubt on Fama's EMH.

For example, jstor won't let you see passed the first page but...

http://www.jstor.org/pss/4479854

http://www.jstor.org/pss/2328371

http://papers.ssrn.com/sol3/papers.c...ract_id=420313

AS: anyone can come up with a trading rule that works in the past. Any pattern discovered ex post is probably just data mining, and if it isn't then it won't be true in the future anyway.

[Kuciwalker]

AS: here's a good investment rule I've discovered by looking at historical asset prices: if GOOG is below $500, buy!

[Kuciwalker]

It's kind of sad how Asher keeps demonstrating he doesn't understand anything outside of pure software development

Hell, AS is doing way better in this thread - at least he figured out I was talking about the EMH, and understands the general method of inferring real knowledge from asset prices.

[Asher]

And yet somehow you are able to determine the true value of AAPL.

You still fail to read the basics.

The general case is irrelevant.

[Asher]

It's kind of sad how Asher keeps demonstrating he doesn't understand anything outside of pure software development

Hell, AS is doing way better in this thread - at least he figured out I was talking about the EMH, and understands the general method of inferring real knowledge from asset prices.

Oh, don't be so bitter.

I worked directly with traders for about three years. You know what you read in your textbook (as it relates to actuarial science ) and what daddy told you.

All of your nice statistical models and economic models and theories are pure theory. You have no idea how irrational many of those traders are, or how stupid the automated trading algorithms can be. You have no ****ing clue how much of a house of cards a stock like AAPL will be because it doesn't fit in your nice, pretty little model very well. You aren't even trying to explain the dot-com bubble. You're skirting the issue altogether while being pedantic and misreading people's posts.

All this thread has continued to demonstrate is how you fail to understand basic humanity and human psychology, preferring instead to believe the world is a perfect economical model with a cut-and-dry answer. It's impossible for irrationality and panic to affect the stock market, isn't it Kuci?

Christ your naivete kills me. The fact that you are trying to spin this on me not getting it is just golden.

What banks are on your resume, Kuci? I've got two (three if you include a few weeks at Barclays). I spent about three years working in the finserv market and building back-end trading systems and dealing with traders and BAs. I can assure you, the world of trading isn't nearly as refined and predictable as you want it to be.

[Asher]

Kuci, I'd like to see you answer these.

1) Is AAPL overpriced? How do you know?
2) Is AAPL a good investment at this point? How do you know?
3) How did Black Friday & the dot-com bubble happen if the market was fully rational?
4) How do you think the stock of AAPL will react when Steve Jobs dies or people finally realize Mac will remain niche and the iPhone will also become niche?

My main argument here is AAPL is overvalued because there's no way in hell they can continue to sustain the growth they have now. And the price of the stock right now, which doesn't pay any dividend, will NOT continue to rise to a substantial degree without sustaining the growth they have now. I don't think most of the AAPL investors actually follow the market as a whole or understand industry trends or potential future products very well. They're people like you -- they look at numbers only, plug it into a calculator and think it's worthwhile; or they're people jumping on the bandwagon because everyone else is buying it. And what happens when everyone jumps on a bandwagon with a stock? Its value goes up. And as any sports fan will tell you, most of the people who jump on the bandwagon when times are good are nowhere to be found when times are tough.

[Kuciwalker]

You're skirting the issue altogether while being pedantic and misreading people's posts.

this, from Asher, who hasn't managed to address the issue (or even show that he understands it) at all.

You aren't even trying to explain the dot-com bubble.

There is nothing I need to explain about it. Sometimes the market predicts wrongly. Sometimes it is very wrong. Sometimes it is extraordinarily wrong in ways that, in retrospect, look pretty irrational. And yet none of that comes close to addressing the question of whether it's possible to make ex ante judgments of stock prices that have better than even odds of turning out correct.

All this thread has continued to demonstrate is how you fail to understand basic humanity and human psychology, preferring instead to believe the world is a perfect economical model with a cut-and-dry answer.

Human psychology and behavioral economics affect the prices of goods and services, not assets. You are sitting there ignoring (refusing to address!) the fact that only a tiny fraction of market participants have to be rational for stock prices to be efficient.

What banks are on your resume, Kuci? I've got two (three if you include a few weeks at Barclays). I spent about three years working in the finserv market and building back-end trading systems and dealing with traders and BAs. I can assure you, the world of trading isn't nearly as refined and predictable as you want it to be.

the fact that you worked with so many incompetent traders explains why you don't understand anything about finance or economics.

[Asher]

You're skirting the issue altogether while being pedantic and misreading people's posts.

this, from Asher, who hasn't managed to address the issue (or even show that he understands it) at all.

You aren't even trying to explain the dot-com bubble.

There is nothing I need to explain about it. Sometimes the market predicts wrongly. Sometimes it is very wrong. Sometimes it is extraordinarily wrong in ways that, in retrospect, look pretty irrational.

It was pretty ****ing irrational at the time, too. While the dot-coms were massively overvalued during the dot-com bubble, AAPL is overvalued now.

Your own lack of foresight and understanding of how businesses actually operate probably explains why you can't see it as overvalued now. You will be one of those people who, in 5 years, looks back at AAPL and says "in retrospect, it looked pretty irrational to buy it at >$350".

And yet none of that comes close to addressing the question of whether it's possible to make ex ante judgments of stock prices that have better than even odds of turning out correct.

And yet no one cares about that question, not the least of which is me. Perhaps you'd like to join in the conversation instead of trying to dictate it to more pedantic ones. The fact that you're using phrases like "ex ante" truly exposes your tactic here -- if you continually to act like a bore with pointlessly esoteric terms, people will just give up...

Human psychology and behavioral economics affect the prices of goods and services, not assets.

Oh, you can't seriously believe this, can you?

Human psychology and behaviour affect every aspect of human behaviour. The stock market is simply a marketplace for humans (and their AI brethren) to trade stocks. You'd have to be a complete and utter moron to think that marketplaces where humans are trading things are not affected by human psychology and behaviour...

You are sitting there ignoring (refusing to address!) the fact that only a tiny fraction of market participants have to be rational for stock prices to be efficient.

Why would I address something completely irrelevant to the fundamental conversation, which you are obviously incapable of comprehending?

the fact that you worked with so many incompetent traders explains why you don't understand anything about finance or economics.

If you want to be taken seriously on this site, Kuci, I strongly suggest you stop making an ass out of yourself.

[Kuciwalker]

[QUOTE=Asher;5932039]1) Is AAPL overpriced? How do you know?[/q]

I don't know, and no one I know (including you) knows. Steve Jobs and some other Apple insiders might know, and some very smart and well-informed people who study the tech industry might know, but for everyone else the best estimate of the value of AAPL is the market price.

2) Is AAPL a good investment at this point? How do you know?

See above, with the caveat that AAPL's investment value also depends on the individual and his current portfolio (you and I are already highly exposed to technology stocks, so all else being equal we should prefer to minimize our holdings of AAPL and similar).

3) How did Black Friday & the dot-com bubble happen if the market was fully rational?

Well, one explanation of Black Friday is that the market realized the Depression was coming.

The dot-com bubble happened because the market's prediction was wrong. It's not omniscient; it's just smarter than any of the rest of us. Plenty of people correctly called the bubble, but people are predicting bubbles all the time so of course you'll always find someone who was right. Note that Greenspan's famous "irrational exuberance" claim was a wrong bubble prediction; had you gone long on NASDAQ that day and held the stock you would have made a decent return by now. We should still lend more credence to the market price than to anyone telling us it's wrong.

My main argument here is AAPL is overvalued because there's no way in hell they can continue to sustain the growth they have now. And the price of the stock right now, which doesn't pay any dividend, will NOT continue to rise to a substantial degree without sustaining the growth they have now.

I don't know enough to judge this on industry knowledge, but I infer from the relevant asset prices that you're probably wrong.

I don't think most of the AAPL investors actually follow the market as a whole or understand industry trends or potential future products very well.

It wouldn't even matter if they are Apple fanboys; the market only needs a small number of rational investors for the price to be correct. Rational investors with access to sufficient leverage can and will completely neutralize the effect of the irrational investors on the price.

They're people like you -- they look at numbers only, plug it into a calculator and think it's worthwhile; or they're people jumping on the bandwagon because everyone else is buying it.

I wouldn't presume to do anything like that. For me, even attempting to value a stock based on 'fundamentals' would be an irrational choice.

And what happens when everyone jumps on a bandwagon with a stock? Its value goes up. And as any sports fan will tell you, most of the people who jump on the bandwagon when times are good are nowhere to be found when times are tough.

That analogy doesn't even work. The irrational people on the bandwagon are still on it when it drives off the cliff; someone who was smart enough to be able to deliberately time their exit for the top of the market would be an absolutely brilliant investor.

[Aeson]

I don't see why Kuci is having such a fit about Asher claiming Apple is mispriced. Any investment is an admission on the part of the investor that they think the investment is mispriced (at least in regards to their specific circumstance, including tax shelters and such).

[Asher]

I don't know, and no one I know (including you) knows. Steve Jobs and some other Apple insiders might know, and some very smart and well-informed people who study the tech industry might know, but for everyone else the best estimate of the value of AAPL is the market price.

Oh, I see the problem.

You have no ****ing idea what I'm talking about because you're a pedantic *****.

I am quite clearly referring to the market price. Your answer is "we don't know anything!" so we can't make a judgment on if the stock is a good investment.

That is amazingly helpful.

Well, one explanation of Black Friday is that the market realized the Depression was coming.

The dot-com bubble happened because the market's prediction was wrong.

You want to know why it's wrong? Because investors were irrational.

Investors believed the magical growth in all of these new markets would continue growing apace, good times everyone!! When it started slowing down, some people started panicking and dumping tech stocks. That caused others to panic and dump. Which caused others to panic and dump...and pop goes the bubble.

And what I'm saying is I believe AAPL is in exactly the same spot. They've been making money off tons of new product categories and disruptive technologies, and investors keep investing because they are predicting it'll keep happening. But they will be wrong, and the train will stop. There's only so many disruptive technologies AAPL can introduce to make a profit off of. Their business model is pretty much fundamentally flawed for longevity, they are currently on a boom/bust cycle where the booms offset the busts because of new products disrupting the market. But what happens when those runs out? The busts are catching up to them.

I don't know enough to judge this on industry knowledge

That much is clear.

but I infer from the relevant asset prices that you're probably wrong.

It wouldn't even matter if they are Apple fanboys; the market only needs a small number of rational investors for the price to be correct. Rational investors with access to sufficient leverage can and will completely neutralize the effect of the irrational investors on the price.

And that's exactly what happened with the dot-com bubble, amiright?

That analogy doesn't even work. The irrational people on the bandwagon are still on it when it drives off the cliff; someone who was smart enough to be able to deliberately time their exit for the top of the market would be an absolutely brilliant investor.

Huh? Not all of the people are on the bandwagon was it goes off the cliff. People see the cliff approaching and start jumping off, which sparks a panic and others start jumping off as well. The point is the people who jump on the bandwagon because they see it was going up and up...(and make no mistake, the ONLY reason to invest in AAPL is when you think the value will keep increasing, as there is no dividend) are going to be the people who jump off once it becomes clear the stock has peaked. And that'll crash the stock.