Some of you may have heard about $DRYS, the dry bulk shipping company that had a massive spike and subsequent collapse in the last week.
Within one week, $DRYS went from under $5, to almost $100 before trading was halted by Nasdaq for a day and has now fallen to around $12.
And for no other reason than irrational exuberance.
If only we had learned from our friend Isaac Newton, who lost millions in the South Sea Company bubble and collapse.
- As long as people are irrational, irrationality (i.e., inefficiency) will exist in the stock market.
- Inefficiency breeds opportunity (i.e., the price of a security does not always reflect its intrinsic value).
Quantitative investing is one path to finding repeatable opportunities to exploit. Chasing greed is a path to getting burned, if not this time then maybe the next.