Still Have 40,000 Shares of IMMR

[DesertCat]

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OK, lets put it differently. As long as only a few people know an angle they couldn't possibly move the price to what they think is correct. Because the closer they moved it to that price the greater the amount of money that would bet the other side.

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First, I'll concede on dick size, as I'd rather not go to showdown with you Second, if I post that I got lucky in a hand of poker you wouldn't think much of my poker skills (actually I did, and you probably don't). Much of 2+2 is devoted to analyzing the right lines to take in various forms of poker, so why shouldn't this forum be devoted to discussions of the right lines to take with investments?

You've already said on the TASR thread that you believe in the efficient market theory and that stocks are fairly priced. But then you say you can find stocks where the market is incorrectly pricing in a specific important event/factor, and you can find an edge doing so. These two statements are contradictory, do you see why?

You've referenced this as working in sports handicapping and I admit I don't understand how it works in sports handicapping, because I see it as similar to investing. Why I don't think it can work in investing is that stock valuations are a multifactor calculation. Picking one factor can't tell you the values of the other factors, nor can it tell you what value the market is putting on your specific factor. All you know is the total value the market is putting on the business, i.e. the sum of it's component valuation factors.

This is why I think you have to analyze all the relevant valuation factors before you decide the market is wrong. But I'm here to learn. Can you explain why you think differently?

[kdotsky]

[ QUOTE ]
OK, lets put it differently. As long as only a few people know an angle they couldn't possibly move the price to what they think is correct. Because the closer they moved it to that price the greater the amount of money that would bet the other side.

[/ QUOTE ]

Ok so you have to argue that very few people see the same angle as you.

You're saying it's hard for the price to become correct because the massive other side pushes back; but it's going to be corrected eventually -- that's why you buy it. But you still don't know WHEN it's going to be corrected. How do you know it hasn't already corrected itself at the time you're investing? It's not like when the correction happens the public is going to walk around saying "oh TASR isn't so bad, everyone overreacted to the rare deaths thing". And when you see the price go up you have no idea if it just corrected or went up because of unrelated factors.

[kdotsky]

I have no reason to believe I'll explain it any better, but I'll try anyway:
1) the market is efficient, ON AVERAGE
2) we see one aspect of the stock we think is unaccounted for
3) we can assume the other aspects of the stock are 0 EV because they are efficient, on average. So we can be lazy and ignore them, and the stock is undervalued.

I think generally it's sound. But my problem is with identifying (2). I don't know how you can tell when the aspect of the stock you think is unaccounted for, has been finally accounted for. One way would be to look at everything about the company and try to put a value on the stock, as you say.

[Sniper]

kdotsky, the market is not that efficient.

[David Sklansky]

"You've already said on the TASR thread that you believe in the efficient market theory and that stocks are fairly priced. But then you say you can find stocks where the market is incorrectly pricing in a specific important event/factor, and you can find an edge doing so. These two statements are contradictory, do you see why?"

I don't believe in the efficient market theory. I mis spoke. In other words I don't believe that the market always evaluates public information properly. I believe only in what I think you call the weak version. That the markets price on average is correct. Which sort of implies that charting won't work.

As to the rest of your post, you seem to have a mental block about something that is common sense. If only I know the quarterback is hurt do I need to know more to make a bet? True sometimes the second string quarterback is just as good, and those bets will be bad, due to my laziness. But on average I will still win.

[DesertCat]

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As to the rest of your post, you seem to have a mental block about something that is common sense. If only I know the quarterback is hurt do I need to know more to make a bet? True sometimes the second string quarterback is just as good, and those bets will be bad, due to my laziness. But on average I will still win.

[/ QUOTE ]


What if the market is under-rating the teams running game and defense?

How do you know the market doesn't rate the quarterback change as skillfully as you?

The wonderful thing about the stock market is that while it's usually efficient (not the same as on average), occasionally it presents you with a price that is clearly wrong. But catch these errors, you need to be able to estimate what intrinsic value is, and you can't do that by just looking at one aspect of the company. I.e. TASR's product risk of causing death may be a minor impact on it's value as you think, but if you don't know what TASR's real value should be, you can't tell whether that one factor is causing TASR to be undervalued or not.

[Cubswin]

I believe it is generally accepted that certain sports teams see a large amount of action for no apparent reason and the odds offered by Vegas books reflect this action. This is not that much different than many stocks.

Sports books often have futures bets on the Cubs winning the World Series at odds way off from the real odds of this event happening. Now, your friend in the Cubs front office tells you the team is about to make some big off season moves and pick up a stud pitcher and a big name hitter. The Vegas books haven’t yet heard the news and futures odds have not yet moved. Putting aside the general stupidness of futures bets, is there now value in placing this bet on the Cubs to win the WS?

I think you would agree that the sports books generally get it right in the same way the markets generally get it right. Sometimes you may have knowledge or insight that is not seen by other investors or punters, but is it necessarily +EV to act on this one small piece of knowledge without knowing something about the value of the investment or bet? Without looking at the underlying value of the stock or the underlying value of a sports bet, you are doing nothing more than speculating.

I'm Irish, there will be no dick waving on my part.

[Sniper]

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That the markets price on average is correct. Which sort of implies that charting won't work.


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David, can you explain your reasoning as to why market price on average being correct, would lead to an implication that charting won't work?

[Jcrew]

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But catch these errors, you need to be able to estimate what intrinsic value is, and you can't do that by just looking at one aspect of the company.

[/ QUOTE ]

So according to this statement, you cannot make money with insider information about pending one time events (lawsuits, settlements, recalls, discoveries, etc.) which is equivalent to the realization of the market misinterpreting the effects of public one time events.

Price is determined by the aggregate view of the market. If the public is irrationally viewing one factor, how is this any different from the public irrationally viewing the sum of all of the factors(ie the intrinsic value)? Both are going to put pressure on the price in one direction and both are making assumptions about how much attribution various aspects contributes to the price determined by the market.

[Jeff W]

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If only I know the quarterback is hurt do I need to know more to make a bet?

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Yes, that is because you're the only one who knows he's hurt and thus you can assume that information is priced in. That is insider information, though.