Elias Chen commented on a stock · Nov 24, 2024 02:13

Do most investors/traders not know which uncommon stock market facts?

The biggest gift of the market is not profit, but a sober understanding it requires us to adhere to.

As long as you have growth potential, Wall Street is willing to give you a high valuation, and never stingy.

The valuation systems of large institutions on Wall Street are complex and multi-dimensional, as well as very discerning. For high-tech growth companies, as long as you have growth potential, they are willing to give you a high valuation without hesitation. Therefore, a very high PE ratio is often the standard allocation for these companies.

Focusing too much on short-term gains, short-term trend returns, and short-term profit margins is an important watershed for measuring whether Wall Street is made up of heroes or clowns.

Similarly, people have short-sighted views, favoring rises and disliking declines, simply caring about short-term trends and arbitrage of short-term trends. Whether buying stocks based on short-term trends results in being trapped or profitable is the sole criterion to measure the correctness of investment transactions. It is destined to have difficulty achieving significant accomplishments in the financial market—missing out on the epic rise of Tesla, or ultimately, only benefiting from a tiny fraction of the fragmented short-term market trends when viewed in the grand scheme of history.

Attempting to avoid every downturn in the market, swiftly increasing holdings or fully loading up on stocks at the moment of price surges, is merely a utopian wishful thinking.

Ronald Stephen Baron, the founder of Baron Capital, one of the top twelve institutional shareholders of Tesla, holds over 6 million shares of Tesla stocks (with a cost of only $42.88 per share), an American billionaire and investor, has already made $6 billion on this stock and is ready to hold for another decade.

Do you think those who rely on the so-called Elliott Wave Theory and software that tracks block orders, arrogantly enter and exit, sell high and buy low, occasionally make huge profits, and some even boast of making money every day...

The Bible, Old Testament, Deuteronomy.

3:22 Do not be afraid of them; for the one who fights for you is the LORD your God.

3:22 Ye shall not fear them: for the LORD your God he shall fight for you.

How can foreigners understand these?

The market will require you to clearly understand your identity every day.

If you are not clear about your trading plan, trading goals, most importantly, if you are not clear about your trading habits, then the market will teach you, but this will be a costly lesson.

Before the market demands anything from you, first demand clarity of objectives from yourself.

Ronald Stephen Baron shared the following: In Baron Capital managed by him, a client friend unexpectedly passed away due to a sudden event. His account, for some reasons, had not been traded at all. Due to previously buying low and selling high, with planned and systematic steps, with staggered and incremental, discrete random variable position building, now looking at it, the holding cost is amazingly low, while the profits are amazingly high, outperforming the returns of accounts operated by so-called professionals, experts.

You are not familiar with the late world-class mathematician James Harris Simons and his leading Renaissance Technologies LLC and Medallion Fund. Nor do you understand the improved and expanded Leonard Baum mathematical calculation model developed by algebraist James Ax and mathematician Elwyn Ralph Berlekamp. Most professionals do not comprehend these altered calculation models or know how to apply them in practical financial market scenarios (requiring significant adjustments to adapt to market conditions), with only a few top mathematicians like the late Chinese-American top mathematician Shiing-Shen Chern and top Chinese mathematician Shing-Tung Yau showing disdain. Therefore, the Leonard Baum mathematical calculation model has become the nuclear weapon-level secret weapon in profitability for James Harris Simons, sweeping through Wall Street financial institutions, including George Soros's Quantum Group of Funds and the acclaimed as the most successful investor in the world, stock god Warren Edward Buffett, making them all pale in comparison.

The world blindly pursues short-term trend arbitrage, preferring to add ornaments to the already good, unwilling to help when needed, and even less willing to accompany high-tech enterprises in their growth. This is something worth reflecting on.

Do most investors/traders not know which uncommon stock market facts?

It is very interesting that Ron Baron publicly stated in March this year that Tesla will impact $1500 by 2024 and $2000 by 2030, while selling 1.8 million shares of Tesla holdings. Baron referred to this as a 'painful' decision, mainly to help clients mitigate risks. Since then, Tesla has entered a long period of adjustment, only hitting a new high in October. Baron also stated on Wednesday that he is prepared to continue holding Tesla 'for at least ten years'.

Baron also praised Musk in the interview, admitting that about ten years ago when he first met him, he had doubts about the success of the (electric car) project, so he only started buying shares after the company began producing the Model S. Baron mentioned that the biggest risk for this investment is Musk's health, although there are currently no issues, his habit of only sleeping 5 hours a day is too short.

During the interview on Wednesday, Ron Baron was also asked about the newly proposed congressional "billionaire tax" bill, which aims to tax unrealized capital gains of the extremely wealthy. Although he himself could be a potential target for the tax, his words focused more on defending Musk.

Baron stated that it seems like those in Congress want to play Robin Hood, with Musk being the target. Tesla was not even invited to the White House's electric vehicle industry promotion meeting before. In fact, lawmakers could have generated such revenue ($30 billion) by investing resources to combat tax evasion, but they refused to do so, ultimately coming up with such a strange proposal. Similarly, this money could have helped Tesla create hundreds or even thousands of job opportunities.

How can mathematics be applied in stock trading?

Let me try to explain in the simplest form.

Regression analysis. This is a simple and poor method used to measure the relationship between one variable (such as gold price) and another variable (stock price). As shown below.

Y=a+bX

You visit Yahoo Finance to download historical stock prices and gold prices of a gold mining company. You want to understand how the gold price affects the stock price of this gold mining company. In regression analysis, you will compare these two time series.

You run regression analysis (MATLAB, Eviews, Excel, etc.). Assuming you perform this operation in Eviews, you will get the following results (a random Eviews screenshot inserted from Google):

You will obtain a series of statistics, such as t-stat, R-square, which will help you understand how the independent variable (gold) explains the dependent variable (stock price).

All of the above are basic knowledge from high school mathematics last year. There is no simpler introduction on how to apply mathematics to stock trading. Because if you know a variable has explanatory power, then you can use it to predict how it may impact your future stock prices from a forecasting perspective.

...this is how you make money.

Why are most wealthy people so frugal?

The answer is very simple, if you want to become wealthy, this is also the most important lesson you will learn.

Are you ready?

Becoming wealthy has nothing to do with how much money you earn.

You can earn 0.1 million US dollars per month.

If you spend 0.1 million US dollars per month, you will never become wealthy.

Wealth is generated by the difference between what you earn and what you spend.

Being frugal will create a surplus between your expenses and income. If you wisely invest these surpluses, you can create wealth.

Why do wealthy people practice frugality?

Being frugal leads to wealth.

They will not become frugal after becoming wealthy. Being frugal can make them wealthy, as long as they invest the difference wisely and make it work for them.

The sooner you understand this, the sooner you can embark on the path to wealth.

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