Afamiii

Options Trader: Monday Outlook

Markets will always missprice stocks, particularly at times of high fear or high greed. This is NOT a deficiency of the market.

Financials and real estate companies are at all times highly leveraged (and in this cycle even more highly leveraged than normal) such that small changes in asset value can deliver large changes in shareholder value.

The average investor (and I include large institutional investors), who might be following dozens of stocks, has very little real understanding of the value of these assets (by now it should be obvious that even the managers of the assets have less understanding of their value - certainly not within +/- 10%.) And therefore little understanding of the value of the company (certainly not within +/- 50%.)

So owners play safe and sell rather than risk permanent capital loss, whilst the average buyer also stays clear.

Giving room for the super investor who has superior knowledge and understanding of the asset to deploy (smart) capital and make a superior return.

For sure many financial institutions will not survive this cycle downturn and those (minority of) investors who do have superior understanding must be compensated for deploying capital (and expertise) in a high risk environment. smartinvestorafrica.co...