Share prices: whats the big deal?

[VielGeld]

I think this is a very interesting discussion as the price/value divide (and the fact a share's price does not generally have an impact on a company aside from executive compensation) has always bothered me. The reason I turned to trading over being a value investor is that the cause -> effect relationship is often non-existent or hard to decipher (in my experience). I come from a science background (physics, specifically), so to my mind if I were to invest based on value, then there must be some causal relationship involved.

But as I gained experience, I came to see the auction process as superseding fundamental aspects of a company/commodity. The fundamentals may either be great or poor, but price often does not reflect either. For example, the contrarian mentality of buying when people are talking doomsday or selling when there's mass euphoria goes against the grain of "value". Or so I see it.

I would actually prefer to trade causal relationships as I believe those are easier to make money off of. But this trading/investment game is about making money off someone else, so price does not always reflect value. And so I turned to trading instead and saw rather saw value in people's behaviour to price than my perception of the asset's value.

Now, if I'm wrong, I would love to be proven so. Maybe there's something I missed in the fundamental aspects of things...

 

[WillieTim]

This is all about controlling the profits, so there are some fair chances of missing certain fundamentals.

 

[0007]

A very interesting discussion: any trader who doesn't understand how a share price may be/not be related to a company's value (and that's a discusion in itself) is going to end up in trouble sooner or later.

 

[Dick Lexic]

A very interesting discussion: any trader who doesn't understand how a share price may be/not be related to a company's value (and that's a discusion in itself) is going to end up in trouble sooner or later.

do you mean manipulation?