Happy Girl,
As usual your posts have much to respond to. I apologize if I don't get to all of the points, as I am preparing to leave on holiday (and 5 days with, I expect, no computer available).
1. You say: "As for valuation models, I am more inclined to TA. Fundamentals are usually factored into the price, its the human sentiments which guides stock movement." (To be fair to the context, you went on to say that FA is useful for long-term analysis).
My reaction: It certainly looks to me as though YHOO is currently being guided by human sentiments; I suppose all stocks are so guided, for every stock sale has on one side a buyer and the other a seller, each guided by his or her own sentiment about whatever (s)he deems important to the decision. But I have been having a lot of trouble, in case you didn't notice, identifying what YHOO fundamentals are factored into the current stock price. I do agree that FA is more of a long-term tool and TA more of a short-term tool. But one way of looking at the world is that the long term is nothing but a succession of short terms. And if the short-term TA says this stock is about where it "should" be, or even below where it "should" be, while the long-term FA suggests that it is substantially above where the fundamentals would usually require, where does that leave you? I see two answers, but perhaps there are more. First, you could conclude (as the bears and shorts do, often condescendingly) that the day of reckoning will be upon us before long. Second, you could conclude that this is a situation that calls for an expansion of fundamentals in recognition of a dramatic new development.
2. You say: "Problems with ISFPs ;) is that they get so hung up on frames, tools, methods that they lose sight of the end. (I have lived with an ISFJ for 12 years now). Its simpler than you think it is. Its all about objectives and goals. The details are important to S&Fs. The mere fact that this stock would return good value is not enough, you need to be convinced about the means too. Should someone guarantee you a return on YHOO, you would still hesitate !"
My reaction: (observors of this dialogue are referred to the YHOO board from a few days ago for definition of terms -- sorry don't have the post numbers available). Yes, details matter in my world view. I haven't assigned letters yet to my better half of the past 15 years, but I'm sure she would agree that I am at times unable to see past the details to the immediate objectives and goals. And yet, when a detailed approach is required, she is more than happy to leave it to me. So from the perspective of investment philosophy, I suppose it is a fundamental (there's that word again) personality difference that helps define our approaches. But again, my problem is: if you don't look at the details, on what should you rely? Gut feeling? Instinct? While to a degree you may rely on those things, I sense from your posts that you're thinking it through as much as the rest of us are.
(BTW -- I got a car repair yesterday without shopping around for it at all. So maybe there is some hope for me yet.)
3. Your discussion of how these personality traits have a way of expressing themselves in investment philosophies was on target.
4. You say: "(Of course the term rational is relative...what seems rational to me may seem terribly irrational to you). I do believe YHOO will be a survivor in the long run, but I'm in a prisoner's dilemma. For ease of understanding my dilemma, consider your situation. You believe there will be a correction. Can you at this point put your money on that conviction ? You also believe the stock will go to 250 before going to 150, could you put your money on that conviction ? Everything seems so easy in retrospect though."
My comment: I will have to think about whether rationality, as I understand it (from within my cage!), is a relative concept. I use rationality to describe a system of logical, deductive reasoning. The rules of that game are fairly standard and agreed upon; what is *not* agreed upon is whether those rules are applicable to a given situation, particularly a fluid, dynamic situation. And assumptions and objectives are also important elements of rationality. If you assume x, then rationality (logical reasoning) may inevitably lead you to y. But if you assume a, then you probably are going to arrive someplace other than y, unless a and x are basically the same or compel the same result. I'll have to give some more extensive thought to the Prisoner's Dilemma application -- at first glance I'm not sure I buy the analogy but there may be something there so let me think about it some more.
(BTW -- OT re your other post and Nash equilibriums -- There is a recent biography of Nash called "A Beautiful Mind" that I am in the midst of and so far is quite interesting. I don't remember the author's name but I got it from Amazon, which has a lot of info on it.)
5. I remember the UN shoe-pounding incident quite well, although I too have forgotten what the underlying issue was (Cuba, perhaps?). Anyway, I would call that calculated irrationality to attain a specific objective. Calculated irrationality is itself rational; a different example would be a sacrifice in chess. You make a move, knowing that the opponent will see the move as seemingly irrational (giving up a piece for no apparent gain), and you hope to capitalize on the opponent's reaction to that move. I have a little difficulty applying these examples to stock prices in that the irrationality, if that's what it is, is unlikely to be calculated in that it is an expression of beliefs (or even rationality based on each investor's assumptions) about YHOO's prospects for stock price appreciation by large numbers of people who are not acting in concert (I don't buy the conspiracy theories of market maker manipulation). But I agree that the example is instructive in terms of the appropriate *responsive* behavior to the apparent irrationality. Sometimes apparent irrationality is, in fact, irrational; it is someone who refuses or is unable to or doesn't want to follow the logical rules. Other times, though, it is not irrational at all; it is the expression of a different set of assumptions, or even a purposeful manipulation of one's opponents (as in the UN and chess examples). So one cannot simply say, "these people are crazy," and act without exploring where their apparent irrationality is coming from.
MAD DOG
(PS -- If any of this made sense, you'll have to consider dropping your tag line. The line doesn't resonate with me anyway, having been with a girl who's smarter than I am for the past 15 years). |
