Efficient Markets in Action | Brandon Averill, Justin Dyer | AWM Insights #86

Public markets are efficient, meaning they price in all public information almost instantaneously. This was proven once again this week when Peloton reported earnings and immediately dropped 25%. Then, Zillow reported they were exiting the house flipping business and promptly dropped 22%. These were unpredictable news events that were immediately incorporated into the stock price. Private investments do not have this same efficiency. Those with the right access to the best investments have a huge opportunity to create and sustain generational wealth with such an illiquid asset class.When it comes to the public markets, success is achieved by investing in a diversified and data driven way across the world, and always staying long-term oriented.   EPISODE HIGHLIGHTS:(0:32) News: Braves win the World Series. Payroll number beats expectations and lifts the market higher. Very good news for the US Economy, which also brought unemployment down to 4.6%. Central banks have begun pulling back some stimulus and normalizing operations.     (2:27) Earnings season is underway. Peloton, a COVID winner, dropped on weak forward guidance.   (3:45) Zillow is exiting the house flipping business after losing money and is unloading their current inventory of homes.(4:55) Efficiency of markets and news is immediately priced into the stock price.(6:30) Public markets are efficient whereas private markets are not. (7:30) Company forecasts are often wrong just as the analysts that follow the stocks are often wrong. They both cannot predict the future. (8:15) Zillow, with their large amounts of data, could not predict future home prices enough to make a profit.(09:40) Investors with access to asymmetric information, like exists in the private markets, creates an opportunity to earn higher returns. Only inefficient markets can provide that.     (10:20) Realtors almost always tell clients their homes will appreciate but they are just guessing.   (10:42) Penn National Gaming stock crashed because of one person in the company, Dave Portnoy. (11:00) The lesson at the end of the day is that for long term investors are rewarded as the world economy continues to grow. That is the bet with the highest chance of success.(11:33) Invest across the world, in a data driven and thoughtful way. If you can do that, ignoring the short term noise, you will have success.