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resident posted:Well he hasn't posted any losses but he has posted some massive options gains so maybe he's actually a gifted trader. I would say I've been more lucky than good. I started trading full time near the start of the greatest bull market in more than a generation and it's been very easy to make money when all I've had to do was identify market leaders and buy the dips. It is funny to see some people here thinking it's impossible to make money trading though. Yes most traders fail, but the rest succeed. Gamesguy fucked around with this message at 05:42 on Jan 3, 2014 |
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Jan 3, 2014 05:40
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Gamesguy posted:I would say I've been more lucky than good. I started trading full time near the start of the greatest bull market in more than a generation and it's been very easy to make money when all I've had to do was identify market leaders and buy the dips. It's not about whether or not you can make money trading, it's about you asking about dodging the SEC by switching brokers- that makes it painfully obvious you are out of your depth.
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Jan 3, 2014 06:17
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Gamesguy posted:I would say I've been more lucky than good. I started trading full time near the start of the greatest bull market in more than a generation and it's been very easy to make money when all I've had to do was identify market leaders and buy the dips. I think most posters here just want to emphasize the "most traders fail" part because all new traders seem to believe (usually after being hyped up by a dumbass friend, website or email or some poo poo) that they've found the newest way to get rich quick. So the gentlemen here like to temper that attitude with "it is highly likely you will fail and become poor". I too am a fairly successful trader (and I trade using technical criteria, at that!), and my investment portfolio has more than doubled since I started. Like you though, I've started in the last 5 years and have experienced pretty much constant profits. I like to believe that it is because of my money and risk management skills, but it's hard to deny that it's been free money for a long time now. Honestly, there are so many people out there telling you the trading in the stock market is the easiest money you'll ever make, I prefer it to be nothing but (or at least, mostly) negative nancies in here. At least the goon who comes rushing here asking "where do I sign up for the free money?!?!" will have a sobering second thought before diving in head first.
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Jan 3, 2014 06:26
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greasyhands posted:It's not about whether or not you can make money trading, it's about you asking about dodging the SEC by switching brokers- that makes it painfully obvious you are out of your depth. I fail to see what my lack of knowledge regarding SEC regulations has to do with your insinuation that I must've inherited my money or have gotten lucky with bitcoins because it's clearly impossible for anyone to make money as a trader. Sokrateez posted:I think most posters here just want to emphasize the "most traders fail" part because all new traders seem to believe (usually after being hyped up by a dumbass friend, website or email or some poo poo) that they've found the newest way to get rich quick. So the gentlemen here like to temper that attitude with "it is highly likely you will fail and become poor". I agree with what you said, but it's one thing to caution against buying into some guy selling a system or a pump and dump scheme and another to completely dismiss that anyone could possibly make money trading.
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Jan 3, 2014 10:44
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Sokrateez posted:I too am a fairly successful trader (and I trade using technical criteria, at that!), and my investment portfolio has more than doubled since I started. Heck, you even hinted at that yourself: quote:I like to believe that it is because of my money and risk management skills, but it's hard to deny that it's been free money for a long time now.
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Jan 3, 2014 11:47
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Gamesguy posted:It is funny to see some people here thinking it's impossible to make money trading though. Yes most traders fail, but the rest succeed. It's pretty easy to make money, especially in a bull market. It's hard to continue making money for an extended period of time. People tend to let greed get a great hold of them when they either start making crazy money, or start losing money. People start doubling down, or continue buying dips, and it can get out of hand rather quickly. Don't try to play around the SEC - you aren't a big enough player to not be made an example of.
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Jan 3, 2014 15:25
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Shmoogy posted:Don't try to play around the SEC - you aren't a big enough player to not be made an example of. Also, you (Gamesguy) have now posted on a public internet forum about your desire to dodge SEC scrutiny. If you got in trouble, this post would kill any "I just didn't know what I was doing, sorry guys" defense you might have. Not that it would have been a great defense to begin with.
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Jan 3, 2014 17:46
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The guys who 'make money' (beat the market) are the ones who flipped heads five times in a row. Dont kid yourself about there being a great deal of skill involved. Even the great goon pick of 2013, buying apple at 400 - we've barely beaten the market return.
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Jan 3, 2014 17:51
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I'm just confused what you are trying to avoid from the SEC... are you worried they are going to front run your trades? Are you trading African conflict diamonds? Are you long the North Korean stock market? Do you have Iranian crude contracts? I don't get what you think the SEC is going to even care about your trading.
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Jan 3, 2014 17:53
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abagofcheetos posted:I'm just confused what you are trying to avoid from the SEC... are you worried they are going to front run your trades? Are you trading African conflict diamonds? Are you long the North Korean stock market? Do you have Iranian crude contracts? I don't get what you think the SEC is going to even care about your trading. He doesn't, he's just vanity posting about his big wins.
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Jan 3, 2014 18:25
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Is that guy seriously saying that he day traded $20 million in a day or $200 million in a month? And he is asking for securities regulatory legal advice on SA instead of talking to a lawyer? e. I mean I understand that there are other calculations you can use to get to large trader status and my question is largely rhetorical, but... Seriously? Phil Moscowitz fucked around with this message at 18:52 on Jan 3, 2014 |
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Jan 3, 2014 18:44
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rich jerks itt edit: honestly if you are trading $20m a day, unless you are leveraged to the hilt I don't understand why you wouldn't just buy some treasuries and pick up a new ferrari once or twice a year complements of US Government. nebby fucked around with this message at 19:20 on Jan 3, 2014 |
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Jan 3, 2014 19:12
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nebby posted:rich jerks itt It could be 200 million shares in a month. That could be significantly less than $200 million, for sure. If the SEC includes options and/or margin in those parameters, you can control a lot more than 200 million shares with a lot less than $200 million. Think about it, if you go far out enough in time or strike, you can buy OTM options for pennies. Each one controls 100 shares. So you can load up $10k into a single options trade and control hundreds of thousands of shares.
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Jan 3, 2014 20:07
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tiananman posted:It could be 200 million shares in a month. That could be significantly less than $200 million, for sure. I think you have the right idea for options volume calculations under Rule 13h-1. And securities lawyers can be expensive. But that kind of volume might be worth a consultation. Also it doesn't seem like you can avoid the reporting requirement by picking another broker but IANYL
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Jan 3, 2014 21:35
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Baddog posted:The guys who 'make money' (beat the market) are the ones who flipped heads five times in a row. Dont kid yourself about there being a great deal of skill involved. Even the great goon pick of 2013, buying apple at 400 - we've barely beaten the market return. I understand the geneal cautiousness/negativity in this thread but come on. Yes there are active managers who beat the market and yes there is a tremendous amount of skill involved. Blanket generalizations don't help anyone.
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Jan 4, 2014 02:24
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R.A. Dickey posted:I understand the geneal cautiousness/negativity in this thread but come on. Yes there are active managers who beat the market and yes there is a tremendous amount of skill involved. Blanket generalizations don't help anyone. What percent of active managers consistently beat the market? http://www.marketwatch.com/story/almost-no-one-can-beat-the-market-2013-10-25 choice quote - "Only 0.6% — you read that right, 0.6% — showed any true skill at beating the market consistently, “statistically indistinguishable from zero,” the three researchers concluded. " This guy summarizes a few other studies, as well as giving a pretty well stated argument that trading, while fun, cannot compete with an index fund. So if you have any significant amount of cash, you should have most of it in an index. And if you have a lot of cash, you need to diversify into other asset classes - bonds, real estate, etc. Do not trade it all, jesus. http://www.travismorien.com/FAQ/trading/futradersuccess.htm
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Jan 4, 2014 08:29
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R.A. Dickey posted:I understand the geneal cautiousness/negativity in this thread but come on. Yes there are active managers who beat the market and yes there is a tremendous amount of skill involved. Blanket generalizations don't help anyone. Someone hasn't read Four Pillars. One of the best examples is (page 85, The Market is Smarter than You, How the Really Big Money Invests, for those playing along at home  ) pension funds. This is all US centric, and while I'm not American it doesn't matter in the slightest and applies to all our economies.I'll type this out for you because it's a good study exercise for me too. There is one pool of money that is even bigger and better-run than the mutual funds: the nations pension accounts. In fact, the nations biggest investment pools are the retirement funds of large corporations and government bodies, such as the California Public Employees Retirement System (CALPERS) which manages an astounding $170 billion. These plans receive a level of professional management that even the nation's wealthiest private investors can only dream of. If you are a truly skilled and capable manager, this is the playground you want to end up in. For example a top-tier pension manager is typically paid .1% of assets managed - in other words 10 million a year on a 10 billion pool - more than most 'superstar' fund managers. Surely, if there is such thing as skill in stock picking, it will be found here. Bernstein then goes on to show us, with a graph, something we're used to seeing by now. They, on average, don't beat the market return. Discouraged by this failure of active management, these plans are slowly abandoning active portfolio management. Currently half of all pension stock holdings are passively managed, or 'indexed', including over 80% of the CALPERS stock portfolio. It's not being cautiousness or negativity. Active management is simply an outdated concept consistently proven as inconsistent. I'm looking at index funds on other markets, such as trading the Swiss index on the Swiss exchange.. that's showing returns that make our American and Australian markets look positively sickly. I'm thinking this is more the idea if you want to chase returns.. with some of that betting money in your portfolio.. rather than trying to play analyst on an industry and company you really don't know.
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Jan 4, 2014 10:51
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let me ask you this: if the smart money is indexed, how can the market be efficient? if the market is inefficient, then isn't it possible to beat the market? of course managed funds are at a huge disadvantage, they have to take on huge position sizes, among other things. don't think that the idea that active managers managing hundreds of millions of dollars failing to beat the index has anything to do with an individual buying and selling stocks. but go on, keep just buying index funds, you're keeping the market from being efficient and making it easier to make winning trades based upon fundamental analysis. one of the major reasons valuations get disconnected from stock prices is because of the massive amount of indexed money irrationally moving around due to the rules based approach of indexing. see: whenever a company enters the S&P, for example. nebby fucked around with this message at 12:02 on Jan 4, 2014 |
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Jan 4, 2014 11:59
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So you're saying you make money on the rules based trading that results from index funds (like FB recently entering the S&P and the resulting increase in price as all the index funds buy their position). Ok cool, but the question has always been .. how consistently? You're betting on firms going into and out of the S&P and the resulting shift.. so you're not only assessing that company and it's industry but it in context with the others as well. There will be some stronger bets than others, but it still sounds like something that could bite you. Major fund managers have to deal with impact costs, but if you took a professional in any industry and applied a large handicap to them I would still expect them to be more proficient at what they do than a layman. If you're beating the market.. by how much? Then you need to factor your risk against that. It depends on what you're trying to do, invest or speculate.
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Jan 4, 2014 15:55
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Everyone has a different investment strategy and risk tolerance. An actively managed fund which invests primarily in volatile small caps will beat the poo poo out of the S&P500 one year, but might not get close the next. It has a high return potential, but also a very high risk associated to it. Some people might want that for a percentage of their capital one year, and others they may not the next. Maybe I want a portfolio that has a high dividend return with lower capital risk. Maybe I want to invest more money into a certain geographic area and capitalization. Another thing I have found from the influx of "index" ETFs is that many of these supposed indexes are beginning to become manufactured versions of active investment strategies. You now have the "MCSI Chinese mid-cap, high-risk dividend index" or something similar. The indexes are no longer acting as a benchmark like they previously were.
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Jan 4, 2014 17:51
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Tony Montana posted:So you're saying you make money on the rules based trading that results from index funds (like FB recently entering the S&P and the resulting increase in price as all the index funds buy their position). Ok cool, but the question has always been .. how consistently? You're betting on firms going into and out of the S&P and the resulting shift.. so you're not only assessing that company and it's industry but it in context with the others as well. There will be some stronger bets than others, but it still sounds like something that could bite you. Hence, there's plenty of reason to believe individual investors can regularly beat the main indexes with some diligence and effort, particularly since the trend is towards indexing not away from it. All of my smart friends believe that you cannot beat the market, you should buy index funds, and that's that, as if this were some immovable fact. The more people who believe this and act on it by putting their money in index funds the increasing likelihood there will be clear opportunities for mispricing. I'm a value investor when it comes to stocks. I'm not going to buy anything that isn't obviously cheap relative to the wider market and cheap relative to the quality of the business. I have no stocks right now, since none of the opportunities I've found are cheap enough to make it obvious they are mis-priced. When the opportunities come along I'm pretty sure a good part of the reason they happen is because there is a ton of dumb money moving the price due to these stocks being bought and sold as part of index funds and rule-based ETFs, as well as traders moving the price due to stupid momentum signals. nebby fucked around with this message at 21:51 on Jan 4, 2014 |
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Jan 4, 2014 21:47
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nebby posted:I think you missed my point. My point wasn't "Hey, look how a stock jumps when it enters the S&P, I buy calls when that is announced and make money!" It was that this effect is evidence of how indexing contributes to market inefficiency. In everyone indexed, the stock market would be a ponzi scheme and there would be nobody pricing stocks based on analysis of future cash flows. I'm not really convinced that your argument is very sound. For one thing, most examples of indexing involve purchasing that is based on market capitalization, so the index funds purchasing in theory would not have a significant effect on asset prices relative to one another within the same asset class. The other thing that isn't clear to me is how much effect there is from percentage of indexers vs. stock pickers. Intuitively to me, it would seem like a relatively small percentage of stock pickers, assuming they were competing freely against one another, would still be able to very efficiently price stocks regardless of what was happening from the indexers. What is also not clear is what the effects of such "smart people" migrating from stock-picking to indexing. On the one hand you might say that the people left doing stock-picking are primarily morons who don't know what they're doing and so it would be easier to compete against such sub-par talent. On the other hand, the really crafty people (the group I'm sure you would identify yourself with) who think they have what it takes to beat all the morons will also still be left competing with each other. So which is it? Is the stock-picking competition dumbed down by people moving to indexing, or is it in fact becoming even more cutthroat and difficult to compete than before, because the pool of people you are competing against are on-average better stock pickers?
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Jan 4, 2014 23:18
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nebby posted:In everyone indexed, the stock market would be a ponzi scheme and there would be nobody pricing stocks based on analysis of future cash flows. But I don't care about the firms in the S&P as long term concerns. I don't care about their business models or the usual metrics of a solid stock, all I care about is that they're in the S&P 500. As long as the stock is worth money and it's a big deal in the stock market, I buy it's stock (or my index fund does). As soon as it either dies out due to no fault of it's own, or it's just the next bubble stock, I don't care, as soon as it drops out of the S&P the index sells out (which must actually have a snowball effect, just as a new firm entering the S&P like FB gets a huge kick in the rear end propelling it upward, someone dumped from the S&P also gets hit with all the index funds dumping them too). That is the point of passive management. The index isn't looking at the individual stocks, just wether it's one of the 500 biggest issues of shares on the market. Share price is still the share price, it doesn't matter if its sustainable or not, right now that's what it is worth. Quite simply.. what are you returns? Have you consistently beat the market, through a bear as well as the current bull? That is all that matters. If you really have the data to back your trading skill up, then you should feel confident and you'll be a rich person. I am also not saying only by index and any stock trading is stupid. I don't believe this either and am offended by the notion that I couldn't spot a really sure thing in my industry combined with my business eduction. But the analogy is finding 10 bucks lying on the ground, or the joke was the stockbroker said 'leave it, if it was a real 10 bucks someone else would have already picked it up'. You might be able to find money lying on the ground on occasion, but you can't make a living out of it and it's a waste of time trying to.
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Jan 5, 2014 00:10
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quote:But I don't care about the firms in the S&P as long term concerns. I don't care about their business models or the usual metrics of a solid stock, all I care about is that they're in the S&P 500. As long as the stock is worth money and it's a big deal in the stock market, I buy it's stock (or my index fund does). What would happen if everyone did this though? Company values would rise and fall solely based upon whether or not it was a top 500 stock by market capitalization. In addition, Standard and Poor's would essentially become the portfolio manager for the entire economy. Nebby is saying that if the most desirable investment was always from index funds, then the market would always invest in said indexes and be inefficient. Because the market is not completely inefficient, it means that there are a good deal of otherly managed portfolios out there. Once again though, I have always thought that "beating the S&P" is a really arbitrary concept. Everyone wants something different from their investments at any point in time. The broader market may be the most efficient, but that does not mean that the level of risk or return is acceptable to the investor.
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Jan 5, 2014 05:14
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Tony Montana posted:Quite simply.. what are you returns? Have you consistently beat the market, through a bear as well as the current bull? That is all that matters. If you really have the data to back your trading skill up, then you should feel confident and you'll be a rich person. Again my point is less about maximizing returns vis a vis some arbitrary metric like "did you beat a specific index fund" which is ridiculous, and rather trying to understand what exactly you are purchasing and for how much. It's a pretty basic concept we apply in nearly every other facet of life but when it comes to investing people seem to throw this out the window. I'm perfectly happy to take a loss relative to the S&P if I am confident I had a more informed perspective on risk and knew what I was putting my money into. People who just buy index funds often don't have a real investment thesis (beyond "I can't beat the market, the Four Pillars told me so, here Vanguard take all my money you have the lowest fees") and they wear this on their sleeve as the very reason why they do what they do. If you don't have an investment thesis that you can articulate you should not be investing and are much more of a gambler than the most aggressive trader who understands the stocks they are purchasing. If you are going to be an owner of a business I don't think it's too smart to not understand the business. Index funds make this impossible, and let you mentally punt on the entire problem and ride the rollercoaster. The nice thing at least is, like when you're at the craps table, when you lose everyone else is losing so you don't feel too bad. nebby fucked around with this message at 07:22 on Jan 5, 2014 |
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Jan 5, 2014 07:07
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Bernstein's book is great, it's a great intro to investing. Everyone should read it and internalize the ideas he presents, and you should evaluate building a portfolio of bonds and index funds. However just because BFC (and me, and probably many of the people arguing that indexing is not the best investment strategy) think you should read it, does not mean either of the following: 1) Everything Bernstein says is true. 2) Bernstein presents the best way to invest your money. Bernstein's book is specifically targeted to get people who are not sophisticated to a level of sophistication, to help you avoid some common pitfalls such as placing your money in an actively managed fund, embracing more risk than you are prepared to embrace and consequently getting scared out of the market, and failing to diversify intelligently. The investment strategy he recommends is good for people who are risk averse, who cannot afford the time to actively manage their investments, and who will evaluate the performance of their capital investments by social comparison. In short, he's making a recommendation that anyone can succeed with regardless of their skill, sophistication, or emotional discipline. It does not provide a refutation of active capital management, it does not demonstrate that active capital management is a losing proposition, it shows that paying someone else to actively manage your capital is a losing proposition. Which it is. Dwight Eisenhower fucked around with this message at 16:36 on Jan 5, 2014 |
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Jan 5, 2014 16:33
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nebby posted:Again my point is less about maximizing returns vis a vis some arbitrary metric like "did you beat a specific index fund" which is ridiculous, and rather trying to understand what exactly you are purchasing and for how much. It's a pretty basic concept we apply in nearly every other facet of life but when it comes to investing people seem to throw this out the window. I'm perfectly happy to take a loss relative to the S&P if I am confident I had a more informed perspective on risk and knew what I was putting my money into. People who just buy index funds often don't have a real investment thesis (beyond "I can't beat the market, the Four Pillars told me so, here Vanguard take all my money you have the lowest fees") and they wear this on their sleeve as the very reason why they do what they do. If you don't have an investment thesis that you can articulate you should not be investing and are much more of a gambler than the most aggressive trader who understands the stocks they are purchasing. If you are going to be an owner of a business I don't think it's too smart to not understand the business. Index funds make this impossible, and let you mentally punt on the entire problem and ride the rollercoaster. The nice thing at least is, like when you're at the craps table, when you lose everyone else is losing so you don't feel too bad. It's fine that you want to understand what you're buying. Being "happy" to take a loss relative to the S&P in a given year is fine too. The real question though, is whether you are gaining anything over investing in the broad market over long periods of time. If you are losing money relative to a passive strategy, then not only are you wasting money but you're wasting your time. You're right that there are plenty of people who take a passive strategy because they don't understand what they're doing beyond "a book told me so." There are also plenty of people who have looked long and hard at the question and ultimately decided that an active investment strategy is not worth the time investment or risk. Have you ever taken a detailed look at how much time you spend working on your investments, and considered how much you are "paying yourself" on an hourly rate given the amount you earn compared to the time spent? Chances are that it pales in comparison to what you would make at a second job, even one that earns minimum wage. This is especially likely if you start to compare your return against the broader market. If over a 10-year period of time, your strategy nets you an annualized 7.5% gain, but the VT etf gains 5% annualized over that same period, all of your work and time went into gaining you an extra 2.5% per year. If you started out with $1million that you were investing, you would've gained an additional ~$280,000 over what you would've made investing it all in VT instead. If you spent an average of 10 hours per week over 10 years (which isn't even really that much), then you would've spent a total of 5,200 hours, giving you an average of about $53/hr for the time you spent. That would be pretty good, but that's if you're tossing around $1mil, which most people don't have. If you had a more reasonable number, like say $100,000 - you would presumably have to spend just as much time working on research etc but then your effective wage for your time is a measly $5.30 per hour. You would've more constructively spent your time flipping burgers at McDonalds. If you aren't benchmarking your returns against a passive strategy, you could very well be earning less than a passive strategy over long periods of time, meaning not only are you spending a lot of time/energy researching stocks, etc, but you're also effectively charging yourself money to do it for no benefit.
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Jan 5, 2014 17:22
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Cheesemaster200 posted:What would happen if everyone did this though? Company values would rise and fall solely based upon whether or not it was a top 500 stock by market capitalization. In addition, Standard and Poor's would essentially become the portfolio manager for the entire economy. Not solely, but membership of the S&P does influence company value significantly right now. Not only due to index funds, just on the back of the confidence it inspires being one of biggest things happening in the economy right now. Also as S&P indexes are weighted, doing some accounting tricks or weird expenditure to 'get yourself over the S&P 500 line' doesn't really work because then you're just over the line and the index buys a only a small proportion of you shares compared to everyone else. nebby posted:This line of argument only makes sense unless you think a) "beating the market" means anything (who is "the market?") and b) if there is One True Way to measure risk-adjusted returns. The market, in that context is generally recognised as the leading indices. The S&P 500, the Dow Jones, the NASDAQ Composite. I'm assuming you know this, but it's simply the sum of the biggest players in the market for a given period. The S&P is different than the other two because it's is more broad and weighted differently, it is generally recognised as the goto 'market' statistic. Forget risk adjustment for a second and just compare the sum of all your trades and their returns against the percentage of movement of the S&P. I would argue your individual trades are more risky and hence your return value should be discounted more (further reducing your performance), but even if you just put that aside for a moment (so it can't be hidden behind), how did you do? nebby posted:When looking at an individual company, you actually *can* often mitigate a lot of the "poo poo hits the fan" risk by looking at their financial statements. If you err on the side of caution you can often find companies where you can have confidence in their future cash flows and feel secure that your principal is not at risk. You talk about it like buying a car. Have you ever worked for the biggest corporations on this fair earth? I have and I can tell you, they do some stunningly stupid poo poo.. that on the ground level you simply cannot believe. Wether it's a groupthink mentality driven by internal politics or bad consultancy due to the desire to sell more consultancy.. your P&L and Balance Sheet and AGM report don't give you insight into how much someone like HP can decide to release a tablet that completely sucks and doesn't work. Or Microsoft can decide to make one OS for all people and all platforms, despite people trying to quietly say 'but everyone and everything is actually pretty different'. I suggest you don't have the insight into the companies you speculate on that you think you do. Nor their industries, Microsoft was selling Windows Mobile phones and there was a nice company called Nokia doing very well until a snotty upstart that had been kicking around in the boonies since the 80s realised how far you could go with a phones. You're not going to see any of that on MS or Nokia's financial statements or vision statements, because they didn't see it coming and hence didn't plan for it. Now, like Cheesemaster200 is saying, what is important here is what are we talking about in terms of the profile. If you're talking 50k of 'betting money' and wanting to make a good return and use fundamental analysis and a knowledge of the industry and spot a gap.. that is very different to 300k that is your retirement fund and you're in the last decade of your career. nebby posted:If the wider market starts to slide you will not be stressed because you know that you paid a fair price originally, just like you don't stress out when the local store has a sale on a pair of shoes you already own. Conversely, index fund owners will be making GBS threads themselves on the way down because they didn't understand what they were buying in the first place and have no idea where the bottom could be. Your 'fair price' is based on your assessments, which are not perfect. You could have bought Nokia stock, thinking they have cash reserves, they're making money, brand recognition is ridiculous - they are a valuable company. You just couldn't see the blindside truck of the iPhone coming, you certainly couldn't see it if a company like Nokia with all their technologists and engineers and professional deep thinkers couldn't. Like the people buying Telsa, with the major car manufacturers of the world competing in the world's largest racing events pouring unthinkable resources into hybrid and electric drive technology. If Renault and Mercedes and Fiat make advances on the racetrack that Elon never could (because his operation is laughably tiny in comparison to their racing teams) and that trickles down to car production.. which it has before.. Elon's talk of the 'affordable common electric Telsa car' will be meaningless as any sane person would prefer a Mercedes instead. Telsa can have great numbers on paper, up until the point their value proposition is disrupted from the outside. Hail the free market. Where is the bottom for Nokia, on that stock you paid a 'fair price' for earlier because you read their papers and applied common accounting assessment to? Where is the bottom for Xerox or DEC? These companies are dead, actually killed, worth zero.. while your Four Pillars reader should have read the section on the History of the Stock Market. If the stock market actually completely collapses and can't regain then society will loving break down. Your portfolio will be the least of your concerns, you should probably get some canned food and be sure you know how to work a gun. The worst bear ever was in 29 and like every bear there was a rally after. If you sold your stock in the trough, because you didn't know about the history of bears, you lost. If you had individual stocks (all you could have, there were no index funds then) then it's quite possible your pick turns its toes completely up and you've completely lost with no chance to regain. But if you had a diversified pick of stocks, somehow representing the market as a whole.. then it doesn't matter where the bottom is because after it comes it will go back up again. Down is good in fact, because it's time sell some of your other asset classes and buy more diversified stock on sale. Up is good because you now have the option to cash out and buy all that nice stuff you want. That's the point of being educated and doing the reading and knowing the history.. you don't poo poo yourself when you learn this has happened numerous times in the past and what the past results were. Past results are NEVER a sure indicator of future results (again your important for your fundamental analysis).. but that's the best we've got and it's certainly better than some layman's opinion of the direction of the technology sector or electric drive. nebby posted:People who just buy index funds often don't have a real investment thesis (beyond "I can't beat the market, the Four Pillars told me so, here Vanguard take all my money you have the lowest fees") and they wear this on their sleeve as the very reason why they do what they do. If you don't have an investment thesis that you can articulate you should not be investing and are much more of a gambler than the most aggressive trader who understands the stocks they are purchasing. Yeah I've noticed your position and that's fine, there is no point reading a book a integrating it's mantra if you can't defend it against reasonable scrutiny. You can articulate what amounts to common sense (understand what you're buying) as much as you like and I can argue I don't think it's a simple as that.. but as this is finance we have a nice way to settle all argument..'show me the money'. Bernstein's argument is you can't, won't and over any length of time will almost always fail to. p.s. I don't actually want to hear anything about your returns, obviously the point is just making up your own mind about your speculation strategy. flowinprose posted:It's fine that you want to understand what you're buying. Being "happy" to take a loss relative to the S&P in a given year is fine too. The real question though, is whether you are gaining anything over investing in the broad market over long periods of time. If you are losing money relative to a passive strategy, then not only are you wasting money but you're wasting your time. You're right that there are plenty of people who take a passive strategy because they don't understand what they're doing beyond "a book told me so." There are also plenty of people who have looked long and hard at the question and ultimately decided that an active investment strategy is not worth the time investment or risk. This is alot of what I'm saying too, but the time you spend is still experience and has a benefit beyond the return of that year. However, in hindsight if you tally up your whole career in stocks and come out with a figure less than the average market movement.. then yes.. congratulations on convincing yourself you're a Wall Street badass when you're making less than a Wall Street receptionist. Just to finish, I'm not saying you can't make money in stock market speculation. That is obviously a foolish thing to say because people do it everyday. It's the question of investment versus speculation, risk vs reward, how that fits into your overall portfolio. nebby seems to be actually making the argument that index investment is a Bad Thing, not something that is a good vehicle for lower risk, more sustainable return for a retirement fund but actually omg index investing, that's terrible. I do not agree, from what I've learned. Tony Montana fucked around with this message at 17:48 on Jan 5, 2014 |
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Jan 5, 2014 17:33
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I think this argument also has a lot to do about what equity class we are talking about here. If you have an actively managed portfolio of blue chip stocks, each with a volume of 30 million a day, then there is not going to be much of an valuation arbitrage to be gained based on currently available information. These stocks are too efficient and have too many investors following it. Therefore, trying to beat a benchmark with these stocks is going to be based more on chance, resulting in a lack of sustained returns. It is the old adage of "what do you know that the market does not". If there are 30 million trades a day, the answer is probably nothing. However, once you get into small and medium cap stocks which do not have the investor coverage of blue chips, the chance for a mis-valuation based upon current information is much greater. I feel in small caps, actively managed funds make a lot more sense because there is a lot more value to be gained. Benchmarking small caps is also much harder in my opinion. Finally, what happens when you want a large cap stock portfolio with a 3% dividend yield? What happens when you want a stock portfolio with all components having a Beta under 1.5? All of these things require active management. You may not have the most efficient portfolio per Markowitz, but it is meeting your needs.
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Jan 5, 2014 18:30
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I don't have time to respond to all of the above, but a few points. First, when I said you can hedge by looking at financial statements, I wasn't talking about trying to predict the next Tesla, I was talking about trying to do the most you can to preserve your principal. Just understanding the liquidation value of the company and their balance sheet can go a long way to giving you an idea of how much risk you are taking with your capital. Capital gains would be nice but the goal should just be to preserve your principal and have a solid thesis for why you're getting a good price for sustainable cash flows and a good business. By buying an index fund, you are giving this visibility up completely because you would have had to analyze hundreds of stocks. Instead, why not own 20 or 30 companies (I still believe in diversification) that you understand well, that you have a solid investment thesis for, and that you can monitor to see if that thesis changes? Wrt to returns, this is a stupid line of argument. Few, if anyone, here has been investing long enough (as far as I can tell) to be able to look at their returns and make statements on their performance. Regardless, I still don't think net returns is a good measure for performance on its own vs also digging into detail as to how your hypotheses played out. Everyone is making money right now if they are buying stocks. If you are still in your first 10 years of investing the only thing you have to go on is forming a mental and psychological framework for how you think about investing and that's what I'm articulating here. Needless to say, I spend a lot of time on this and I wouldn't be doing it if I thought it was only going to have a trivial net effect on outcomes. If you don't have a large portfolio, then sure, buy an index fund and don't spend any time on it because it doesn't make a difference. This kind of goes without saying. Re: trying to beat efficient market for large caps, I agree its definitely harder especially in an environment like right now where everyone is buying, but when the momentum turns south of course the bargains appear across the whole market. FWIW, I'm heavily invested in highly diversified bonds right now. Seeing the bond fund discounts skyrocket a few months ago on taper talk smelled like an opportunity and I made a big move. Mostly actively managed though, not indexed, since I want a team of analysts managing default risk and keeping an eye on thousands of companies and municipalities is obviously not feasible. nebby fucked around with this message at 19:12 on Jan 5, 2014 |
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Jan 5, 2014 19:07
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I go away for three weeks and a large position of mine gets called for a cash buyout. Now I'm far too liquid. What the hell do I do?
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Jan 6, 2014 02:42
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goooooooooooooooooo solarstocks #solar #solarstocks #2013 #2014 #JKS #SUNELelorox posted:I go away for three weeks and a large position of mine gets called for a cash buyout. Now I'm far too liquid. What the hell do I do? press bhutan
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Jan 6, 2014 09:05
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mindphlux posted:goooooooooooooooooo solarstocks #solar #solarstocks #2013 #2014 #JKS #SUNE oddly enough it was an energy stock.
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Jan 6, 2014 10:27
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nebby, I think you're talking investment now. So that means a couple of things, we probably should be doing this in the other thread but that's find and the fence-sitting argument of 'different portfolios for different folks' can take a backseat. You're talking about long term investment for sustainable returns, you even say capital gain isn't your main focus. So I believe that means what I've been saying has even more relevance.nebby posted:Just understanding the liquidation value of the company and their balance sheet can go a long way to giving you an idea of how much risk you are taking with your capital. Someone like Microsoft or IBM with their ridiculous cash reserves and brand recognition isn't going to liquidate. They'll just lose value, perhaps a shitload of value - your value. Perhaps even with all their resources they can't figure a way to beat the new kid on the block, so then they slowly die, taking your money with them with no chance for recovery. nebby posted:Instead, why not own 20 or 30 companies (I still believe in diversification) that you understand well, that you have a solid investment thesis for, and that you can monitor to see if that thesis changes? Because 20 or 30 stocks isn't that diversified. As you've picked them, you can assume you're applying your logic and biases to all of them, so if there is something you couldn't or didn't forsee or got wrong or even got right then it will probably be present throughout your 'diversified' stock portfolio. Your monitoring may mean nothing (don't see the disruptor on the horizon) and you've now gotta make the call when to bail on a loser. You can't just leave it alone knowing a bear is always followed by a bull, you could have bought Nokia based on your assessments. nebby posted:Wrt to returns, this is a stupid line of argument. Few, if anyone, here has been investing long enough (as far as I can tell) to be able to look at their returns and make statements on their performance. Regardless, I still don't think net returns is a good measure for performance on its own vs also digging into detail as to how your hypotheses played out. Everyone is making money right now if they are buying stocks. If you are still in your first 10 years of investing the only thing you have to go on is forming a mental and psychological framework for how you think about investing and that's what I'm articulating here. Few professions have such a clear quantitative measure of performance. To deny this is the yardstick by which you and everyone decides if they are on the right track or not is ridiculous. The thing about noone has been investing long enough to assess returns, that's why we read books. That's why we use the experience of those that go before us.. you don't have to work out everything on your own. That is what education is. The more complex stuff you don't have time and can't work out on your own. Your 'mental and psychological framework' may be specific to a period, such as a bull, so your 'experience' is limited as far as that. When the next GFC comes, what you got? Nokia (and every major corp in the S&P 500 probably) has business brains literally doing nothing else as a full-time job assessing their own profitability and the industry around them, and tweaking their own corporation to suit. I personally don't believe you, or any other stock picker has better insight into the future profitability of such an entity as they do themselves. Are you in stocks to expand your mind? Are you kidding? We are here to make returns and stocks are one asset class where my money could go as opposed to other options. The measuring stick for each of the options is returns and then within each option are the individual returns of different methodologies. If you're really here to 'develop a mental framework' and aren't looking at the bottom line at the end of the day then we may as well stop talking because we are from different planets. nebby posted:Needless to say, I spend a lot of time on this and I wouldn't be doing it if I thought it was only going to have a trivial net effect on outcomes. If you don't have a large portfolio, then sure, buy an index fund and don't spend any time on it because it doesn't make a difference. This kind of goes without saying. This is the point behind reading those that go before you. Bernstein has written a best selling book about that it does have a trivial net effect on outcomes. It's not just him, you can find tons of other analysts and finance people that will agree. Quite frankly, who are you to say otherwise?
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Jan 6, 2014 12:13
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Tony Montana posted:Someone like Microsoft or IBM with their ridiculous cash reserves and brand recognition isn't going to liquidate. They'll just lose value, perhaps a shitload of value - your value. Perhaps even with all their resources they can't figure a way to beat the new kid on the block, so then they slowly die, taking your money with them with no chance for recovery. quote:Because 20 or 30 stocks isn't that diversified. quote:As you've picked them, you can assume you're applying your logic and biases to all of them, so if there is something you couldn't or didn't forsee or got wrong or even got right then it will probably be present throughout your 'diversified' stock portfolio. Your monitoring may mean nothing (don't see the disruptor on the horizon) and you've now gotta make the call when to bail on a loser. You can't just leave it alone knowing a bear is always followed by a bull, you could have bought Nokia based on your assessments. quote:Few professions have such a clear quantitative measure of performance. To deny this is the yardstick by which you and everyone decides if they are on the right track or not is ridiculous quote:When the next GFC comes, what you got? Are you in stocks to expand your mind? Are you kidding? quote:The measuring stick for each of the options is returns and then within each option are the individual returns of different methodologies. - How consistent were you with your investment decisions and approach to investing? - How many of your hypotheses turned out to be right? How many turned out to be wrong? Were you able to validate any learning? - How much sleep did you lose over your portfolio? - How rigorous were you when screening stocks? Backtesting? Doing your homework? Growth in any skill cannot only strictly be measured by externally measurable metrics. "Know thyself", etc. I know this seems like a bunch of hippie mumbo jumbo but until you get creamed a few times you won't get it. quote:This is the point behind reading those that go before you. Bernstein has written a best selling book about that it does have a trivial net effect on outcomes. It's not just him, you can find tons of other analysts and finance people that will agree. Quite frankly, who are you to say otherwise? For example I have a masters of engineering so I was perfectly capable of building and designing a simple hedge fund-like trading strategy over asset classes like your average smarter-than-the-average-bear Four Pillar'er would do once they read enough to realize that alpha is potentially out there. I modeled it in matlab, normalized the historical data properly, backtested it properly (using standard machine learning techniques like test and validation sets to determine parameters, and introduced noise and randomization to initial conditions to ensure there was not some bias there), and it was an obvious winner so I decided to trade it. I started executing on it and found that I was unable to sleep at night because I had no clue, really, what I was buying and for what price, I was just mindlessly following asset classes based upon a trading strategy that happened to backtest well and I had no fundamental thesis to go on to decide if things stopped working if it was a fluke or if my idea was actually broken. Value investing is different, pretty much anyone with a basic math background can do 80% of it, it's logical and makes sense, and makes it relatively easy to sleep at night compared to mindlessly buying large index funds you don't understand and are relying upon past correlations being predictive of future correlations. Right now, if you are a value investor, you are probably not buying in the US equities market, and you are sleeping well despite the S&P making new highs. I understand the history of quant folks analyzing value investing (as best as you can with quant techniques) like the Fama French study doing basic factor analysis and showing it has some outsized risk premium in certain conditions, and while that's all interesting from a math perspective (everyone loves a good application of singular value decomposition) I don't really care since it has a marginal impact on my decision that it makes any sense. (Like all mathematically based concepts, the best ones intuitively make sense both before and after you apply mathematical models to them.) If you want to keep thinking that there is one be-all-end-all conclusion about investing, what it is, why you do it, and how to think about it, and that one thing is returns, by all means do so. But I'd encourage you to read more and continue educating yourself: there are very successful stock pickers, and they can't be explained away by simple statistics. There are huge holes, both intuitively and literally in the mathematical formulations of mainstream economic theories like CAPM that provide the mathematical foundation for indexed investing being an ideal investment strategy. Indexing as a strategy isn't based upon the "you can't beat the market" intuition thing, or the flaws of active management, the entire concept of indexing came about due to academic economic theories pointing in that direction. If you don't think the academic theories are correct, you take less stock the merits posited by indexing since those supposed merits *implicitly assume the theories are correct*. If you want to round out your perspective (beyond getting your rear end kicked once this bull market ends) then here's a list of some pretty widely divergent views on investing from smart people: http://www.amazon.com/Quantitative-Value-Web-Site-Practitioners/dp/1118328078 http://www.amazon.com/The-Missing-Risk-Premium-Volatility/dp/1470110970 http://www.amazon.com/Expected-Returns-Investors-Harvesting-Rewards/dp/1119990726/ref=pd_sim_b_1 http://www.amazon.com/Following-Trend-Diversified-Managed-Futures/dp/1118410858/ref=pd_sim_b_9 http://www.amazon.com/Jackass-Inves...ckass+investing http://www.amazon.com/Intelligent-I...ligent+investor http://www.amazon.com/Berkshire-Hat...=buffet+letters If you don't read any but one of these, read Buffett's letters. He says the average person should put their money in an index fund, of course, but I don't know about you but to me "do as I say, not as I do" isn't exactly a ringing endorsement. nebby fucked around with this message at 18:17 on Jan 6, 2014 |
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Jan 6, 2014 17:45
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Ok, I'm interested in your alternate texts and will read them, nebby. I've got The Intelligent Asset Allocator here, along with some stock trading books, does that present some alternate viewpoints? A couple of things: nebby posted:I bet you own mostly US stocks. Guess what you're less diversified than you think. I'm not even American and don't trade on the US exchanges. Also keeping tabs on 20 or 30 stocks, reading all their financial data and interpreting it.. that's a lot of work. I'd want to be paid for this work. I like this as an example of how we organize our portfolios. nebby posted:- How consistent were you with your investment decisions and approach to investing? As an index investor - so far, there is only one approach. Own the whole market. Perhaps own some other markets too with betting money. What are you suggesting is the risk here? - The hypotheses that the market as a whole will eventually always go up, a bear is always followed by a bull, even if that takes years to happen? The hypotheses that the movement in the market index is as much as in individual investment focused stock picks, when you factor paying yourself? There is a plenty of data to support these. - None, because I'm not trying to be smarter than the market. It will do what it always has done, or we're all hosed anyway, so who cares? - No, none. It's sorta like a managed fund but without eating a ton of your return in fees. Anyways, I'll move onto your other sources as you've provided some and I'm interested that you're so vehemently opposed to index investing. This isn't my idea, as you well know, and you're a lone voice of dissent in a sea of praise for the modern index fund. I'm interested to see if I come to the same conclusions you did from your sources. Tony Montana fucked around with this message at 18:17 on Jan 6, 2014 |
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Jan 6, 2014 18:14
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Tony Montana posted:Anyways, I'll move onto your other sources as you've provided some and I'm interested that you're so vehemently opposed to index investing. This isn't my idea, as you well know, and you're a lone voice of dissent in a sea of praise for the modern index fund. I'm interested to see if I come to the same conclusions you did from your sources. What is your biggest drawdown in terms of % and dollar amount? Much more than returns, that, combined with the actions you took afterwards and the reasons for doing so, will tell a lot more about your investing track record, to me, than your net returns today. If you can sit through a 50% drawdown in your index funds and not be tossing and turning at night, then I'll kindly shut the gently caress up and say you have things figured out way better than I do.If my portfolio is down 50% the most important thing to me at that point isn't the money I've "lost" but my mental state and the discipline I'll have at that point. Value investing provides a pretty solid rock on this front, much more than holding a nice diversified ETF portfolio does (since I know better than to think it will ever recover) or an active momentum trading strategy does (since I think when it comes down to it technical analysis is bullshit.) If I am sitting in stocks that I am extremely confident I bought at a extremely fair price, and think have long term sustainability as businesses with robust margins, that's the best place to be when the poo poo hits the fan (aside from cash, of course )edit: And yeah the link you cited is pretty much straight-down-the-middle "I'll just buy the market and dial up bonds to reduce risk" albeit with fancier ETF composition than your typical "US stock vs US bond fund." If you want a more nuanced perspective on how this type of portfolio isn't truly diversified (since it's focused on asset classes, not return drivers) then check out Jackass Investing for a laymen's perspective or Expected Returns for a survey of the literature. There are plenty of potential market environments where an asset-class based portfolio will have correlations go to 1 and will crash and burn and not recover by the time you need the capital. If you really want to bank on diversification being your savior, you shouldn't just be buying asset classes but be mixing in things like manged futures, carry trade, long-short funds, low-liquidity funds, dividend policy based funds, rules-based fundamental analysis funds, and other stuff that dictate overall macro trends for returns n the market beyond asset classes. If you're doing *that*, I can respect the approach but it's not for me. (I backtested a bunch of strategies here, but there's just not enough data and the data that's there to me wasn't convincing. But I could sleep OK if I held a portfolio that I thought was robust to changes to second-order covariance (coskew?).) Just buying asset class index funds seems insane to me though if your core investment philosophy is "diversify, diversify, diversify." For me, and the part of the entire thing I haven't mentioned at all, is my approach is that on one side of your portfolio you have your value-based equity picks (if there are any opportunities) and on the other side you have your income. For a good book on income investing check this one out: http://www.amazon.com/The-Smart-Investors-Money-Machine/dp/047039174X I'm tilted way over to the income side right now since equities seem to be in crazy land (in the US at least) and there are some huge discounts going on in the area of the world's most hated asset class right now: the bond. (And all interest rate markets for that matter.) I'm getting a 9-10% tax adjusted yield on funds that are still sitting at a 10% discount to NAV. It's pretty crazy to see this during ZIRP. nebby fucked around with this message at 18:57 on Jan 6, 2014 |
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Jan 6, 2014 18:23
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nebby posted:Cool. You keep asking for my past returns, which I insist won't tell you much, but I'll turn it around and ask you something  There's the Vanguard International Total Market Index (VGTSX) fund, where I have my Roth IRA (I'm still young, so I can afford some more short-term risk - I'll diversity to other types of holdings soon). I started investing in 2007. I had paper losses for years during the Recession, during which I invested as much as I could. It's certainly not "real money" like you seem to have, but it's mine and I take it seriously. I also have a few thousand in individual stocks because it's fun to watch them (especially when they're doing well like everyone has now), but that's just a side thing. Bonus:  At a ridiculous expense ratio of 0.05%, the 500 Index Fund. berzerker fucked around with this message at 20:51 on Jan 6, 2014 |
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Jan 6, 2014 20:41
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mindphlux posted:goooooooooooooooooo solarstocks #solar #solarstocks #2013 #2014 #JKS #SUNE On the other side of the energy spectrum I'm very close to finally closing my crude short through SCO since the CL broke trendline support but climbing back above it. Might consider flipping and going long if it holds/breaks $95 and because crude has been strong at the beginning of the past few years(blah blah past performance ≠ future results). Acquilae fucked around with this message at 21:05 on Jan 6, 2014 |
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Jan 6, 2014 21:03
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Just following on from berzerker, this is the second time I've posted this image in this thread. How short our memories seem to be. So there is your 50% downturn, three times in the last century. You've got the big bad crash of 29, the Oil Crisis which I didn't know about because I was too young, in Australia there was a crash in 87 but that's not important to you, and then the dot com boom and the GFC. You can even see a mean of how long until the recover started. The point of knowing this is when the next one comes, I don't do poo poos and I just sit tight, because I own the whole market. I don't worry about a sector or a business model or a fad, I know the entire economy, the sum of all of the activity.. must improve.
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Jan 6, 2014 21:29
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