Editing 2270: Picking Bad Stocks
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==Explanation== | ==Explanation== | ||
+ | {{incomplete|Created by a CAMPING ROOMBA. Please mention here why this explanation isn't complete. Do NOT delete this tag too soon.}} | ||
− | + | [[Cueball]] and [[Ponytail]] are discussing the stock market. Ponytail explains that there has been no reliable way to consistently pick stocks that outperform the market average. She also states that there could be a corollary to that; there is no way to consistently pick bad stocks (presumably for this discussion, ''bad stocks'' refers to stocks whose value is expected to go down). Cueball states that he could consistently pick bad stocks, and the last panel shows him at a trading terminal purportedly buying bad stocks, while [[White Hat]] and [[Megan]] use his bad stock picks as indications that those stocks should be removed from whatever stock index they manage. | |
− | + | Generally, people invest in the stock market hoping to make money. They buy stock in companies whose value they expect will increase, and sell stock when they feel its value is about to stop increasing or start decreasing. Someone who could tell whether a stock's price will rise or fall (more than the average stock) in a given time interval could make a lot of money, but this is an infamously difficult problem. Market prices already reflect the consensus estimate of what a stock should be worth based on all public information about the company. Some investors use {{w|fundamental analysis}}, that is, they attempt to understand companies based on their financial statements and market position to identify which stocks are likely to become more or less valuable over time, while others use {{w|technical analysis}} which seeks to identify patterns in the stock prices themselves. Technical analysis was featured in [[2101: Technical Analysis|comic 2101]]. However, while the rise and fall of stock prices are sometimes connected to real events (strong or weak profit statements, new product announcements, major scandals) that one person might predict better than another, they more often exhibit random-walk behavior. Many studies, such as the long-running "[https://papers.ssrn.com/sol3/papers.cfm?abstract_id=670404 Investment Dartboard Contest]" run by ''{{w|The Wall Street Journal}}'', have found that an index of stocks that represent the total market, or even a set of randomly-selected stocks (often colloquially stated as "picked by a monkey") beats paying an expert to choose your portfolio. | |
− | + | Realistically, in investing, someone who purposely trades in ''bad stocks'' is called a '''short seller''', and someone who could consistently pick ''bad stock'' could make a lot of money in the stock market. Short selling consists of selling a stock before you own it, with the anticipation that the stock's price will drop soon, and you can later purchase the stock to fulfill the sale. The difference between the selling price and the purchase price is your profit, just as with any normal ("long") purchase and sale. However, in US stock markets, it is illegal to sell stocks that you don't own, so when you short a stock, you need to borrow that stock from a third party (possibly the trading firm you're working with, or some other firm that the trading firm has a stock loan relationship with, that currently holds a position in the stock you're shorting) to cover the sale. This is all done automatically by the trading platform you use. Between the time you sell the stock until the time you repurchase the stock on the open market, you will have what's called a '''short position''' on the stock, and you need to pay interest to the company that lent you that stock. Because of the interest payments, short sales are almost always short-term positions, as the interest paid on the loan can quickly exceed any profit you might make on the sale. {{w|Gary Shilling|A. Gary Shilling}}, a financial analyst, famously remarked that "[https://quoteinvestigator.com/2011/08/09/remain-solvent/ markets can remain irrational a lot longer than you and I can remain solvent.]" Ponytail attempted to explain short selling to Cueball in [[2094: Short Selling]] (perhaps that comic and this one are part of the same conversation), although Cueball found Ponytail's advice much less helpful than he has found this comic's conversation. However, in this case, Ponytail is not describing short selling but instead, investing in every stock except for the bad ones | |
− | + | Cueball's statement about wanting revenge on a ghost may be a reference to [[2259: Networking Problems]], in which Cueball was driven insane trying to debug network problems and came to believe in ghosts. Perhaps the CEO of company #208 has had a similar experience with a network. | |
− | Cueball's | + | If Cueball's statement that a company is developing a "camping {{w|Roomba}}" is correctly attributing the trademark (as opposed to genericizing it to refer to any small cleaning robot), then presumably company #1434 is {{w|iRobot}}. While a Roomba for camping may sound like a ridiculous concept that is not likely to make much money, developing a robot that can navigate and move around natural environments would be a major advancement leading to new opportunities for both their civilian and military product lines. A campground offers a more challenging environment than indoors, while being slightly more controlled than a truly wild area, making for a good development step. Dropping iRobot from this company's index is probably not a move that would be suggested by a stock broker who is earnestly trying to make money, but maybe Cueball's "market anti-sense" knows something we don't. |
− | In | + | In the title-text, it seems that perhaps Cueball's investment advice was actually taken seriously (perhaps his trading terminal was accidentally connected to the market, or the video feed was view-able by other investors), which caused consumers to take the camping Roomba more seriously and make it (and iRobot) more successful than if Cueball had done nothing. Or maybe he's worse at picking bad stocks than he thinks he is; a legitimate investor could have seen what Cueball saw and taken it as a good sign. |
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==Transcript== | ==Transcript== | ||
+ | {{incomplete transcript|Do NOT delete this tag too soon.}} | ||
[Cueball and Ponytail are walking together.] | [Cueball and Ponytail are walking together.] | ||
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:Cueball: What ''is'' investing? Do you just open a website and pick the companies you like? | :Cueball: What ''is'' investing? Do you just open a website and pick the companies you like? | ||
− | [ | + | [Ponytail holds out her hand palm-up.] |
:Ponytail: Well, you totally can. | :Ponytail: Well, you totally can. | ||
:Ponytail: But there's a lot of evidence that no investing strategy consistently picks stocks that outperform the average of the whole market. A lot of fund management is a myth. | :Ponytail: But there's a lot of evidence that no investing strategy consistently picks stocks that outperform the average of the whole market. A lot of fund management is a myth. | ||
[Close-up on Ponytail, who has turned to Cueball.] | [Close-up on Ponytail, who has turned to Cueball.] | ||
− | :Cueball | + | :Cueball: Huh, okay. |
:Ponytail: But there's a weird corollary to that idea: it implies that, ignoring fees and stuff, it's just as hard to consistently ''lose'' money by picking ''bad'' stocks from an index. | :Ponytail: But there's a weird corollary to that idea: it implies that, ignoring fees and stuff, it's just as hard to consistently ''lose'' money by picking ''bad'' stocks from an index. | ||
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:Ponytail: In a way, bad judgement is just as helpful as good judgement. | :Ponytail: In a way, bad judgement is just as helpful as good judgement. | ||
− | [ | + | [Cueball raising his hands.] |
:Cueball: Oh my God. | :Cueball: Oh my God. | ||
:Cueball: I can do that! | :Cueball: I can do that! |