Buckle your Seat Belts
Investing is tricky business. Professional speculators attempt to determine what something is going to be “worth” in the future given everything that is true about the world today and by looking to the past for what’s “normal”. The major challenge, of course, is that the world is constantly changing – often unpredictably and so how reliable those estimates are, and over what period, ultimately determines how successful an investor or trader will be over the long term.
For retail investors it is important to understand that analyst estimates are a best guess. When companies report their earnings and activities to their shareholders, both analysts and investors can see for themselves what a company has or hasn’t been doing, and depending on the company, may get some insight into what’s coming around the corner.
The example of Facebook’s IPO, the ensuing legal drama, seemingly endless commentaries and price volatility are just a brief glimpse into the many moving parts involved in a publicly traded company. The price chart on Facebook’s stock also reveals that market participants were less than optimistic after the release of the earnings report a signal that there is a bumpy road ahead for those who are still on for the ride. Of course only time will tell if Facebook and its investors will continue to stay friends.