Having conversations about the stock market this summer, with all the BBQs and days off, etc. One of the things that strikes me these days is how completely unaware civilians are about how old and…non-utilitarian their information is.
Many of these talks go something like this…
So, Facebook is in some trouble, huh?
Yes, I guess.
I sold it. I think there’s going to be fines and regulation and stuff.
Well, yes, this has already started…
It’s going to be bad.
Okay, but Facebook is up like fifty percent this year, with bad headlines every week, so…are you referring to some new sort of troubles?
Yes. It’s actually doubled the performance of the S&P Communications Services sector, so, do you think the other companies in that sector are in even bigger trouble by your logic?
No, I was just thinking there’s going to be a crackdown and fines and stuff and-
So you don’t think millions of professional investors have the same information about this that you have? You don’t think this reality has already been digested and priced into Facebook’s share price over months and months? I mean, if you and I are talking about something in a backyard in the Hamptons, you don’t think the market is already fully aware of it?
Had almost identical conversations about Nike’s SJW routine, the Boeing plane problems, the launch of Disney’s app and how it might affect Netflix, the prices of oil and oil stocks, the Malaysian lawsuit against Goldman Sachs, etc.
I think that people who read pieces of information about companies from time to time in mainstream publications don’t always consider that there are market players (and algorithms) who are constantly digesting and pricing information 24 hours a day.
I never seek out these conversations. I don’t give out stock tips and I’m not really interested in being on the receiving end of any myself. But these conversations seek me out, which I understand completely. But I’m still amazed at the degree to which civilians think that they’ve read something or heard some bit of company news that might be of use to them in making a buy or sell decision on a stock. I guess it will always be that way, no matter how fast the markets become, or how wide and deep and the pool of professional, skilled operators become.
I think when people see a news segment or read a book, they find places to interject the information they’ve retained from watching or reading into a lot of their conversations right afterward. All of a sudden, the last thing they’ve learned seems to be apropos to every discussion they find themselves in.
I get it. And this is what feeds into an availability bias when it comes to individual stock stories. I read this thing, it must be important.
If it’s been in print for a few hours, the market has already moved on. You’re not in possession of anything useful. Just a soundbite or a opening for small talk around the grill.