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Comment by tqi | Hacker News Reader

Apple, Alphabet, Amazon, and Facebook, which combined are worth almost $5 trillion dollars[1] all releasing earnings on the same day seems crazy. From what I could find, that is 14% (5T/35T) of the total stock market posting earnings on the same day [2].

I'm curious if anyone has thoughts on what effect that has on the overall market in terms of volatility? (I really have no good idea as to how any of this works) Could we see other stocks dip/rise as money is reallocated?

[1] https://www.cnbc.com/2020/07/29/big-tech-including-apple-and... [2] https://siblisresearch.com/data/us-stock-market-value/

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There's a concept in the options trading world called "correlation skew," which describes how tail risk for baskets like SPY/QQQ/XLK can trade richer than tail risk for the basket components, based on how much correlation there is expected to be in the components. When correlation is expensive, you can buy option contracts on the basket components and sell contracts on the basket itself, to set up a position that profits when the basket components exhibit dispersion rather than correlation.

Sure, we could see sector rotation into tech tomorrow. This may be somewhat muted because tech is already a very crowded trade, and tech names are already trading far higher than where they closed.

The timing is based on quarter end dates. There’s a season of a few days each quarter when everyone on a standard calendar reports. Similar companies move together on the assumption of “if Walmart has good earnings, Target should too”

There is only so many trillions to be invested in stocks (because, where else?), and they have already been invested. Stock markets have for so long had a totally irrational relationship with day-to-day news, that they probably won't move the needle much.

Market cap is set by marginal prices, so supply of uninvested capital isn't super relevant and might even increase volatility due to lower liquidity.

First and foremost, the stock market is not the economy. Second, stocks are primarily traded on their expected future value, not current profits, hence why companies like Tesla have a price to earnings ratio that is absurd.

Tesla's stock price makes zero sense in any plausible scenario. I understand the narrative, but unless Tesla becomes the only car company on the planet, it can't be worth 10x Ford

Robin Hooders + solar energy + funds that buy Tesla after 4 x profit profitable quarters + China + ...

Still doesn't explain the crazy valuation

Where else? Derivatives and commodities,bonds,etc...

The bond market is many times bigger. There is much more that could come to the stock market.

See this paper [0] bu Gabaix for instance:

> This paper proposes that idiosyncratic firm-level shocks can explain an important part of aggregate movements and provide a microfoundation for aggregate shocks.

> Existing research has focused on using aggregate shocks to explain business cycles, arguing that individual firm shocks average out in the aggregate. I show that this argument breaks down if the distribution of firm sizes is fat-tailed, as documented empirically.

> The idiosyncratic movements of the largest 100 firms in the United States appear to explain about one-third of variations in output growth.

[0] http://pages.stern.nyu.edu/~xgabaix/papers/granular.pdf

You are missing Microsoft, worth now over 1.5T in your analysis. I dont even know what that means... Three times Facebook. Also Google numbers look not as bright compared to the other.

One (or maybe more) of them had to adjust dates because of the congressional hearing.

Somehow only Alphabet had a decline in revenue...

Vix doesn't seem to move much this week

Market cap is an irrelevant measure. It's simply the price of the last sold share * number of shares outstanding.

Why is that irrelevant?

It’s not irrelevant, but it also isn’t a fair indicator of the total value of the company. Let’s say a company had 1000 shares outstanding at $1000 each. Just because one person would buy a share for $1k doesn’t mean that anyone would buy the whole company for $1mm.

If people started selling off their shares, the share price would drop, so maybe in the end this hypothetical company would end up worth $500k. I’m not the original commenter, but I assume that was their point.

> If people started selling off their shares, the share price would drop

This is only true if there is a lot of dispute about the value of the company.

Suppose a company is nothing more than the owner of a bank account with a million dollars in cash. Well, then it's worth a million dollars. If there are a thousand shares then you'll be able to find arbitrarily many buyers at ~$1000/share. Existing investors would have no reason to sell for less than that because they could get that much just by liquidating the company.

Where the values diverge significantly is where there is a lot of uncertainty about the value of the company, and then there could be a lot of variation in how different people value it, so that the existing owners might assign a much higher value than others, and if they tried to sell a significant fraction of the shares it's the others whose price they'd have to meet to find a buyer.

> it also isn’t a fair indicator of the total value of the company

Public company acquisition prices are highly correlated with their market caps. In fact, in acquisitions, the acquirer generally pays a premium to the market cap [1].

[1] https://cpb-us-west-2-juc1ugur1qwqqqo4.stackpathdns.com/u.os...

While market cap may not be the actual realisable value of the company, that doesn't mean it's irrelevant. It's perfectly relevant when comparing the relative value of different companies, especially when they are in similar sectors. That's especially true when companies have very different numbers of issued shares.

Even then, market cap does actually correlate directly to realisable value in acquisitions. They rarely trade for exactly the market cap, but it's definitely a useful benchmark against which to compare the company's relative value to the acquirer and it's current owners.

I guess this is the biggest argument for breaking up the tech giants - not only are there clear examples of each company either abusing public trust or using their size in anti-competitive ways, but their wealth shields them from having to meaningfully engage with the public at large or reign in said behavior.

There are alternative to each of the four. No one forces anyone to use any of their products.

Definitely no one forces people to buy Apple’s products at a large premium over their competitors. I would say that Apple has to work harder to get users to willingly depart with their cash.

>I would say that Apple has to work harder to get users to willingly depart with their cash.

Actually, it's often the opposite. In the Boston area, the Apple Stores are always packed while the Microsoft Store (now closed) was usually mostly empty in the high-end mall across the street from the stand-alone Boylston Street Apple Store.

Price isn't the primary factor for many people, especially younger people.

First, there's no real price difference between high-end Android phones—the newest Samsung, for example—and similar iPhones.

A Galaxy S20 Ultra 5G 128GB list price is $1399; the iPhone 11 Pro Max with 256GB (double the storage) is $1249. That's $52.04/month.

I worked with 24 public high school kids last summer. Most of them were from 1st or 2nd generation immigrant families and would qualify for free or reduced lunch at school. Every one of them had a newer model iPhone than my 6s at the time.

Zero Android devices.

Which confirmed something I learned from market analysis years ago regarding Apple: people with limited funds can't afford to make a mistake when spending their limited money, which is why they tend to gravitate to higher quality, better made products.

Yes, there was the typical desire for teens to have the right sneakers, t-shirt, jeans, etc. The iPhone is definitely in that category, with 85% of them either owning or intending to buy an iPhone: https://www.phonearena.com/news/teens-love-apple_id123682.

> Actually, it's often the opposite. In the Boston area, the Apple Stores are always packed while the Microsoft Store (now closed) was usually mostly empty in the high-end mall across the street from the stand-alone Boylston Street Apple Store.

We know that anecdote says nothing. The only thing that the Microsoft store and Apple store sell in common are computers and Mac marketshare is around 10%. It’s not even close.

> Price isn't the primary factor for many people, especially younger people.

If price weren’t the determining factor, the average iPhone buyer wouldn’t live in a household in the US with A 40% higher income.

https://www.comscore.com/ita/Public-Relations/Infographics/i...

> First, there's no real price difference between high-end Android phones—the newest Samsung, for example—and similar iPhones. A Galaxy S20 Ultra 5G 128GB list price is $1399; the iPhone 11 Pro Max with 256GB (double the storage) is $1249. That's $52.04/month.

Only in the US. My understanding is that most of the rest of the world doesn’t have monthly payment options where the price delta would be more apparent.

But also, there are high end Android phones that cost the same, but out of the Android manufactures, Samsung has the highest average selling price, and it’s like $290 - $100 less than the cheapest iPhone. They haven’t been able to convince many people to pay for high end phones.

> The iPhone is definitely in that category, with 85% of them either owning or intending to buy an iPhone:

A survey also showed that 58% of iPod owners “intended” to buy a Zune in 2006....

https://arstechnica.com/gadgets/2006/11/5826/

If price weren’t the determining factor, the average iPhone buyer wouldn’t live in a household in the US with A 40% higher income.

I can tell you based on where I live and who I work with, there are many people who are low and moderate income who own iPhones now.

They don’t buy their phones outright like some people do; they usually can’t drop $1000 in one go on something that’s not their rent.

However, low and moderate income people can pay $10 or $20 a month for the phone while using prepaid services.

To be blunt, that’s why poor inner city kids can rock very nice iPhones.

An iPhone SE is $200 on a carrier deal; it’s a better phone than anything else in that price range that low and moderate income people can afford.

>> Apple’s products at a large premium over their competitors

What premium? Right now I'm trying to decide between Dell XPS 9500 and MacBook Pro 16" and with similar spec MacBook is actually the cheaper option.

In the smartphone space top Samsung models are also priced similarily to iPhones

But they aren’t actually selling.

Samsung’s average selling price is $290....

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