Risk is not the same as a real problem

Discussion in 'Trading' started by Tarl_Cabot, Mar 15, 2007.

  1. I keep hearing "stock prices must go down because of risk", which makes no sense at all.

    What that is saying is the following:

    - XYZ Corp stock price with no risk = $25
    - XYZ Corp stock price with risk = $20

    now - for mathematical clarity - assume all other factors remain constant for - say - six months, after which the problem for which there was a "risk" did NOT occur.

    The result is a loss of $5 for no mathematical reason at all.

    If the future were predicatable, then no other market factor would be of any importance, because the person with the accurate predictions would rule the world.

    So, the future cannot be predicted.

    Thus, claims of "increased risk" are simply a BS tool of shorts.

    PS If you flip a coin 50 times, and it happens to come up heads every time, nevertheless the probability of tails the next time is 50%.
  2. You have it backwards.

    The price of xyz with risk would be 25 and less risk would be 20.