2270: Picking Bad Stocks

Explain xkcd: It's 'cause you're dumb.
Revision as of 21:40, 19 February 2020 by Someguy (talk | contribs)
Jump to: navigation, search
Picking Bad Stocks
On the news a few days later: "Buzz is building around the so-called 'camping Roomba' after a big investment. Preorders have spiked, and..."
Title text: On the news a few days later: "Buzz is building around the so-called 'camping Roomba' after a big investment. Preorders have spiked, and..."

Explanation

Ambox notice.png This explanation may be incomplete or incorrect: Created by a CAMPING ROOMBA. Please mention here why this explanation isn't complete. Do NOT delete this tag too soon.
If you can address this issue, please edit the page! Thanks.

Cueball and Ponytail are discussing the stock market. Ponytail explains that there has been no reliable way to pick stocks that perform the market average. She also states that there could be a corollary to that; there is no way to consistently pick bad stock (presumably for this discussion, bad stocks refers to stocks whose value is expected to go down.

Cueball states that he could consistently pick bad stocks, and the last panel shows him at a trading terminal purportedly buying bad stocks, while White Hat and Meghan use his bad stock picks as indications that those stocks should be removed from whatever stock index they manage.

In investing, someone who purposely trades in bad stocks is called a short seller. Short selling consists of selling a stock before you own it, with the anticipation that the stocks price will drop soon, and you can purchase the stock to fulfill the sale, and the difference between the selling price and the purchase price is yours. However, in US stock markets, it is illegal to sell stocks that you don't own, so when you short a stock, you need to borrow that stock from a third party (possibly the trading firm you're working with, or some other firm that the trading firm has a stock loan association with) to cover the sale. Between the time you sell the stock until the time you repurchase the stock on the open market, you will what's called a "short position" on the stock, and you need to pay interest to the company that lent you that stock. Because of the interest payments, short sales are almost always short-term positions, as the interest rates can quickly exceed any profit you might make on the sale.

If Cueball's statement that a company is developing a "camping Roomba" is correctly attributing the trademark (as opposed to genericizing it to refer to any small cleaning robot), then presumably company #1434 is iRobot. While a Roomba for camping may sound like a ridiculous concept that is not likely to make much money, developing a robot that can navigate and move around natural environments would be a major advancement leading to new opportunities for both their civilian and military product lines. A campground offers a more challenging environment than indoors, while being slightly more controlled than a truly wild area, making for a good development step. Dropping iRobot from this company's index is probably not a move that would be suggested by a stock broker who is earnestly trying to make money, but maybe Cueball's "market anti-sense" knows something that we don't.

Transcript

Ambox notice.png This transcript is incomplete. Please help editing it! Thanks.

[Cueball and Ponytail are walking together.]

Cueball: I feel like by now I should know about the stock market.
Cueball: What is investing? Do you just open a website and pick the companies you like?

[Ponytail holds out her hand palm-up.]

Ponytail: Well, you totally can.
Ponytail: But there's a lot of evidence that no investing strategy consistently picks stocks that outperform the average of the whole market. A lot of fund management is a myth.

[Close-up on Ponytail, who has turned to Cueball.]

Cueball: Huh, okay.
Ponytail: But there's a weird corollary to that idea: it implies that, ignoring fees and stuff, it's just as hard to consistently lose money by picking bad stocks from an index.

[Cueball and Ponytail are both back in frame. They are standing still and facing each other.]

Ponytail: If someone could consistently buy bad stocks, you could beat the average by hiring them, letting them pretend to invest, then buying every stock except the ones they pick.
Ponytail: In a way, bad judgement is just as helpful as good judgement.

[Cueball pumps his fists with excitement.]

Cueball: Oh my God.
Cueball: I can do that!
Ponytail: No, it's just an example--
Cueball: This is the job I was born for.

[Cueball is either sitting in a box or being viewed on a camera screen. He is sitting in front of a computer console, and a camera is pointed at him. Megan and White Hat are viewing him, and White Hat is holding a tablet.]

[Text box: Soon...]
Cueball: Hey, this company's CEO wants revenge on the same ghost as me! I'm buying!
Cueball: Ooh, and this one is planning to develop a "Camping Roomba." That's a sure bet!
Megan: Drop companies #208 and #1434 from the index.
White Hat: Done.


comment.png add a comment! ⋅ comment.png add a topic (use sparingly)! ⋅ Icons-mini-action refresh blue.gif refresh comments!

Discussion

clearly nobody told Randall about shorting stocks 162.158.18.160 20:57, 19 February 2020 (UTC)

I was going to say that Arachrah (talk) 09:29, 20 February 2020 (UTC)

Can someone create a "stock market" category, or "economics"? There are a lot of comics referencing this. 172.69.33.89 23:21, 19 February 2020 (UTC)

You can start by listing these comics here, someone will pick them up to create the category.141.101.98.166 10:35, 20 February 2020 (UTC)
Yep. General inofficial rule of thumb is, that a new category should have at least 5 comics or consist of a direct series. (the latter doesn't seem to be tha case here.)--Lupo (talk) 10:41, 20 February 2020 (UTC)
Stock market related comics:
Please add -- 141.101.104.161 (talk) (please sign your comments with ~~~~)
You mean that there is so few people knowing how to create category that they agreed on some rule? And why didn't they told me? -- Hkmaly (talk) 23:27, 20 February 2020 (UTC)
As I said it is an inofficial rule of thumb... discussed e.g. on Kyndes talk page --Lupo (talk) 10:58, 21 February 2020 (UTC)

When he said "camping" I thought more of snipers in MMFPS games (or gate-campers in Eve) and I was imagining the robot waiting patiently hidden under the sofa until someone dropped a crumb, zipping out and hoovering that crumb up then zipping off back again. 141.101.98.148 11:30, 20 February 2020 (UTC)

Shouldn't they be dropping the companies from a basket rather than an index ? From my understanding, indices refer to "official" lists of stocks, and custom ones are more known as baskets. 108.162.229.28 12:46, 20 February 2020 (UTC)

I suspect Cueball is more influential than expected 108.162.241.202 14:02, 20 February 2020 (UTC)

In BBC Radio 4's Dickensian-comedy-spoof series Bleak Expectations (from memory, during the second series/season - though not available at the time of writing, at least direct from the BBC) at one key point Pip Bin uses his best friend's investment 'recommendations' (Harry Biscuit is also a notoriously bad inventor obsessed with using swans in many of his own Heath Robinson/Rube Goldberg devices) to invest in entirely the opposite manner. Not that I think Randall has heard these programmes (or, indeed, programs), so not an annotatable reference for the comic, but putting it out there as a recommendation in general because there's a good chance of humour(/humor) overlap. And it has Anthony Head in it, if there are any Buffy fans/etc, reading this... 141.101.98.148 15:28, 20 February 2020 (UTC)

Not exactly the same idea, but... in one of Iain Banks novels (Complicity, I think) there's a character who is seriously thinking of setting up as an unethical investment counsellor, deliberately picking investments that are unethical in one way or another (polluters, products that are damaging in some way, etc.) on the grounds that that's where the money is; ethical investments tend not to make huge profits.--Marcus Rowland (talk) 00:00, 27 February 2020 (UTC)

Maybe Cueball is a 21st-Century Timothy Dexter? 172.69.68.93 16:03, 20 February 2020 (UTC)

In the last line of the current explanation, it supposes Cueball is connected to and making changes to the portfolio. I read this more as an ironic counterpoint, indicating that even though he's good at picking bad stocks, he is not infallible. OhFFS (talk) 17:18, 20 February 2020 (UTC)

The ads displayed for me on this page suggest investing in Irish Whiskey. Given the context here, would it be better to buy or short now? Bischoff (talk) 17:40, 20 February 2020 (UTC)

I'd give a strict buy recommondation. If you loose money on it, you can at least get drunk. --Lupo (talk) 07:50, 26 February 2020 (UTC)

Anyone else find the "This is the job I was born for" statement and situation strikingly similar to #408: Overqualified? 108.162.246.53 22:00, 21 February 2020 (UTC)

I think the title text intends to say that he's consistently picking good stock now that he's trying to pick bad ones. Murphy's Law.

Company #1434 --> I lost the game AoPS is superior (talk) 09:06, 31 December 2023 (UTC)