Stocks - The Best Buys 2

[Enoch Root]

Originally Posted by CASe333

So they provided a report saying they weren't meeting earnings and immediately there was a sell-off within 5min. But why did it almost immediately drop to the low? I'm looking at after hr trades and price dropped almost immediately. Why wouldn't it drop more incrementally with time? Even a volatile stock like TSLA doesn't move like this.

If the information is available, and is relatively easy to analyze and determine a new valuation point, then the price of the shares will instantly jump to the new price (or thereabouts).

Let's say, for simple math, that AMZN was worth $100, with previously expected earnings of $10/share. Then, they come out and say that earnings will be $8/share, and they don't expect that to change any time soon. The simple analysis here says the stock should drop 20% to $80.

Okay, so you're wanting to buy AMZN and you were waiting for the news. Before it came out, you might have been prepared to buy at $100 (or at a price reflective of what you expected the earnings to look like). But now, it is clearly only worth $80. So why would you buy at $99 or $98 or $97... the answer is you wouldn't. Any orders that you might have on the books, you would remove and you would put in a new order at $80.

This is how it works (overly simplistically). Sure, there would be a few people who's orders weren't removed, and sellers would immediately jump on them. But the market would almost immediately drop to $80, because that is where the bids would be.

No rational person would buy at price X, if they think the price is going to soon be less than X. Decide what price makes sense, and buy there. That is why markets drop quickly.

[Enoch Root]

Further on this, there is no 'mechanism' that forces a stock price to move linearly from $100 to $99.99 to $99.98 to $99.97, etc

People tend to behave this way, because people see patterns, even when they don't exist. However, each of those price points are not required, in order to get to the new price point.

So if the current bid (the highest price anyone is willing to pay) was $100, but then new information comes out that says it is worth way less, the price will immediately change to whatever the new bid is. And that bid could be anything.

9/11 happened before the markets opened. Bids immediately evaporated, and it was quickly apparent that there would be bedlam, with prices going absolutely anywhere (though obviously well down). We might have had a situation where there were literally NO bids on some securities, making them effectively (theoretically) worthless.

That is why they decided to not open the markets, and suspended all trading until things could settle, and information could be gathered and disseminated.

[bizaro86]

Originally Posted by Enoch Root

If the information is available, and is relatively easy to analyze and determine a new valuation point, then the price of the shares will instantly jump to the new price (or thereabouts).

Let's say, for simple math, that AMZN was worth $100, with previously expected earnings of $10/share. Then, they come out and say that earnings will be $8/share, and they don't expect that to change any time soon. The simple analysis here says the stock should drop 20% to $80.

Okay, so you're wanting to buy AMZN and you were waiting for the news. Before it came out, you might have been prepared to buy at $100 (or at a price reflective of what you expected the earnings to look like). But now, it is clearly only worth $80. So why would you buy at $99 or $98 or $97... the answer is you wouldn't. Any orders that you might have on the books, you would remove and you would put in a new order at $80.

This is how it works (overly simplistically). Sure, there would be a few people who's orders weren't removed, and sellers would immediately jump on them. But the market would almost immediately drop to $80, because that is where the bids would be.

No rational person would buy at price X, if they think the price is going to soon be less than X. Decide what price makes sense, and buy there. That is why markets drop quickly.

Yeah, the idea that 5 minutes is quick for a large cap with big news to adjust is very wrong. 5 seconds is more realistic. Plenty of programmatic traders analyzing news flows with AI and auto-trading on the info to try and get a speed advantage. Although after hours is definitely slower/less liquid

[Slava]

Originally Posted by Enoch Root

Further on this, there is no 'mechanism' that forces a stock price to move linearly from $100 to $99.99 to $99.98 to $99.97, etc

People tend to behave this way, because people see patterns, even when they don't exist. However, each of those price points are not required, in order to get to the new price point.

So if the current bid (the highest price anyone is willing to pay) was $100, but then new information comes out that says it is worth way less, the price will immediately change to whatever the new bid is. And that bid could be anything.

9/11 happened before the markets opened. Bids immediately evaporated, and it was quickly apparent that there would be bedlam, with prices going absolutely anywhere (though obviously well down). We might have had a situation where there were literally NO bids on some securities, making them effectively (theoretically) worthless.

That is why they decided to not open the markets, and suspended all trading until things could settle, and information could be gathered and disseminated.

Well I used the word mechanism because I think that was the best word for the case. Maybe that gave the wrong impression, because I think we're saying essentially the same thing here.

[Enoch Root]

Originally Posted by Slava

Well I used the word mechanism because I think that was the best word for the case. Maybe that gave the wrong impression, because I think we're saying essentially the same thing here.

No, I was not referring to your use of the word mechanism at all - just in the general, conceptual sense. Yes, we were saying the same thing, just in different ways.

[Manhattanboy]

Best buying opportunity in years gone so it seems. Can’t believe how quickly and significantly the US indexes have rebounded.

[Manhattanboy]

Wow Imperial Oil on a tear. Amazing results

[Enoch Root]

Originally Posted by Manhattanboy

Best buying opportunity in years gone so it seems. Can’t believe how quickly and significantly the US indexes have rebounded.

Is this sarcasm? The S&P500 is still down 19%

IYW (tech ETF) is still down 33.2%

[opendoor]

And ~10% run ups are quite common in down markets. This is the 3rd one this year after the 11% increase in March and the 17% increase in June -> August. But each succeeding peak has been lower than the previous one, and if that were to continue we'd see another drop relatively soon.

While at some point it'll start a more consistent trajectory upwards, I don't think there's much reason to think we've seen the bottom (though I guess it's possible). Right now, it's the 20th biggest drop from peak to trough among the 22 bear markets in the last 100 years. And the S&P has always bottomed out within or just after a recession. So if one is going to happen in the next year or so, that would suggest that there's room to drop still.

[Leondros]

My general feeling is there is still a lot to shake out. Tech stocks are just the beginning of lousy earnings. I think the rally today was predicated on the Blackstone note that came out that said the fed is going to be less hawkish. I don't see how they can not keep consistent with their messaging going into Tuesday next week. You need to keep spending in check and changing your signaling only erodes that goal.

[Slava]

Originally Posted by Manhattanboy

Best buying opportunity in years gone so it seems. Can’t believe how quickly and significantly the US indexes have rebounded.

An equal weighted holding of Meta, Amazon, Microsoft, Apple and Google would be down 42% year to date. I guess if you consider that fully recovered, you’ve missed your chance there!

Originally Posted by opendoor

And ~10% run ups are quite common in down markets. This is the 3rd one this year after the 11% increase in March and the 17% increase in June -> August. But each succeeding peak has been lower than the previous one, and if that were to continue we'd see another drop relatively soon.

While at some point it'll start a more consistent trajectory upwards, I don't think there's much reason to think we've seen the bottom (though I guess it's possible). Right now, it's the 20th biggest drop from peak to trough among the 22 bear markets in the last 100 years. And the S&P has always bottomed out within or just after a recession. So if one is going to happen in the next year or so, that would suggest that there's room to drop still.

That’s IF there’s a recession though. People keep saying we’re there already (GDP was positive in both Canada and the US and likely not negative on a quarterly basis). A recession that’s yet to come would be the most widely predicted recession ever, and that’s questionable because they’re generally unexpected. There’s also a lot of evidence that companies are hoarding staff. They’ve had a difficult time hiring and aren’t keen on cutting to repeat the process as things improve. Instead, they seem to be signaling that they’re prepared to ride it out for the most part. That’s an issue for the “recession is still coming camp”.

And as far as the idea that the economy was over-heated and companies were way over leveraged, it doesn’t seem to be the case either. It seems like the one reason we could sink negative is the fed raising rates too fast, and of course that’s also questionable. Maybe they push us to recession, or maybe things slow and don’t go negative. It’s not a binary outcome.

And lastly (sorry for the length of this), Canada is in a pretty different scenario. Our energy/materials sector is keeping things positive in terms of GDP, and we could well avoid recession nationally, but certainly provincially.

[TherapyforGlencross]

Originally Posted by Manhattanboy

Best buying opportunity in years gone so it seems. Can’t believe how quickly and significantly the US indexes have rebounded.

I think this statement is a bit premature.

[Strange Brew]

Originally Posted by Manhattanboy

Best buying opportunity in years gone so it seems. Can’t believe how quickly and significantly the US indexes have rebounded.

Dated August 8, 2022.

[GGG]

It’s always the best time to buy.

[Johnny199r]

Originally Posted by GGG

It’s always the best time to buy.

This. Always this. Time in the market beats timing the market. There is never a perfect time to jump in the market. If someone knew when that was, they'd be rich beyond belief.

[Strange Brew]

I’m long Boeing. I believe long term prospects for air travel are great and they are getting g their operational issues sorted out. Eventually the China situation will be solved.

Long term I think it’s good value and will outperform the S&P.

[zamler]

Originally Posted by GGG

It’s always the best time to buy.

If you bought GE 12 years ago you're looking at a 3x-5x loss. It's entirely possible you could hold the stock for the rest of your life and never be in the green.

tl;dr: good advice to a point.

[GGG]

Originally Posted by zamler

If you bought GE 12 years ago you're looking at a 3x-5x loss. It's entirely possible you could hold the stock for the rest of your life and never be in the green.

tl;dr: good advice to a point.

You assumed there was some advice about what to buy in there.

Dollar cost averaging beats timing the market in any broad based study. It’s always time to buy.

[Enoch Root]

Originally Posted by zamler

If you bought GE 12 years ago you're looking at a 3x-5x loss. It's entirely possible you could hold the stock for the rest of your life and never be in the green.

tl;dr: good advice to a point.

it applies to markets, not individual securities

[bizaro86]

Originally Posted by Enoch Root

it applies to markets, not individual securities

And not all markets all the time. You can get a bubble so big that it wipes out decades of returns. If the Nikkei goes up another 30% or so it'll be back to even from its all time high - which was in 1989 (over 30 years ago). And it's not like Japan is a weak economy or had political upheaval during that period (if you include those there are LOTS of markets with similar characteristics for many decades: Argentina, Spain/Italy, etc).