Signal stock and efficient markets

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
workingmanblues
Posts: 17
Joined: Wed Jan 03, 2018 2:40 pm
Location: Bay area

Signal stock and efficient markets

Post by workingmanblues »

So I am starting to question the "efficient markets" hypothesis. On Thursday, Elon Musk tweeted "Use Signal". A totally unrelated company called Signal advance, which apparently has one employee today, the CEO, and has a stock trading at $0.60, shot up to $7 on Friday. There were articles on how this was mistaken identity. Signal app tweeted as such too. But still, today, the stock was up to $40 :oops: Who are these people? Where do they come from?

https://markets.businessinsider.com/new ... 1029956384
Triple digit golfer
Posts: 6248
Joined: Mon May 18, 2009 5:57 pm

Re: Signal stock and efficient markets

Post by Triple digit golfer »

Young people who invest in stonks with their Robinhood app.
User avatar
firebirdparts
Posts: 2083
Joined: Thu Jun 13, 2019 4:21 pm

Re: Signal stock and efficient markets

Post by firebirdparts »

We missed the boat on that one.
A fool and your money are soon partners
burritoLover
Posts: 533
Joined: Sun Jul 05, 2020 12:13 pm

Re: Signal stock and efficient markets

Post by burritoLover »

Probably an extremely low volume stock prior and then a bunch of retail idiots pile in after Musk's comment. Efficient markets doesn't mean all investors are imbued with perfect interpretation of new information. The question is, could you have predicted this ahead of time and profited from it?
"Your money is like a bar of soap. The more you handle it, the less you’ll have." - Gene Fama
rockstar
Posts: 1158
Joined: Mon Feb 03, 2020 6:51 pm

Re: Signal stock and efficient markets

Post by rockstar »

workingmanblues wrote: Mon Jan 11, 2021 4:27 pm So I am starting to question the "efficient markets" hypothesis. On Thursday, Elon Musk tweeted "Use Signal". A totally unrelated company called Signal advance, which apparently has one employee today, the CEO, and has a stock trading at $0.60, shot up to $7 on Friday. There were articles on how this was mistaken identity. Signal app tweeted as such too. But still, today, the stock was up to $40 :oops: Who are these people? Where do they come from?

https://markets.businessinsider.com/new ... 1029956384
Why do you think markets are efficient? If they were, we wouldn't have had a toilet paper shortage.
Be Calm
Posts: 3
Joined: Thu Jan 07, 2021 1:48 pm

Re: Signal stock and efficient markets

Post by Be Calm »

Consider that the market is so efficient that it prices in everything - not merely the logical valuations of analysts, but the capricious emotions of novice traders.

It’s possible that the meteoric rise in Signal Advance Inc. is, in fact, quite predictable from an emotional perspective - the knowledge that many investors are likely to make this “name game” error in the wake of a celebrity-level tweet. This exact speculation has been very efficiently priced in, and in real time. It’s likely that a significant drop in Signal Advance Inc. stock price will be priced in, just as efficiently, once investors (in aggregate) believe they will reap greater rewards by shorting the stock.

Humans are capable of using both logic and emotion in their market moving activities. The market reflects the sum total of these forces.
langlands
Posts: 752
Joined: Wed Apr 03, 2019 10:05 pm

Re: Signal stock and efficient markets

Post by langlands »

Wow. You could have gotten in after the first 5x jump and still have gotten a 10x return.
livesoft
Posts: 74574
Joined: Thu Mar 01, 2007 8:00 pm

Re: Signal stock and efficient markets

Post by livesoft »

langlands wrote: Mon Jan 11, 2021 5:41 pm Wow. You could have gotten in after the first 5x jump and still have gotten a 10x return.
Maybe. I will guess that the "float" is about 1000 shares. Spread that out among 5 idiots and you might make $500.
Wiki This signature message sponsored by sscritic: Learn to fish.
langlands
Posts: 752
Joined: Wed Apr 03, 2019 10:05 pm

Re: Signal stock and efficient markets

Post by langlands »

livesoft wrote: Mon Jan 11, 2021 5:45 pm
langlands wrote: Mon Jan 11, 2021 5:41 pm Wow. You could have gotten in after the first 5x jump and still have gotten a 10x return.
Maybe. I will guess that the "float" is about 1000 shares. Spread that out among 5 idiots and you might make $500.
Volume today was 2 million shares, and stock opened at 7.5. Plenty of volume for most people. If you knew what was going to happen today, you could have easily turned $100K into $500K (liquidated by end of day).
livesoft
Posts: 74574
Joined: Thu Mar 01, 2007 8:00 pm

Re: Signal stock and efficient markets

Post by livesoft »

langlands wrote: Mon Jan 11, 2021 5:49 pm Volume today was 2 million shares, and stock opened at 7.5. Plenty of volume for most people. If you knew what was going to happen, you could have easily turned $100K into $500K (liquidated by end of day).
2 million shares is the same as 1000 shares and 2000 trades.
Wiki This signature message sponsored by sscritic: Learn to fish.
langlands
Posts: 752
Joined: Wed Apr 03, 2019 10:05 pm

Re: Signal stock and efficient markets

Post by langlands »

livesoft wrote: Mon Jan 11, 2021 5:52 pm
langlands wrote: Mon Jan 11, 2021 5:49 pm Volume today was 2 million shares, and stock opened at 7.5. Plenty of volume for most people. If you knew what was going to happen, you could have easily turned $100K into $500K (liquidated by end of day).
2 million shares is the same as 1000 shares and 2000 trades.
I don't get your point. Very quickly eyeballing the chart, approximately 300K shares traded hands under $8 per share in the morning. In the afternoon, there was a steady trickle of volume of at least another 300K shares at $35 per share. If you bought in $100K right at the start of day, you'd have added 5% volume, which is substantial, but not massive (at the worst maybe you'd get 10% worse fill than what today's chart showed). Similarly in the afternoon.
Last edited by langlands on Mon Jan 11, 2021 6:06 pm, edited 1 time in total.
User avatar
JoMoney
Posts: 10536
Joined: Tue Jul 23, 2013 5:31 am

Re: Signal stock and efficient markets

Post by JoMoney »

An in-efficient market implies there are people out there with better information than you.
The old poker saying is, "if you don't know who the sucker at the table is, it's you".
Be careful out there. There are market participants actively trying to take your money, even if EMH theories suggest they couldn't have any advantage.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
rockstar
Posts: 1158
Joined: Mon Feb 03, 2020 6:51 pm

Re: Signal stock and efficient markets

Post by rockstar »

JoMoney wrote: Mon Jan 11, 2021 6:06 pm An in-efficient market implies there are people out there with better information than you.
The old poker saying is, "if you don't know who the sucker at the table is, it's you".
Be careful out there. There are market participants actively trying to take your money, even if EMH theories suggest they couldn't have any advantage.
That's Wall Street. A bunch of salesmen preying on wealthy, insecure investors.
ohboy!
Posts: 571
Joined: Thu Jan 04, 2018 2:21 pm

Re: Signal stock and efficient markets

Post by ohboy! »

Looks to me like people are realizing more collective power. Easy access to trading and broader lines of communication. You can dismiss it as idiotic but in fact I think there is quite a bit more to it than that.

Oh and interestingly enough, you can’t buy that OTC stock on robinhood
langlands
Posts: 752
Joined: Wed Apr 03, 2019 10:05 pm

Re: Signal stock and efficient markets

Post by langlands »

ohboy! wrote: Tue Jan 12, 2021 1:47 am Looks to me like people are realizing more collective power. Easy access to trading and broader lines of communication. You can dismiss it as idiotic but in fact I think there is quite a bit more to it than that.

Oh and interestingly enough, you can’t buy that OTC stock on robinhood
The problem is that it was the wrong company...
ohboy!
Posts: 571
Joined: Thu Jan 04, 2018 2:21 pm

Re: Signal stock and efficient markets

Post by ohboy! »

langlands wrote: Tue Jan 12, 2021 1:55 am
ohboy! wrote: Tue Jan 12, 2021 1:47 am Looks to me like people are realizing more collective power. Easy access to trading and broader lines of communication. You can dismiss it as idiotic but in fact I think there is quite a bit more to it than that.

Oh and interestingly enough, you can’t buy that OTC stock on robinhood
The problem is that it was the wrong company...
Tweet wasnt even about stonks. But for anyone who has got in and out or someone who was a shareholder a week ago, it was the right company.
langlands
Posts: 752
Joined: Wed Apr 03, 2019 10:05 pm

Re: Signal stock and efficient markets

Post by langlands »

ohboy! wrote: Tue Jan 12, 2021 2:00 am
langlands wrote: Tue Jan 12, 2021 1:55 am
ohboy! wrote: Tue Jan 12, 2021 1:47 am Looks to me like people are realizing more collective power. Easy access to trading and broader lines of communication. You can dismiss it as idiotic but in fact I think there is quite a bit more to it than that.

Oh and interestingly enough, you can’t buy that OTC stock on robinhood
The problem is that it was the wrong company...
Tweet wasnt even about stonks. But for anyone who has got in and out or someone who was a shareholder a week ago, it was the right company.
OK...so you know what happened is that a tweet by Elon caused an unrelated stock to climb 50x. Just like ZOOM went up for no reason during the pandemic when people meant to buy ZM.

The point of the OP is just that efficient markets don't do that.
langlands
Posts: 752
Joined: Wed Apr 03, 2019 10:05 pm

Re: Signal stock and efficient markets

Post by langlands »

Incidentally, the price dropped 75% today back exactly to 10 at EOD. Just another 10x to go to get back to 1 (which is still double what it was before Elon tweeted).
Post Reply