DeepSummary
The episode begins with a discussion about the emails Jeff Gannon has been receiving from people asking why stocks are so expensive and if investors have gotten better at valuing businesses or are just anchoring to low interest rates. Jeff expresses skepticism about trying to find explanations for why stock prices are at their current levels, suggesting that sometimes prices are just high or low without a clear reason.
The conversation then shifts to the role of momentum and quantitative trading strategies in driving stock prices. Andrew and Jeff discuss whether markets have become more efficient due to increased data availability and computational power, or if there are still significant inefficiencies reflected in phenomena like momentum. They also explore the idea that social media has created a new dynamic of crowding behavior that could impact market dynamics.
Throughout the discussion, Jeff repeatedly emphasizes that he doesn't think there are satisfying explanations for why valuations are currently high, and that trying to retroactively come up with narratives to justify market levels is problematic. He suggests that sometimes stock prices are simply disconnected from fundamentals without a clear driving force.
Key Episodes Takeaways
- Jeff Gannon expresses skepticism about common narratives used to explain current high stock valuations, suggesting these narratives often don't hold up to scrutiny.
- Gannon argues that the success of momentum trading strategies points to significant market inefficiencies that contradict claims of increasing market efficiency.
- Gannon speculates that the rise of social media and mobile internet may have led to new crowding behaviors among investors that impact market dynamics.
- The discussion explores whether advances in data, computing power, and quantitative models have made markets more or less efficient.
- Gannon suggests that sometimes stock prices are simply high or low without a clear fundamental driver or narrative explanation.
- The conversation highlights the difficulty in finding satisfying explanations for why valuations are at their current levels.
- Gannon repeatedly pushes back on the idea that investors have gotten better at valuing businesses, arguing that current prices often seem disconnected from fundamentals.
- The interplay between value, growth, and momentum investing strategies in the context of high valuations is explored.
Top Episodes Quotes
- “I don't think that we have evidence to explain why it is the way that it is or that we even have explanations that make much sense.“ by Jeff Gannon
- “Most explanations that people say don't actually, to me make much sense because these would suggest that each case that we've had in the past was a special case that has a different explanation than the current case.“ by Jeff Gannon
- “It is possible that we may see permanently more crowding behavior in markets just because there's more people who have more experience with crowding behavior than ever would have happened before the smartphones and stuff.“ by Jeff Gannon
- “If momentum works a lot in markets, why would that be? Other than markets are quite inefficient, and the more momentum works, the more you would think that it's inefficient.“ by Jeff Gannon
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Episode Information
Focused Compounding
Andrew Kuhn and Geoff Gannon
4/12/24
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