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Comment by setheron | Hacker News Reader

The market is really testing being irrational longer than I can withstand.

The "economics" part of the stock market is just a fig leaf to let people pretend it's not just another form of gambling. It's OK to enjoy it, lots of people like poker and blackjack. But don't pretend it's something more than that. The market is exactly as rational as a deck of cards.

Spoiler alert: The market has never been rational.

The market is so irrational that the most profitable businesses with the highest profit margins and scalability and highest barriers to entry have the highest market capitalizations.

Spoiler alert: there's a decent argument to be made that the market has never been irrational either. It's just a matter of timing to allow the markets to adjust. A market in of itself is never perfect.

Rationality is binary.

the very occurrence of speculative bubbles, (to be pedantic; where asset prices soar well beyond their intrinsic values and eventually crash) is a strong argument against market efficiency.

Disagree. Nobody is perfectly rational. So if you make rationality binary, then everyone and everything is irrational. That's not a useful definition.

It's more useful to notice that, while everyone and everything is irrational, some are far more irrational than others. That is, it's much more useful to not consider it a binary.

How do you know the "intrinsic value" of share? In most cases that is inaccessible.

Then if markets are always non-efficient, but they "work", I'd argue that they aren't irrational, they are simply quite rational in doing their overall job over time.

I think you are confusing efficiency and effectiveness. Markets, when regulated, can be an effective way to distribute goods and services.

Equity markets tend to be reasonably efficient - we can debate the extent of the efficiency and how exactly we define things like "weakly efficient" etc.

It's not, but individual investors can still be rational.

Can they? If it's possible, I don't think it's the rule.

At least it used to have the decently to play-act at being so.

Hah, when? It's always been a random walk.

The market used to crash, people used to be able to afford houses without going into proto-slavery. Thousands of people used to enter a single store on black friday. We used to be a country.

This is just a hallucinatory phase.

It's been irrational since the Industrial Revolution; future growth has never been priced in even to the level of a reasonable discount rate.

The time value of money is constantly in flux, so even if future growth were priced in / perfect market theory held, prices would still change with P/E swings as investors can get more or less for their money elsewhere.

The market is rational about AI. it's truly going to be transformational. They are irrational about NVIDIA but hey, when money flows out from NVDA it will go to the next AI company, it's not like the sector will deflate

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