And yes, we know how herd mentality takes over fast. That's why there are circuit breakers and rules and incentives.
And yes, TLSA "crashes" every other week, and bounces back the next day. (Of course if a 5% swing is a crash then everything crashes all the time. But MSNBC et al. have to make content somehow, those 24 hours ain't gonna fill themselves, so ... everything is crashing then.)
> The way to win in the stock market is to properly model that joke.
Yes, there are - by definition - infinite levels of the meta game, and modeling some of them (and just lower/upper bounding them in a residual) makes sense too, but there is usually a signal in the noise too. (Not the kind of post-hoc Nostradamus "yes we know something is going to happen because VIX increased by two points, and now it's COVID time" bullshit, but the WeWork/Uber finally hit the fan, and so on kind.)
> The idea that the stock market is a bunch of rational, informed experts setting valuations on things will get you nowhere, and it doesn't function that way, and doesn't behave according to that model.
Agreed. I hope I never claimed that it's all "fully rational". All we have is bounded rationality anyway (because of time and resource constraints), and of course it's not a group wise scholars with sophisticated MCMC models :)
The SEC is just the embodiment of the good old "reality" outside the game. There's no point in letting the markets get into pathological states just to see who would win the game.
Investors are generally not informed, act on FOMO, and not the right people to determine the value provided by a company.
NVDA stock crashing when Uber's self-driving car crash, for example. Or TSLA stocking crashing when an accident occurs and driver exits safely and unharmed, when they would have died in a normal car.
Or some company's stock hurtling up because they release some hoo-la-la PR about some new piece of software, but as a software engineer I know its faults.
Scientists and engineers are informed. Customers are also informed. Investors, on the other hand, are generally people with lots of money but who have lost their basic skills and science knowledge in the process.
Of course there are a few knowledgeable people in the lot, but they aren't the majority -- at least that's the case with the public stock market.
The public stock market itself is a bunch of uninformed people hedging bets based on information provided by uninformed, unskilled PR people -- it's more or less a joke, and that's the name of the game, whether or not you choose to accept it. (I know I'll get downvoted for this -- probably by the people who have millions in the stock market!) The way to win in the stock market is to properly model that joke.
The idea that the stock market is a bunch of rational, informed experts setting valuations on things will get you nowhere, and it doesn't function that way, and doesn't behave according to that model.
Unfortunately, the SEC is meddling in proper modelling of jokes right now, which sucks. It's easier to model it when it's either fully a joke or fully rational, and it's much more on the joke side overall.