I lost faith in economics a long time ago. The whole science is built on flawed assumptions. My breaking point was the efficient market hypothesis, which states stock prices reflect all current information. Basically, you can’t beat the market. I disagree and I will show why it is dumb. Let’s look at some price action on some trash stocks to show how inefficient the market really is.
Nikola – $NKLA
Nikola IPO’d as a $30B company. It soon turned out to be a fraud. Six months later, we are working our way to the truth, but who still believes Nikola is worth more than Stitchfix? I’m triggered. I want to fight the market right now because it’s so inefficient.
Kodak – $KODK
You can see two spikes in this above graph. The first is when Kodak (yes – the camera company) announced they were entering the crypto mining business. A company that struggled to go digital and was crushed by competition is now getting into crypto mining? Come on… but the market reacted with the stock going up by 4x. Quickly the market came back to it’s senses and the stock went back to normal trading range. Then in July 2020, the Trump administration announced a $765M loan to Kodak so they could start producing pharmaceuticals. Yes, we are still talking about the camera company that struggled to go digital and was crushed by competition. The “efficient” market priced in this information by temporarily raising the stock price 16x. Eventually, the loan was rescinded, but $KODK is still trading significantly higher than prior to the announcement.
What this all means:
Meanwhile, the market is flush with great companies ($SPOT, $AMZN, $SQ, $SE, $MELI, etc…). Why would the efficient market be piling billions of dollars into trash stocks when many better stocks exist? The answer is simple… the market isn’t efficient. Remember this and go make some money. Oh and I’m going to buy some more $SFIX. Nothing fixes being triggered like getting rich.