QuoteOriginally posted by: KackToodlesQuoteOriginally posted by: mensa0Christmas '05, my daughter's wish list was clothes - all from American Eagle Oufitters. I went to the closest AEOS store to get her a gift card, again about three weeks before Christmas. The place was packed!! Teenagers, tatoos, piercings, loud incomprehensible music playing, etc., and a lot of their parent's credit cards. I bought AEOS the same week. I make the most money in stocks that I personally see something that I don't think the Wall Street analysts do.Why can't wall street analysts see that demand for ipods or AEO products is growing? This is precisely what analysts do -- track demand and same store growth. What you describe id NOT behavior -- it 's the very rational rise in stock prices in response to improving fundamentals! Behavioral has to do with IRRATIONAL behavior of stock prices. Or irrational posts to wilmott, ha ha. First, retail comps are reported with a lag. A savy consumer will know that a store is crowded a week or more before an analyst does (unless the analyst visits the stores themselves). The consumer can still be wrong (the store's margins might suck due to excessive discounting which creates both extremely high sales but also high losses).But this phenomenon isn't just about fundamentals. There are stocks that are persistently overvalued on the fundamentals due to the popularity of the company. Consumers that like the products and like the company tend to buy the stock with less regard for the numerical value of inscrutable metrics such as P/E ratio etc. In such a situation, the price dynamic of the stock switches from being set by expectations of future cashflows to a function of the time-rate-of-change in popularity. (The fundamentals can't be bad, but as long as the company is profitable, it can be popular out of proportion to fundamental financial projections.) On one level of analysis, price=popularity is irrational. But the more appropriate term is bounded-rational because these consumer-investors are using a subset of information available to them to make buy/sell decisions.
Last edited by Traden4Alpha
on January 13th, 2007, 11:00 pm, edited 1 time in total.