efficient markets? ha!

The stock markets for the past 3 weeks has been just fascinating. And by fascinating, I mean quite crazy and on most days, quite painful.

I studied Finance at Rutgers, and we learned a lot about how “efficient” the markets were. How all available and whispered about information is efficiently synthesized by the vast army of buyers and sellers which leaves the price at the perfect spot balancing all available information.

I’ve always thought this theory was total crap. And now, with a few more years away from coursework, I definitely think this is all crap.

Based on my 10-year investment (I’ve proven stunningly successful at losing money) career, and on the past few weeks, I’ve concluded that the market tries to find equilibrium between two things:

1) Greed.
2) Fear.

That’s it. These wild fluctuations sealed the deal for me. Today, apparently, everyone is greedy.

5/13/13 – Duh. I wrote a totally obvious thought and pretended it was insight.

tech bubble 2.0: coming soon to a market near you?

I shudder to even type the words, but I wonder if another stock market tech bubble is forming. The last time we were here, at the end of the last decade, everyone’s cash flowed into tech and telecom because it seemed like a sure thing. Exuberance all around. Today, the exuberance is missing– but the interest and attention remain. So what would trigger a tech bubble to form? Exuberance, yesterday. Fear, today.

I fear that an unattractive general securities market, driven by the sub-prime mortgage mess influencing everything from credit markets to (potentially) consumer discretionary income, will leave techs as the most attractive securities remaining. Most tech today is very attractive due to strong balance sheets (how different from last time, huh?) and lots of cash/free cash-flow, strong growth prospects, and potential cost-savings promises for business which would be very attractive in a depressed economic climate. If this is indeed the general perception of tech, as the general market drops, money could continue to flow into tech creating a bubble. Pure conjecture. Thought I’d share the random thought.

5/13/13 – Right in the abstract, totally wrong in the details. A year after I wrote this, we got the collapse I was worried about. Instead of tech stocks though, the money went to cash and t-bills. I should have bought tech stocks at this record low for all the positive reasons I wrote in that last paragraph.