Investing Blog

Making money in the stock market requires you know what’s going on, unless of course you subscribe to the random walk theory. But is it about being right, or is it about being first, or is it being right first?

This is what has always bugged me with investing and the stock market. Prices on the stock exchange are set by a huge number of people buying and selling things at prices they consider a good deal.

Back in 1999 someone might have sold Yahoo stock for $2 per share, thinking that was the best they’d get. Another person bought it, thinking $2 was only the beginning. One of the people was right, the other was wrong.

But why was the other person right?

The person who bought Yahoo stock in 1999 thought the share price would go up. Obviously, the common person does not buy stock thinking it will go down.

But let’s think for a moment. WHY do stocks go up and down. They don’t go up and down based on true, fundamental value, otherwise every stock would sell close to its book value. They aren’t priced based on their earnings or their growth, otherwise they’d all have similar PEG values, and we know that is not true.

But what they do sell on is the price that other people are or will be willing to pay. In my own mind it comes down to who’s first, not who’s right. Being right, in my opinion, is being first, at least when it comes to the market.

I don’t know how to measure what each person is thinking. I know maybe 100 people who I could ask, but they’d all be from one place and have differing opinions. Plus, in a market made up by millions, maybe billions, of people, a 100 person sample would be less than adequate.

And thus I asked Google to help me out. Its SmartSearch doo-hickey of technology let’s you know what other people are looking for, just in case you’re just like them.

I admittedly picked a bad day for this experiment, it just so happens that Tetris was created today in history. Heres to 25 years of making things fit!

Anyway, looking at the smartsearch above tells us that people are searching for the following things in order:

real estate
stocks
gold
bonds
silver
oil
the stock market
mutual funds
tips

Now that I think about it, I can see how the list of searches is pretty accurate at predicting, or creating, today’s and tomorrow’s price movements.

Real estate is bottoming in some markets. In others its dropping. But judging by the list people are finding low prices an interesting investment.

Stocks have moved off their bottoms. But stocks are the things people invest into the most, so more people is more people. I can’t really draw conclusions here.

Gold is soaring, and so is the interest in the metal, apparently. Gold tops bonds, that’s WEIRD.

Mutual funds and TIPS are at the bottom of the list. I don’t know if stocks are just meant to be a synonym of mutual funds, but that’s how the overwhelming majority of people invest in stocks. Maybe this #9 rank for mutual funds could be helped by exchange-traded funds?

TIPS are growing in popularity, but also last place on the list, just as they are in the market itself. Treasury yields are skyrocketing, due to lessened interest.

So take from this what you can get. Let me know how you think the winners win. Is it he who is first, or he who is right?

Investing