[wilkommen]

It’s not a very satisfying answer but personally I believe that there is no material thing linking the price of a stock to the amount of money the company makes. The only thing that drives the price of a stock is whether people think that other people will want to buy the stock for more later. This kind of implies that the whole stock market is a bit of a sham. Which I think is also true. I think the stock market essentially operates as a semi-perpetual Ponzi scheme. It does suck to come to the conclusion that one of the most central systems in world finance is not based on any fundamentals, but the good news is that in no way does that mean the system is unstable in the short to medium term. Nearly the whole world, and almost everyone in power anywhere in the world is pretty heavily invested in the stock market Ponzi scheme continuing to “work”. So it probably will for quite a long time.

[Gene_Parmesan]

I'm not sure I agree with this 100%. If this were true, an investor like Warren Buffett, who has always invested by focusing on the fundamentals of the company he is investing in and focusing on real performance/value metrics, would not be able to be as consistently successful as he has been.

It's hard to say though, because the market in which he made his initial chunk of capital is not the same market today, and it's impossible for me to parse out the self-reinforcing effect of "price goes up because Buffett has taken a large stake" versus the sort of fundamentals I'm referring to.

edit : Having said that, I do believe there is a class of people who are able to make money off of the stock market in a way totally unrelated to the reality of the underlying instruments - profiting on churn, market-making, small percentages on massive positions, etc. But I don't think that means the underlying instruments are actually worthless/not tied to real value.

[dzonga]

laws of nature always win at the end of the day. fundamentals are important, so long can a software saas company make money by selling software to other vc funded saas companies.

at one point the free money being thrown around then spent on saas, cloud and marketing with fb / google will be pulled back. and then we will see who's naked. it might not be today, it might not be tomorrow, but it will happen.

hence buying a piece of a sound business like buffet does, will win at the end of the day. it's not glamorous but it will win.

[jakub_g]

IMO fundamentals win long term, but I also think that company being hyped is often a self-fulfilling prophecy: they suddenly get crazy amounts of capital for free when they stock is high which they can use to for securing loans, transactions, salaries etc. to grow bigger and faster.

[kbenson]

It's pessimistic of me, but I suspect that once the current crop of tech is no longer appealing for large investments some other sector will be found for the long term pump and dump.

The method of Buffet/BH obviously works, but it also seems like it requires a lol it knowledge and skill and patience, otherwise it would be much more popular. Rolling a new mark (or the same marks with a game with a new name) is much easier and reliable for those with less skill.