Why is The Value of Zoom Greater Than Exxon?
Is this realistic or a bubble?
Goal: Discuss Financial Market Reality vs. Expectations
The other day I watched a financial channel and they showed that the value of Zoom company is 138B and slightly greater than Exxon. It made me scratch my head.
Is this reality?
The world has changed. Physical assets that Exxon has vs. bits that Zoom has is what we are really comparing.
The stock market is currently not reflecting reality. It is fantasy land. In case of a large correction, the value of zoom can go to zero BUT the value of Exxon can not because they have physical assets. This is how Buffett has been able to profit over the years by buying companies for their realistic value when they were down.
Why do you care?
There was once a tulip price run up a few hundred years ago. Prices of tulips kept going up and up. It seemed that there was no end. Then reality set in and the market plummeted.
Is this market going to crash?
Anything that is not based on reality will come crashing down. The only question is when. I do not know when and no one else does.
Another interesting observation is performance after earnings. Most of the high tech companies exceeded their revenue targets last quarter. The day these were announced their stocks went down. Yet some companies that have missed earning targets had their stock jump. If you pay attention to what happens before the market even opens it will make you suspect of the market.
For example, let’s say Tesla beat earning per share and reported last night. The big guys decide that it will fall by $50 next morning. Before the market starts they take their profits and drop it almost 50. There is very little room for anyone to make a profit. Market opens and people see the drop and like sheep start shorting the stock(shorting the stock means that they are betting it will fall instead of rise). The market makers let it drop another 10 and then start buying. All of the people shorting start getting out and handing their money to the market makers.
Reality?
People are forced into the market through their 401k. We are feeding this beast that keeps getting bigger and bigger. I believe that if there was no 401k influx of money, the market would collapse so quickly because it is not based on reality.
So what is the danger?
A market is a wonderful invention. It allows a person to “invest” in the future of a company that they perceive is doing well. By taking that risk, if they are correct, their investment increases faster than it would elsewhere.
Unfortunately, the market makers are allowed to profit off the backs of lesser players. That is like playing against Lebron with him being able to control the score. Totally unfair!!!
So what can we do?
I believe that we should not predict the bottom OR top of any stock, mutual fund, or ETF. It is the ride up or down that is important. Once you see that the trend is obviously going up, jump in and ride it for a bit, and get out.
What does that mean?
Suppose you want to buy 100 shares of Apple at 120. It is after an hour after market starts, and the jumping in and out is calmed down, decide the direction of the market(going up, down or sideways) and if the market is still going up, buy your 100 shares.
Apple goes up by 2% after you buy then just get out. It is rare that you will make more than 2% in a day. Don’t look at the stock going up or down. You are done. You made 2% on 12000 investment. That is $240.
Are any other stocks going up? Repeat…
For losses I believe the best rule is to never allow your stock to drop more than 10%. A 10% loss only needs 11.1% gain to get you back to whole. To simplify it a 10% loss needs about a 10% gain to get back to whole. 20% loss needs a 25%, 50% loss needs a 100% gain. So NEVER let your losses get below 10%.
NOTE: I am NOT a financial advisor. What I wrote is common sense investing and rules I follow. I am not giving you financial advice. You can go to brokers for that. Their purpose is to make you BROKER. Nobody cares about your money more than you. Don’t hand it over to others to manage. If you need advice make sure you are talking with a fiduciary advisor for a fee..
My two cents….(this is what I earned from Medium.com in October 2020)
I got to go…my future self alarm went off
Robert Trajkovski is professional with experience in leading people and projects in Steel/ Power, Refining, Chemicals, Industrial Gasses, Software, Consulting and Academia. He has worked for both owners and engineering companies. In addition, he has instructed 73+ courses at several institutions and often offers his courses for free on LinkedIn.
https://www.linkedin.com/in/roberttrajkovski/
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