2270: Picking Bad Stocks - Revision history

NotaBene at 19:53, 28 December 2025

2025-12-28T19:53:22Z

Firestar233: Undo revision 366121 by 162.158.167.69 (talk) i disagree with that statement

2025-02-20T07:02:18Z

Undo revision 366121 by 162.158.167.69 (talk) i disagree with that statement

162.158.167.69: /* Explanation */

2025-02-19T22:24:25Z

‎Explanation

42.book.addict at 20:14, 15 January 2025

2025-01-15T20:14:26Z

Besenj: Removed superfluous apostrophe.

2023-10-01T03:10:33Z

Removed superfluous apostrophe.

Nitpicking: /* Explanation */ typo fix

2023-09-26T10:36:06Z

‎Explanation: typo fix

Nitpicking: /* Explanation */ Close quote

2023-09-26T10:34:56Z

‎Explanation: Close quote

Tromag at 17:55, 20 June 2023

2023-06-20T17:55:36Z

GreatWyrmGold: The prior editors were presuming the success of a venture which seems custom-built to be unsuccessful.

2023-04-04T04:19:23Z

The prior editors were presuming the success of a venture which seems custom-built to be unsuccessful.

Jacky720: rv

2022-05-04T21:39:49Z

Show changes

← Older revision		Revision as of 19:53, 28 December 2025
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	In the title-text, another reason why it's difficult to pick bad stocks is highlighted. Due to a big investment (very possibly, Cueball's investment), the company in question has gotten a lot of attention and a spike in pre-orders. This emphasizes the unpredictability of the markets. People often invest (and even order) based on perception as much as on actual value, and so a company that might seem in trouble might see its fortunes turn around quickly. Because such things are so difficult to predict, beating the market is nearly impossible over time.		In the title-text, another reason why it's difficult to pick bad stocks is highlighted. Due to a big investment (very possibly, Cueball's investment), the company in question has gotten a lot of attention and a spike in pre-orders. This emphasizes the unpredictability of the markets. People often invest (and even order) based on perception as much as on actual value, and so a company that might seem in trouble might see its fortunes turn around quickly. Because such things are so difficult to predict, beating the market is nearly impossible over time.
		+
		+	If we assume that Randall is not using "Roomba" as a {{w\|generic trademark}} for any small domestic cleaning robot, then the company in question is {{w\|iRobot}}; [https://finance.yahoo.com/quote/IRBT/ their stock price] more than doubled in the year after this comic was published, but then subsided back down the year after, even amidst news that they were intending to be acquired by Amazon (which then failed to happen after scrutiny from regulators). At the end of 2025, iRobot declared bankruptcy and was acquired by their contracted manufacturer. Was Cueball's "talent" in any way prescient of this occurrence? But in any case, iRobot's sub-billion-dollar revenue and market capitalization were never going to make or break any meaningful index funds.

	==Transcript==		==Transcript==

@@ Line 23: / Line 23: @@
 In this example, the disturbing news about these companies (such as their CEO exhibiting erratic behavior, or developing an apparently useless product) is already public, and will presumably have been "priced in" to the market. This means that the stock price will have already dropped as much as it's expected to by most investors. At the same time, individual pieces of bad news don't necessarily mean the company will fail. If the CEO's eccentricities start to impact earnings, they'll probably be replaced. An ill-conceived product may indicate poor management, or it may be a one-off, and other product lines can keep the company profitable. As a result, dropping such companies after bad news, when the stock price is likely to be low, is unlikely to be a winning strategy.
-In the title-text, another reason why it's difficult to pick bad stocks is highlighted. Due to a big investment (very possibly, Cueball's investment), the company in question has gotten a lot of attention and a spike in pre-orders. This emphasizes the unpredictability of the markets. People often invest (and even order) based on perception as much as on actual value, and so a company that might seem in trouble might see its fortunes turn around quickly. Because such things are so difficult to predict, beating the market is nearly impossible over time. It could also imply that, after seeing Megan and White Hat trying to game the system, fate itself has intervened to prevent deliberately picking "bad" stocks from being so easy.
+In the title-text, another reason why it's difficult to pick bad stocks is highlighted. Due to a big investment (very possibly, Cueball's investment), the company in question has gotten a lot of attention and a spike in pre-orders. This emphasizes the unpredictability of the markets. People often invest (and even order) based on perception as much as on actual value, and so a company that might seem in trouble might see its fortunes turn around quickly. Because such things are so difficult to predict, beating the market is nearly impossible over time.
 ==Transcript==

@@ Line 23: / Line 23: @@
 In this example, the disturbing news about these companies (such as their CEO exhibiting erratic behavior, or developing an apparently useless product) is already public, and will presumably have been "priced in" to the market. This means that the stock price will have already dropped as much as it's expected to by most investors. At the same time, individual pieces of bad news don't necessarily mean the company will fail. If the CEO's eccentricities start to impact earnings, they'll probably be replaced. An ill-conceived product may indicate poor management, or it may be a one-off, and other product lines can keep the company profitable. As a result, dropping such companies after bad news, when the stock price is likely to be low, is unlikely to be a winning strategy.
-In the title-text, another reason why it's difficult to pick bad stocks is highlighted. Due to a big investment (very possibly, Cueball's investment), the company in question has gotten a lot of attention and a spike in pre-orders. This emphasizes the unpredictability of the markets. People often invest (and even order) based on perception as much as on actual value, and so a company that might seem in trouble might see its fortunes turn around quickly. Because such things are so difficult to predict, beating the market is nearly impossible over time.
+In the title-text, another reason why it's difficult to pick bad stocks is highlighted. Due to a big investment (very possibly, Cueball's investment), the company in question has gotten a lot of attention and a spike in pre-orders. This emphasizes the unpredictability of the markets. People often invest (and even order) based on perception as much as on actual value, and so a company that might seem in trouble might see its fortunes turn around quickly. Because such things are so difficult to predict, beating the market is nearly impossible over time. It could also imply that, after seeing Megan and White Hat trying to game the system, fate itself has intervened to prevent deliberately picking "bad" stocks from being so easy.
 ==Transcript==

@@ Line 27: / Line 27: @@
 ==Transcript==
-[Cueball and Ponytail are walking together.]
+:[Cueball and Ponytail are walking together.]
 :Cueball: I feel like by now I should know about the stock market.
 :Cueball: What ''is'' investing?  Do you just open a website and pick the companies you like?
-[Cueball and Ponytail are still walking; Ponytail is holding out her hand palm-up.]
+:[Cueball and Ponytail are still walking; Ponytail is holding out her hand palm-up.]
 :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.
-[Close-up on Ponytail, who has turned to Cueball.]
+:[Close-up on Ponytail, who has turned to Cueball.]
 :Cueball (off-screen): 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.
-[Cueball and Ponytail are both back in frame.  They are standing still and facing each other.]
+:[Cueball and Ponytail are both back in frame.  They are standing still and facing each other.]
 :Ponytail: If someone could consistently buy bad stocks, you could beat the average by hiring them, letting them pretend to invest, then buying every stock ''except'' the ones they pick.
 :Ponytail: In a way, bad judgement is just as helpful as good judgement.
-[In a frameless panel, Cueball and Ponytail are standing facing each other; Cueball is raising his hands.]
+:[In a frameless panel, Cueball and Ponytail are standing facing each other; Cueball is raising his hands.]
 :Cueball: Oh my God.
 :Cueball: I can do that!
@@ Line 49: / Line 49: @@
 :Cueball: This is the job I was born for.
-[Cueball is either sitting in a box or being viewed on a camera screen.  He is sitting in front of a computer console, and a camera is pointed at him.  Megan and White Hat are viewing him, and White Hat is holding a tablet.]
+:[Cueball is either sitting in a box or being viewed on a camera screen.  He is sitting in front of a computer console, and a camera is pointed at him.  Megan and White Hat are viewing him, and White Hat is holding a tablet.]
 :[Text box: Soon...]
 :Cueball: Hey, this company's CEO wants revenge on the same ghost as me!  I'm buying!

@@ Line 23: / Line 23: @@
 In this example, the disturbing news about these companies (such as their CEO exhibiting erratic behavior, or developing an apparently useless product) is already public, and will presumably have been "priced in" to the market. This means that the stock price will have already dropped as much as it's expected to by most investors. At the same time, individual pieces of bad news don't necessarily mean the company will fail. If the CEO's eccentricities start to impact earnings, they'll probably be replaced. An ill-conceived product may indicate poor management, or it may be a one-off, and other product lines can keep the company profitable. As a result, dropping such companies after bad news, when the stock price is likely to be low, is unlikely to be a winning strategy.
-In the title-text, another reason why it's difficult to pick bad stocks is highlighted. Due to a big investment (very possibly, Cueball's investment), the company in question has gotten a lot of attention and a spike in pre-orders. This emphasizes the unpredictability of the markets. People often invest (and even order) based on perception as much as on actual value, and so a company that might seem in trouble might see it's fortunes turn around quickly. Because such things are so difficult to predict, beating the market is nearly impossible over time.
+In the title-text, another reason why it's difficult to pick bad stocks is highlighted. Due to a big investment (very possibly, Cueball's investment), the company in question has gotten a lot of attention and a spike in pre-orders. This emphasizes the unpredictability of the markets. People often invest (and even order) based on perception as much as on actual value, and so a company that might seem in trouble might see its fortunes turn around quickly. Because such things are so difficult to predict, beating the market is nearly impossible over time.
 ==Transcript==

@@ Line 13: / Line 13: @@
 Ponytail then adds that there's a lot of evidence suggesting that no investment strategy consistently outperforms the market. This is significant, because there's an entire industry of "fund management", in which (often highly paid) financial experts determine how clients' money should be invested. The notion is that such managers, being particularly educated and informed on both general economic conditions and the state of specific companies, should be able to select companies that are more likely to do well and avoid those which will do poorly. However, history shows that stock markets in most advance economies tend to rise over time, which means that most stocks are more likely to go up in value, rather than down. Simply choosing more stocks that go up in value than down is relatively trivial, in order to be valuable, a fund needs to "beat the market", meaning that it appreciates in value more than the entire body of stocks do.
-As Ponytail points out, however, there is little evidence that these funds provide much value in the long term. 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 is likely to produce returns just as favorable as an expert.  This means a large enough set of randomly-selected stocks (often colloquially stated as "picked by a monkey") is likely to do the same, as it's likely to represent the entire market. The reasons for this are much debated. A lot of the value of stocks is based on perception and speculation about the future, and so exhibits a great deal of unpredictable and quasi-random behavior. And any objective information about a company's health tends to shift the prices very quickly, so the typical investor can't really take advantage of those. While a fund might have periods of significantly market-beating performance, those are generally balanced out be periods of bad luck.
+As Ponytail points out, however, there is little evidence that these funds provide much value in the long term. 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 is likely to produce returns just as favorable as an expert.  This means a large enough set of randomly-selected stocks (often colloquially stated as "picked by a monkey") is likely to do the same, as it's likely to represent the entire market. The reasons for this are much debated. A lot of the value of stocks is based on perception and speculation about the future, and so exhibits a great deal of unpredictable and quasi-random behavior. And any objective information about a company's health tends to shift the prices very quickly, so the typical investor can't really take advantage of those. While a fund might have periods of significantly market-beating performance, those are generally balanced out by periods of bad luck.
 Ponytail then points out an interesting corollary. If movements of the stock market are effectively random, then it's just as hard to consistently ''lose'' money by investing as it is to consistently gain money. The reason is that consistently losing money would require a person to be able to consistently identify stocks that are likely to decline in value. The ability to do that would be very valuable, because the more bad stocks you can remove from your portfolio, the higher percentage of good stocks you'll have left.

@@ Line 9: / Line 9: @@
 ==Explanation==
-[[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.
+In simplest terms, the stock market is a system by which private investors (including individual) can invest in companies by purchasing shares of stock, which can pay dividends, based on the company's net profits, and which rise in value if a company is doing well or is expected to do well in the future. Like many laymen, [[Cueball]] apparently understands the concept of the stock market, but is mystified by the complex strategies and vehicles for investment. He asks [[Ponytail]] if he can just "open up a website, and a pick a company you like.  In fact, in modern times, it's quite easy for individuals to set up online brokerage accounts with relatively small investments, and buy any available stocks they like.
-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.
+Ponytail then adds that there's a lot of evidence suggesting that no investment strategy consistently outperforms the market. This is significant, because there's an entire industry of "fund management", in which (often highly paid) financial experts determine how clients' money should be invested. The notion is that such managers, being particularly educated and informed on both general economic conditions and the state of specific companies, should be able to select companies that are more likely to do well and avoid those which will do poorly. However, history shows that stock markets in most advance economies tend to rise over time, which means that most stocks are more likely to go up in value, rather than down. Simply choosing more stocks that go up in value than down is relatively trivial, in order to be valuable, a fund needs to "beat the market", meaning that it appreciates in value more than the entire body of stocks do.
-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
+As Ponytail points out, however, there is little evidence that these funds provide much value in the long term. 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 is likely to produce returns just as favorable as an expert.  This means a large enough set of randomly-selected stocks (often colloquially stated as "picked by a monkey") is likely to do the same, as it's likely to represent the entire market. The reasons for this are much debated. A lot of the value of stocks is based on perception and speculation about the future, and so exhibits a great deal of unpredictable and quasi-random behavior. And any objective information about a company's health tends to shift the prices very quickly, so the typical investor can't really take advantage of those. While a fund might have periods of significantly market-beating performance, those are generally balanced out be periods of bad luck.
-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.
+Ponytail then points out an interesting corollary. If movements of the stock market are effectively random, then it's just as hard to consistently ''lose'' money by investing as it is to consistently gain money. The reason is that consistently losing money would require a person to be able to consistently identify stocks that are likely to decline in value. The ability to do that would be very valuable, because the more bad stocks you can remove from your portfolio, the higher percentage of good stocks you'll have left.
-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.
+Cueball's immediate response is that he's sure can pick money-losing stocks. The final panel suggests that he's teamed up with [[Megan]] and [[White Hat]] to do exactly that, selecting stocks based on absurd reasons, while the others watch from a distance, and cull his suggested stocks from their portfolio, rather than investing in them.
-If this project was successful, dropping iRobot from this company's index would likely not be a wise decision. However, the very difficulty of the project makes success less likely. In addition, if the "camping Roomba" is meant to perform the same functions as a standard Roomba (ie, removing dirt from the floor), success would be virtually impossible, as campground floors are generally made of dirt.{{citation needed}}
+In real life, this strategy would be unlikely to work, for the exact reasons Ponytail laid out: the trends of individual stocks are too complex and random to predict, so good or bad decision making won't consistently stray from market returns.
-In the title-text, it seems that Cueball is 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. This only validates Ponytail's point regarding the stock market - there is no way to consistently identify what stocks will go up or down.
+In this example, the disturbing news about these companies (such as their CEO exhibiting erratic behavior, or developing an apparently useless product) is already public, and will presumably have been "priced in" to the market. This means that the stock price will have already dropped as much as it's expected to by most investors. At the same time, individual pieces of bad news don't necessarily mean the company will fail. If the CEO's eccentricities start to impact earnings, they'll probably be replaced. An ill-conceived product may indicate poor management, or it may be a one-off, and other product lines can keep the company profitable. As a result, dropping such companies after bad news, when the stock price is likely to be low, is unlikely to be a winning strategy.
 ==Transcript==