I have said this before, the reason why the stock market is so inefficient is because we have so many market participants who are clueless. Of the few people we have remaining who would even consider a China stock, most are clueless. Market makers don't know a thing. And hedge funds apply generalistic simple approaches. So that leaves us with 1% or so who does have a clue.
If you look at betting exchanges, their efficiency is awesome. The opposite of the stock market. The "average" participant (non-gambler) is smarter than me. All these guys who have been banned by the bookies, they gather at the exchanges. They devote their entire life to making money "gambling" so they don't have to get a regular job. These people have their own models and computer algorithms and they don't focus on trends, they actual focus on fundamental value. So you can see the difference. I studied the soccer markets for over a year, with the help of my computer, statistics, the works. And I was able to get a 3% profit margin from that, at best. But with 5% commission (or 2% if you are very active) you can't make any money. So, efficient markets are a good thing, if that means that the average gambling addict can at least get fair value for his money. Not here, the average investor won't even consider a China stock, or OTC stock. Fund managers are even "worse". Even if they do consider buying the stock, most are clueless about valuations or simply don't think the stock will go up. So that is how you get this disconnect between value and price.
But that's why I am here :-) There is a lot more opportunity here, although it may take a lot of time.
This is very exciting stuff. I should be discussing this with my old value seeking friends at the betting exchanges. The problem is, most people still believe that the market is usually right. Or that it doesn't matter even if the market is wrong, because the trend is your friend, etc.
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