The SkunK has long circled about a common theme. Luckily for us who look for hidden value, the price of a stock is determined by two faulty humans - the buyer and the seller. Neither has perfect information, and only one of them will be proved correct. A broken watch will be right twice a day - but market forces are based on human emotions and in the short term are not as precise as even that broken clock.
The beauty of market forces however, is that they are self regulating. If a clock is two hours off - without intervention it will always be. If a stock is mis-priced (psst - they all are) - it will eventually correct itself - but not to a "correct price" - but rather to another mis-price - to either more or less its "real" value. This is why any stock will move up and down during the day. It is not because the intrinsic value of the company moves up and down, minute by minute, it is because the value that buyers and sellers give it changes second by second.
In the long term, the SkunK knows The Market Rules!* In the short term we have to depend on the judgement of our peers to set the price. It is here where opportunity lurks! The study of a company is only part of the story - this is where we can develop a personal concept of a companies "real" worth. The other half of this imperfect pricing is the investor! Here is the untold story! The SkunK happened on this article in Wikipedia and found it most interesting and strikingly relevant to both the present market and GERS in particular:
********
Another phenomenon—also from psychology—that works against an objective assessment is group thinking. As social animals, it is not easy to stick to an opinion that differs markedly from that of a majority of the group. An example with which one may be familiar is the reluctance to enter a restaurant that is empty; people generally prefer to have their opinion validated by those of others in the group.
In one paper the authors draw an analogy with gambling. In normal times the market behaves like a game of roulette; the probabilities are known and largely independent of the investment decisions of the different players. In times of market stress, however, the game becomes more like poker (herding behavior takes over). The players now must give heavy weight to the psychology of other investors and how they are likely to react psychologically.
The stock market, as any other business, is quite unforgiving of amateurs. Inexperienced investors rarely get the assistance and support they need. In the period running up to the recent Nasdaq crash, less than 1 percent of the analyst's recommendations had been to sell (and even during the 2000 - 2002 crash, the average did not rise above 5%). The media amplified the general euphoria, with reports of rapidly rising share prices and the notion that large sums of money could be quickly earned in the so-called new economy stock market. (And later amplified the gloom which descended during the 2000 - 2002 crash, so that by summer of 2002, predictions of a DOW average below 5000 were quite common.)
Irrational behavior
Sometimes the market tends to react irrationally to economic news, even if that news has no real effect on the technical value of securities itself. Therefore, the stock market can be swayed tremendously in either direction by press releases, rumors, euphoria and mass panic.
Over the short-term, stocks and other securities can be battered or buoyed by any number of fast market-changing events, making the stock market difficult to predict. Emotions can drive prices up and down. People may not be as rational as they think. Behaviorists argue that investors often behave irrationally when making investment decisions thereby incorrectly pricing securities, which causes market inefficiencies, which, in turn, are opportunities to make money.
**********
Skunk's Conclusion
Determine the "real" value of a company compared to the market value of its stock. Based on that - determine if it is a buy or sell. Constantly reevaluate your position and assumptions based on real information - not based on the direction of the herd. (Or for that matter - the musings of a SkunK!) If you plan to buy a stock after it has gone up or sell it after it has gone down, you might want to say that out loud a few times until the silliness resonates - then change hobbies! (Its either a hobby or old money!)
"Remember the only reason the herd is on the move is because they finally figured out the last place they rushed off to was wrong!" SkunK '09
* (Governments can guide and regulate, they can hinder or help - but in the end they are just a woodwind playing in the tornadic orchestra of supply and demand.)
************
Speaking of herds in general and cows in particular - Picture above is of SkunK's early work towards building a self-regulating methane Powered Blimp. There was no later work. Project never got off the ground!) lol********
SkunK Note: Strategically - I do not expect to be sitting at .03 pps in 60 days. I would really be surprised if it was less than three cents, (I already told you I am a stock holder and expect the price to rise), but I see an even smaller chance that we stay in a three cent trading range. In the second half of January and the first half of February I see a serious Investor Outreach program. I see multiple 8-Ks involving COES completion?, COES increased Backlog?, a Sustainable Expansion Loan?, and of course the inking of the $38M dollar deal?. I see little ESYM trying to catch a bit of the buzz with a business plan and some PRs of their own. I see serious attempts to go outside our little circle of 1,000+ investors. Remember the GE warrants?? They need a higher price of the PPS in order to secure their investment. If you have a choice, it is always better to share the interest of the biggest fish in the pond.
How high will we go? We seem to have had little trouble getting above a nickel, its closing above six cents that has been a sticker. We have not closed above six cents since 21 July '08. If we can do that - then we have a chance of making a run at the dime. If you have to nail me down I will say that there is much better than even odds we will see between a double (.06) and a triple (.09) in the next 60 days. (of course its just my gut feeling - read my disclaimer way below; blah, blah blah)**
My last prediction was 7 December '08:
"SkunK is able to project a .058 EOY pps"
http://greenshift-gers.blogspot.com/2008/12/eoy.html
Sure we closed EOY at .03 - but just give me the back of your hand- eight trading days prior we traded at 6 cents and only 4 days before the EOY we still traded for a nickel!
The SkunK is still excited about the crossing of the 50day Moving Average (MA) above the 200dayMA - more on that later. As earlier predicted I believe this historic event will happen in the next 60 days and it will confirm to the SkunK - that GERS is that turnaround stock he has been saying all along. . .
SkunK
Posts
No comments:
Post a Comment