The Takeover Game

Discussion in 'Wall St. News' started by SiSePuede!, May 4, 2007.

  1. Is it just me of does anyone else scratch their head in wondering why a rumored or real takeover in one industry causes the whole market to jump for joy and rally.

    I understand why a sector might rally, clearly Yahoo being purchased by Microsoft would be dynamic in that industry...but how in the "real world," if that's even a feasible idea anymore, does that trump bad job data and see the whole market rally?

    I guess my thoughts on investing are now more philosophical rather than monetarily influenced. I'd happily sit on the sidelines while the market rallies to it's highest levels ever over and over again if I can't grasp why it's happening or if I perceive a risk like a carry trade being unwound that could hammer the markets.

    The rally monkeys can post how fun it is to make money all day if they want...but a lot them probably don't have $100k to their name and I have many multiples of that and I'm young enough that I don't want to lose it being a rally monkey in a world where the only thing that pushes the markets higher is a highly leveraged borrowing of money. I'd rather invest in truly undervalued businesses that will go up even if the market takes a dump than be on an index ride that I see no value in.

    Just trying to spur some intellectual conversation to combat the fact that the rally monkeys are fairly mindless and there are those who are profiting the rally but understand that it's a game they have to monitor and not a lottery ticket that always win. Cheers.
  2. BENG


    I understand what you mean... but if it can be understood by you, others would be doing it too... but they are not. Sometimes, it's not logical, and it's about the crowd behavior, or you are just too early in the game... but does it matter?

    Just go with the flow, and use your stop.
  3. Why have your own intellectual concept of what fair value is? Why does it matter? Was the tech bubble an obvious bubble? Could Warren buffet have profited immensely in those years by taking advantage of it while using extremely tight risk management and waiting until a clear top was formed to short?

    Sitting on the sideline makes sense if you don't feel you should buy at current valuations... but don't delude yourself into thinking you know better than the market.

    Rally monkeys are not a big part of this run-up. Mostly stock buybacks and private equity. All that matters is finding good trades where you can risk as little as possible and maximize gains.

    If you think the market can unwind, protect yourself with options or stop losses. Sitting on the sideline while intellectualizing is not conducive to flowing with the constant stream of opportunities provided by the market.