[HN Gopher] Does Market Timing Work?
___________________________________________________________________
Does Market Timing Work?
Author : alihm
Score : 146 points
Date : 2023-10-08 04:01 UTC (19 hours ago)
(HTM) web link (www.schwab.com)
(TXT) w3m dump (www.schwab.com)
| [deleted]
| vik0 wrote:
| Ever since I read The Black Swan by Nassim Nicholas Taleb and
| Thinking, Fast and Slow by Daniel Kahneman, I can't take anything
| related to the stock market seriously (among other things as
| well, but this post is related to the stock market, so that's why
| I'm focusing on it.)
|
| There's very little skill involved, which isn't to say there is
| no skill involved whatsoever - but at the end of the day it
| really is just luck
|
| The following excerpts are from Thinking, Fast and Slow:
|
| "The illusion of skill is not only an individual aberration; it
| is deeply ingrained in the culture of the industry. Facts that
| challenge such basic assumptions--and thereby threaten people's
| livelihood and self-esteem--are simply not absorbed. The mind
| does not digest them. This is particularly true of statistical
| studies of performance, which provide base-rate information that
| people generally ignore when it clashes with their personal
| impressions from experience."
|
| "Finally, the illusions of validity and skill are supported by a
| powerful professional culture. We know that people can maintain
| an unshakable faith in any proposition, however absurd, when they
| are sustained by a community of like-minded believers. Given the
| professional culture of the financial community, it is not
| surprising that large numbers of individuals in that world
| believe themselves to be among the chosen few who can do what
| they believe others cannot."
| envsubst wrote:
| Nassim Taleb made his money trading markets.
| ozzydave wrote:
| This data set should be expanded to include 100 of his peers
| who started trading at the same time.
| envsubst wrote:
| Are there 100 people who know finance and think carefully
| like Nassim taleb? What do their outcomes look like? I
| would bet all of them do pretty well. (I'm not even a big
| Taleb fan.)
|
| This is just like the startup founder argument. Every one
| which succeeds ends up having a tremendously interesting
| background demonstrating unique interest and capability.
| achrono wrote:
| FWIW ever since Kahneman, Ariely and similar company have had
| some of their theories get discredited (Ariely's taint is worse
| because it's to do with _fabricating_ research!) I have gone
| back to simply resorting to common sense and quotidian
| skepticism.
| codethief wrote:
| > ever since Kahneman [...] have had some of their theories
| get discredited
|
| Could you elaborate?
| voiceblue wrote:
| https://replicationindex.com/2020/12/30/a-meta-scientific-
| pe...
| achrono wrote:
| [1] below goes into detail on one of the topics, [2] is a
| less technical / more journalistic take.
|
| Essentially Kahneman ended up being super confident
| ("disbelief is not an option" he said) about the findings
| he cited, some of which have been shown to suffer from lack
| of rigor.
|
| If you're wondering "well, just _some_ of them right? " I
| will ask you to ponder for a minute over the fact that this
| is not supposed to be some impulse aisle magazine article
| but a book applied epistemology ("behavioural economics" is
| to me just what gave this and related books some sales
| wheels).
|
| [1] https://replicationindex.com/2020/12/30/a-meta-
| scientific-pe...
|
| [2] https://slate.com/technology/2016/12/kahneman-and-
| tversky-re....
| bluGill wrote:
| A few people have consistently beat the market over many years.
| I call that skill. I don't know if they really know thier how
| they do it though
| olalonde wrote:
| If there are really just a few, it could be explained by
| chance. Warren Buffet is often cited in that group and yet, a
| blindfolded monkey would have done better than him in the
| past 20 years[0].
|
| [0] https://www.linkedin.com/pulse/warren-buffett-has-
| underperfo...
| pokler wrote:
| And what about Renaissance Technologies? Is that just
| chance or luck?
| olalonde wrote:
| I could be wrong but I don't believe Renaissance
| Technologies makes their money picking individual stocks.
| My understanding is that they mostly make money with
| (statistical) arbitrage, market making, etc.
| Kranar wrote:
| A combination of luck, some skill and tax fraud.
| StanislavPetrov wrote:
| I call it (almost always) being a member of Congress or
| someone else with inside information!
| auxym wrote:
| Sorry for shilling this podcast that I mentioned in another
| comment in this thread, but they do have very relevant
| information on this too:
|
| https://rationalreminder.ca/podcast/220
|
| This is an interview with two academic researchers into
| active fund managers who can indeed beat the market
| consistently sometimes. One factor why they exist is that
| they have access to better information than the average
| individual investor. However, (1) excess returns tend to
| mostly get absorbed by higher fees and (2) it's very
| difficult to scale it up, funds who beat the market tend to
| lose this edge when more funds go into them. Thus, market-
| beating funds, if they want to maintain their edge, have to
| severely limit who can invest in the fund and how much they
| can put into it.
|
| The episode also goes into the effect of security selection
| (which stocks are picked) vs market timing, which is relevant
| to TFA.
| matt_s wrote:
| > beat the market consistently sometimes
|
| Is this like "60% of the time it works every time"? The
| fact that there are a few individuals that have beaten the
| market on occasion is a strong indicator that the chances
| of any retail trader doing this are slim to none.
|
| I suspect poker has more skill involved than stock trading.
| satvikpendem wrote:
| You should also read Adaptive Markets by Andrew Lo. It talks
| about how behavior psychology affects the markets, as Homo
| Economicus does not really exist, people are not rational
| actors individually or even at scale in other domains (see, for
| example, loss aversion) so there is no reason to think we are
| rational when dealing with the markets either.
| [deleted]
| 876978095789789 wrote:
| > Ashley Action took a simple, consistent approach: Each year,
| once she received her cash, she invested her $2,000 in the market
| on the first trading day of the year
|
| She benefited from the January Effect:
| https://www.investopedia.com/terms/j/januaryeffect.asp
| hash872 wrote:
| Worth noting that about 30% of active fund managers have beat the
| S&P 500 going back to 1993
| https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4096205
|
| They may not do so for their _investors_ - this is before fees.
| But it does seem significant that they are beating the index on
| their own, and over a consistent period of time. 30% is not
| nothing. Seems like a blow to strong-form EMH to me.
|
| As an FYI, I never want to hear a real-life fund or investor
| compared to a benchmark again. Benchmarks are theoretical
| investments with a 0.0% expense ratio- once you add in some of
| the real costs of running a passive fund, you start to get more
| real numbers
| hansvm wrote:
| That warrants further investigation, but even if the data is
| flawless it isn't necessarily a blow to EMH.
|
| As a very contrived example (to hopefully illustrate the "risk-
| adjusted" component of EMH while keeping the math simple),
| suppose the market consists of many equally sized firms and
| admits a strategy where each year 0.1% of firms will be
| uniformly randomly selected to have all their assets wiped out
| and distributed amongst the rest, and due to social pressures
| and incentives everyone uses the same strategy. Each year,
| 99.9% of firms will beat the market [0]. Forward-looking, 97%
| of funds starting in 1993 will have beaten the market that
| entire period (backward-looking is less meaningful because it
| depends on, among other things, how many new entrants to the
| market there are, not just their performance).
|
| Despite the 97% success rate on a 30-year basis, this is still
| very plausibly a scheme you wouldn't want to participate in
| (your relative valuations of different outcomes might still
| make it desirable, but that's a separate question), but it
| doesn't violate EMH because of the high risk relative to the
| small returns being achieved.
|
| Bringing the contrived example back to the real world a bit,
| that particular failure mode is common whenever a machine-
| learning person tries to tackle the market on their own. Even
| after getting over the hump of price -> bid/ask -> order book
| -> ... in correctly modeling what's happening, they're still
| prone to doing things like predicting the chance a security
| will go up or down and assuming that both branches have equal
| magnitudes. When they throw it at the real world, they find
| that despite low false positive and false negative rates for
| predicting when the price will increase, the times they were
| wrong were all the high-magnitude events, so they lose money on
| average.
|
| Another way that potentially ties back to the real world, what
| exactly are the incentives for an active fund manager? When
| they fail, can they start a new fund? Can they distribute
| excess losses to a couple of years when the market also did
| poorly to be able to say something like "every year the S&P 500
| went up, we went up more" and still attract new clients? It's
| not obvious to me that you'd expect behavior which would result
| in a low chance of beating the S&P 500 over a period of time,
| even if strong-form EMH holds.
|
| [0] This assumes the "market" is static, but the details aren't
| meaningfully different when you instead benchmark against
| something like the S&P 500.
| CuriouslyC wrote:
| Assuming a random distribution of yearly returns centered on 0
| before fees, with enough fund managers you'd see plenty that
| would beat the market for 30 years. That past performance would
| also be in no way indicative of future performance given the
| stated process.
| unusualmonkey wrote:
| A blind monkey throwing darts will beat the S&P 500 some of the
| time.
|
| The problem isn't that it's impossible to beat the S&P 500
| (it's actually trivial), the problem is it's hard to predict
| _which_ portfolio will outperform the S &P 500.
| Aachen wrote:
| The point they're making is that fewer than 30% of monkeys
| would still be positive after so many years if it were random
| chance
|
| Idk if that's true but you're not saying what percentage one
| would expect to see instead
|
| I also think monkeys are the wrong example here because
| aren't they at even odds with the index? 50% of them,
| assuming they take no bananas for their service and assuming
| they don't get to make more trades than the index does,
| should have beaten the index, if my currently-half-awake
| brain is working correctly
| fortran77 wrote:
| Yes, if you're lucky enough to guess correctly. (So it's a No for
| me!)
| tippytippytango wrote:
| The intuition is that low information investment returns are
| compensation for putting capital at risk. The capital must be at
| risk to collect the risk premium. You're an insurance provider as
| much as an investor. When you are timing the market you are
| trying to collect in excess of the risk premium while having your
| capital at risk for less time. This can only work with an
| information asymmetry or luck.
| zoomablemind wrote:
| _"...Each received $2,000 at the beginning of every year for the
| 20 years ending in 2022 and left the money in the stock market...
| "_
|
| All of the experiment "participants" must have Lucky in their
| middle names. They managed to keep their jobs over those 20 years
| and kept their cool at the economy downturns.
|
| They only Buy (the index shares), except for the one that keeps
| "cash" aka money market shares. I guess they plan on doing this
| beyond the 20y, why stop feeding cash into the account, why
| retire when it can contnue growing?
|
| Lucky ones will also retire in upturn.
|
| Yet the whole transaction needs the Sell part to realize the
| gains. Surprisingly, the Schwab experiment did not model this for
| the "participants".
|
| Does one need to "time" the Sells?
| TacticalCoder wrote:
| > Yet the whole transaction needs the Sell part to realize the
| gains. Surprisingly, the Schwab experiment did not model this
| for the "participants".
|
| The FIRE community did model this at great length though. And
| the example in TFA is just an example: saving $2K a year is
| basically drinking one or two beers less each day (so I
| wouldn't look too much into that amount). Most people in the
| west could save that. At the very least the people at which TFA
| is aimed could save $2K a year.
|
| Try $20K a year: most working people here could save that.
|
| Here's a nice "rich, broke or dead" FIRE calculator:
|
| https://engaging-data.com/will-money-last-retire-early/
| throw0101c wrote:
| > _Does one need to "time" the Sells?_
|
| In retirement you need Money more than you need Stocks, so the
| Sell side of the trade could be someone who is not trying to be
| clever with trades, but simply needs to pay for their
| groceries.
| dzink wrote:
| To time the market, you need visibility into it down fine
| intervals and tools not available to anyone without a 3 digit
| investment. Common tools obfuscate data. A typical movement of
| the market that is obvious on a detailed chart, is explained
| haphazardly by likely automated financial press. The jobs data
| was strong on Friday, leading to likelihood of higher interest
| rates for longer, yet the market jumped up that day? Was that a
| Dead cat bounce? Short-sellers exiting their positions before a
| long weekend? A move to drum up retail investor interest in a
| last ditch effort before the S&P crosses the 4200 point of no
| return? The beginning of the next bull market?
|
| The retail investor software is designed to take advantage of
| retail investors left and right. Placing trades is error prone.
| The spreads can be ridiculous (0.5% at 9:30am). the market
| zigzags consistently so no stop loss is left un-triggered before
| a bounce. These conditions are currently leading to a world of
| take-profit trading. Timing works if you pay attention to it all
| the time, but most don't have the time for that. Your retailer
| software won't warn you when you are losing profits gained in the
| past year. That's why long term investors become complacent after
| a long stretch of growth and stop paying attention. With bots
| trading increasingly more and interest rates remaining higher,
| the market will not look the same as it did since 2010 AT ALL and
| the data from before then is only a usable in detail to those who
| can pay. Once retail investors have seen the lines go down. the
| bounce back won't be as linear as 2020 or this spring. Treasuries
| require a lot less sweat.
| PeterStuer wrote:
| The idea with _any_ Ponzi scheme is to get in as early as
| possible and get out before the inevitable collapse. Though if it
| is your meta-governement propping up the Ponzi come hell or high
| water, not sure where you would get out to that would not be
| sucked into the collapse unless you are part of the 0.000001%
| that would potentially have an option to watch the world burn
| from a distance.
| fsckboy wrote:
| The idea with a Ponzi is to create one and make money from the
| get-go.
|
| There is no good idea with a Ponzi if you didn't create it.
| yieldcrv wrote:
| Generic advice gets generic results
| irjustin wrote:
| Yes but only for a select few. For the rest of us... Nope
| medellin wrote:
| And the select few are those making the policies because no one
| else knows whats going to happen
| btbuildem wrote:
| I feel like this could be explained much more succinctly as the
| direct corollary of the founding tenet of capitalist society:
| endless growth.
|
| "The numbers always go up"
|
| That's it.
| rr808 wrote:
| The problem with buy and hold and pretty much every current
| strategy is that its distorted by the huge 40 year bull market
| we've seen in the USA. Every American asset has gone up big time
| - of course "time in the market" is a good thing.
|
| If you look at Japanese or European stock markets they tell a
| very different story. Similarly the next 40 years in the USA
| could be a miserable time for investors. I can't believe how much
| people take for granted that stock markets "usually go up 7% a
| year" or whatever.
|
| No one really knows but it wont be as good as the last few
| decades.
| ais89 wrote:
| and the 7% is skewed towards a small % of companies that have
| averaged up the S&P 500, usually big tech companies. If you
| look at the distribution and median return its actually far
| less.
| the_gastropod wrote:
| Of course predicting the future is impossible. But there's a
| lot more than 40 years of data to support the buy-and-hold
| idea. The updated Trinity Study spans from 1925 to 2009, so
| includes the worst economic calamity in US history. It
| concludes an inflation-adjusted 4% withdrawal rate is safe for
| 30 years in 95% of historical 30 year periods. An inflation-
| adjusted 3% withdrawal rate succeeded in every 30-year period.
| Devasta wrote:
| 1 - People should be able to retire.
|
| 2 - Their retirement should be financed by 401ks and the like.
|
| 3 - Stock Markets can go down as well as up.
|
| You can't have all three, so the government will always ensure
| that the stock market goes up long term.
| [deleted]
| grogers wrote:
| With the excessive debt (which is not slowing down) the
| government is planting the seeds for high inflation in the
| long term. This historically has been very bad for equities
| (in real terms).
| PaulDavisThe1st wrote:
| Or you can elect a government that fundamentally doesn't
| agree with #1.
| jfthoi wrote:
| I'm unsure if you're being facetious so I'll take your
| comment at face value.
|
| Government isn't a static thing - especially one that is
| elected by the people (for the people). Sooner or later
| members within said government will also consider
| retirement. So even if you can elect a government that
| disagrees with #1, you won't be able to hold it for too
| long.
| PaulDavisThe1st wrote:
| "People ought to be able to retire" ... I assume that you
| mean the idea that people who have worked most of their
| lives should be able to stop working something in the age
| range of 60-70, and then enjoy at least a moderately
| comfortable life until death.
|
| If that assumption is correct, this is a relatively new
| idea, at least in the sense that government has any
| active responsibility for it.
|
| I can absolutely guarantee you that there are currently
| elected members of the US Republican Party, and similar
| political parties in other countries, who do not agree
| with the concept that government has any role to play in
| this. Don't work hard enough during your life? Your
| problem. Don't save/invest appropriately ? Your problem.
|
| 100 or 150 years ago, the idea that there would ever be a
| US government that would take notable steps to try to
| ensure a moderately comfortable life during retirement
| would have seemed like a pipe dream. It remains something
| upon that some political ideologies do not agree with.
| danans wrote:
| > Don't save/invest appropriately?
|
| You missed one: "inherit"
| blcknight wrote:
| 100 years ago it was definitely on the radar the US
| government should support retirement. Social security
| started in 1935.
| pixl97 wrote:
| As long as old people keep voting in much larger numbers
| than young people.... how do you expect that to occur?
| wolverine876 wrote:
| Or governments could insure retirement income.
| missedthecue wrote:
| It's called social security and it's enormously expensive
| and borderline unaffordable... And not even enough to
| retire on comfortably
| wolverine876 wrote:
| Yet it works so well that the public overwhelmingly
| supports it.
|
| > borderline unaffordable
|
| It's funded by your own income; it's a compulsory savings
| plan.
| missedthecue wrote:
| No, I mean societally it's unaffordable. The government
| will eventually need to raise taxes significantly or
| begin means testing it. The current system is
| mathematically unsustainable
| the_gastropod wrote:
| The current system is mathematically unsustainable pretty
| much by the design of a certain political faction
| interested in demonstrating the incompetence of
| government. Removing the income cap--currently around
| $160k--on the social security tax would do a great deal
| to make social security sustainable (and more equitable).
| wolverine876 wrote:
| Think how many problems could be solved by removing
| (democratically) that faction: Social security, climate
| change, immigration (to a significant extent), education,
| et al
| dh2022 wrote:
| If they remove the cap on retirement contributions they
| should also remove the cap on retirement payouts. I would
| love to see social security pay former CEOs millions of
| dollars per year:)
| yterdy wrote:
| No, they shouldn't. SS is meant to prevent destitution,
| not enable luxury. Wealthy Americans owe the working and
| consumption classes whose sacrifices make their riches
| possible; there is no such obligation to ensure those
| elite earners get back even what they paid into that
| particular channel, at the expense of people who are much
| less well off, when they have other resources to draw
| from.
|
| You might not think that's fair. I do. Even under this
| hypothetical regime, I know who I'd choose to be: rich
| and paying a ton in taxes, in a heartbeat.
| bumby wrote:
| Devils advocate: by subsidizing the "consumption class"
| you enable more consumption. I get that's how our current
| economy works but there are probably a lot of negative
| externalities associated with increasing consumption.
| the_gastropod wrote:
| I don't understand why the mental model for SS is any
| different than any other service the government provides.
| People don't expect their tax payments to proportionally
| determine: their access to roads, law enforcement
| services, fire protection, access to GPS or weather data,
| etc. Government's purpose is to facilitate the common
| good. Some fortunate individuals are able to contribute
| more, some less fortunate individuals are able to
| contribute less.
|
| I'm relatively lucky in that I do hit the SS income cap
| every year. And I think it's extremely stupid that my
| paycheck suddenly grows 6.2% well before the end of the
| year every year. I can absolutely afford to continue
| paying my 6.2% tax, just like everyone else, and not need
| special treatment when withdrawal time comes in
| retirement.
| AnthonyMouse wrote:
| Social security was sold as an insurance program and
| would have to be completely redesigned to operate like
| other programs -- you'd essentially want it to be a UBI
| for everyone over a particular age funded out of general
| revenues, and might be better off to make it a real UBI
| for just everyone.
|
| But it's "the third rail" because there is so much money
| on the table. It's a program that makes transfer
| payments, which is zero sum, so any change will be fought
| hard by whoever ends up worse off than they are under the
| status quo.
| AnthonyMouse wrote:
| > The current system is mathematically unsustainable
| pretty much by the design of a certain political faction
| interested in demonstrating the incompetence of
| government.
|
| The current system is mathematically unsustainable as a
| result of politics.
|
| If you're going to untie benefits from payments then the
| first sensible thing to do is to make the same payments
| to everyone instead of giving more to people who made
| more money, but this would result in large numbers of
| affluent retirees voting against you.
|
| If you're going to untie benefits from payments then the
| second sensible thing to do is to eliminate social
| security tax whatsoever and fund the program from general
| revenues, which would remove the need for the farce of a
| "social security trust fund" (the government owes itself
| money: it's a debit and a credit in equal amounts and
| nets to zero). But then people would condemn you for
| "bankrupting social security" or "stealing the trust
| fund" or similar nonsense, funded by the people the tax
| burden would be shifted onto.
|
| Removing the cap while leaving the program as it is not
| only is worse than either of these things, it doesn't
| even solve the problem, because the program as-designed
| would then be making higher payments to all of those
| people when they retire which would consume more than all
| of the money they paid in because people who made more
| money tend to live longer.
| bumby wrote:
| > _the government owes itself money: it 's a debit and a
| credit in equal amounts and nets to zero_
|
| Can you elaborate? It seems like the govt has a liability
| and the pensioners have an asset.
| vineyardmike wrote:
| The government has a fund that is used to pay for SS. The
| fund is an _asset_ they've committed to using to pay the
| _liability_ of their pensioner promises.
|
| That fund is an asset full of assets. Those assets are
| government debt. Owning your debt basically nets to 0.
| bumby wrote:
| I agree for a snapshot in time. I think the distinction
| is that if the liability includes future payments to
| current citizens posting into the system, the liability
| may outpace the asset.
| AnthonyMouse wrote:
| The amount of expected social security payments is
| independent. They don't have enough "money" in the "trust
| fund" for that regardless.
|
| The point is that the "trust fund" is a NOP. It's like
| writing a check to yourself. When you go to deposit it
| into your account, your account balance doesn't change.
|
| Every penny the Social Security Administration withdraws
| from the "trust fund" is either coming out of that year's
| general revenues or is causing the US government to sell
| more treasuries into the bond market. It's the same thing
| that would happen if the "trust fund" was empty and the
| money the Social Security Administration pays out in
| excess of what it collected that year came out of general
| revenues or deficit spending.
|
| Worrying about what happens if it "runs out" is
| ridiculous. It's like worrying about what happens if you
| run out of checks you wrote to yourself. What you need to
| worry about is where you're _actually_ going to get the
| money.
|
| Which you can go ahead and do already because both
| "social security tax" and "deficit spending" aren't
| particularly ideal, but that's what's happening today.
| Social Security tax is one of the most regressive taxes
| we have.
| bumby wrote:
| > _The amount of expected social security payments is
| independent._
|
| This is the kind of economic theory that loses people.
| It's like what economists say deficit spending doesn't
| matter because a govt isn't like a person. It certainly
| matters if confidence in the system matters.
|
| The fact that you acknowledge the money comes from side
| other source implies there's a tradeoff. There's no free
| lunch here, regardless how creative the accounting gets.
| pjlegato wrote:
| This is a common and fundamentally incorrect
| misconception about Social Security. Many subsequent
| policy debates are then misinformed.
|
| Your money is not ever saved for you. Your retirement is
| NOT funded by your own past taxes. Your retirement is
| funded by those younger people who are then working and
| paying taxes.
|
| You can see the details at
| https://en.wikipedia.org/wiki/Social_Security_Trust_Fund
|
| Payments to retirees are made out of _currently incoming
| funds_. That is, the money paid in taxes by people
| currently working is immediately distributed to retired
| people who are receiving Social Security payments.
|
| It is, in other words, NOT a savings plan. Full stop.
|
| This scheme sort of worked in the 1930s when life
| expectancies were much lower and only a few people
| survived to retirement age relative to the much larger
| number of working people paying taxes.
|
| Since 2009, Social Security has operated at an annual
| loss: the amount paid out has begun to exceed the
| incoming taxes. The deficit is expected to increase a lot
| in the coming years. (See https://www.cbo.gov/sites/defau
| lt/files/cbofiles/attachments...)
|
| Whatever you may think about whether Social Security is a
| good idea or whether the goverment ought to provide for
| retirement, it's clear that the current structure is not
| going to do that for much longer. A large-scale reform of
| some kind is coming.
| bumby wrote:
| Isn't the implication that solvency can be maintained by
| increasing the age of claimants? It doesn't have to be a
| drastic step function, it could be slowly phased in.
| bumby wrote:
| Most people will get more out of social security than
| they pay in, though.
|
| It's possible that the general HN view is skewed because
| tech tends to pay well and this dynamic erodes at higher
| levels of income.
| sandworm101 wrote:
| >> 1 - People should be able to retire.
|
| Why? Retirement is a very recent phenomena. The idea of
| someone earning enough during their working life to then fund
| several decades of non-working life is a very modern thing,
| maybe only the last sixty years or so. Only a very rarified
| few were ever wealthy enough to actively stop working prior
| to becoming physically unable to work. And then, for most all
| of human history, those too old to work lived out their
| remaining few years being taken care of by their children.
| I'm would not casually assume any "right" to the modern
| concept of retirement.
| pjlegato wrote:
| Too many people here use the drive-by "downvote" as a means
| of expressing their disagreement. This comment is a
| perfectly rational and polite contribution to an on-topic
| intellectual discussion of retirement, yet has received a
| large number of downvotes.
|
| People, if you disagree, that's fine, but make some kind of
| a (polite, rational) counterargument rather than abusing
| "downvote" to express your visceral disgust at becoming
| aware of an opinion that differs from your own.
| bumby wrote:
| Also, to tag in, I believe downvoting is best to mark
| something that goes against the HN guidelines rather than
| just a sentiment you may disagree with.
| LapsangGuzzler wrote:
| You could apply this argument to so many modern workforce
| changes, for example, the 40-hour 5-day workweek.
| Throughout history, most workers have not had the kind of
| rights that they do today.
|
| I think we all deserve to make progress on things like
| retirement instead of making arguments like this. Sure,
| retirement hasn't always been a guarantee, but can we agree
| that this isn't a good thing?
|
| We never question the desire to innovate in how to make
| money, but we're often very quick to dismiss the idea that
| we can also dream to innovate society in a way that's
| decoupled from profit, which is sad.
| bumby wrote:
| While I agree that most of society should be the
| beneficiary of productivity gains, I'm not sure
| retirement is still a net positive. It seems like a lot
| of health and well-being is related to being a valuable
| member of society and fortunately or unfortunately, for
| many, work provides that function.
| LapsangGuzzler wrote:
| > and fortunately or unfortunately, for many, work
| provides that function.
|
| I agree with this, but the problem is that there is no
| guarantee of work being available to everyone. With the
| rise of AI and hyper-specialization of work, that problem
| is only going to get worse.
| AnthonyMouse wrote:
| > I agree with this, but the problem is that there is no
| guarantee of work being available to everyone. With the
| rise of AI and hyper-specialization of work, that problem
| is only going to get worse.
|
| The key here is to make sure that automation and cost
| efficiencies make it through to the production of
| necessities, and we don't prop up artificial scarcity.
|
| There are an effectively unlimited number of jobs that
| employers would pay someone $0.01/hour to do. Not as many
| that employers would pay $100/hour to do. So if you need
| to make $100/hour to afford housing and medicine, that's
| a problem. But if we reduce the artificial scarcity and
| regulatory overhead in these industries, so you only have
| to make $5/hour to afford them, we're in a much better
| place. And all the better if lower costs allow someone to
| make a living at $2/hour.
|
| AI and automation can help to reduce those costs. As long
| as they're in the right places (i.e. production of
| necessities) and we don't have regulatory capture
| preventing it from happening there.
| bumby wrote:
| How do you see automation helping housing? I work in an
| org interested in 3D printed structures and it still
| seems a long way off. Or are you looking at improvements
| in logistics that make it easier to live in less
| expensive areas?
| AnthonyMouse wrote:
| It can be more than one thing. But one of the interesting
| possibilities for housing is modular construction. You
| mass produce homes on an assembly line as walls prefitted
| with plumbing and electrical, put them on a truck and
| snap them together at the site. Now you can produce them
| wherever labor costs are low and assemble them in a
| matter of days or weeks rather than months or years.
|
| This doesn't get you out of zoning restrictions but could
| allow you to recover from their historical effects more
| quickly after zoning reform is achieved.
| bumby wrote:
| I see the problem but have a hard time squaring it with
| history. Decades ago I had an old professor who spoke
| about how he was tasked, as a student decades prior yet,
| to write a report on what people will do with all their
| free time due to automation.
|
| And yet, here we are with people still working many hours
| on average and many jobs going unfulfilled. I personally
| think it's a problem with our relationship to work,
| rather than limited opportunity for work. Humans seem to
| have an insatiable apple for _more_ , which requires
| continued amounts of work to be done. I think the bigger
| problem is getting people to have the skills to do the
| jobs that will still need to be done.
| kelnos wrote:
| Ugh, I hate this way of thinking. Perhaps we've all been
| brainwashed to believe this by capitalism?
|
| I'm perfectly happy pursuing my own interests, at my own
| pace, without having some overlord making sure I'm
| maximizing value for some corporation. Sure, I don't want
| to just sit around doing nothing, but there's a _wide_
| gulf of possibilities between that and full-time
| employment.
| bumby wrote:
| I think you missed some of the nuance in the statement.
| It is not advocating for staying in the grind forever.
|
| But for many retirees, they have never developed the
| mechanisms to continue being a productive member of
| society without structured work. The net result is a
| general drop in well being and health in their "golden"
| years.
|
| Also, i made a comment where I think our relationship to
| work needs to change. I think that speaks to your point.
| I don't think a false dichotomy between "working for the
| capitalist overlord" and "doing whatever I want" is what
| I was after.
| FooBarWidget wrote:
| Retired people can provide a lot of value in ways that
| can't be expressed in money. A lot of parents will be
| fscked if they don't have grandparents to help out with
| kids.
| FooBarWidget wrote:
| Several decades? In Netherlands retirement age is 67. Will
| probably be 70 by the time I retire. Males live 75 on
| average so that's less than a decade of retirement.
| kelnos wrote:
| Why _not_? Why is working all (or nearly all) of your life
| the default?
|
| I forgot which, but one of the more popular economists of
| the last century believed that, with productivity gains,
| people would be working much, much shorter work-weeks by
| now.
|
| He was only sorta wrong: the productivity gains did
| actually happen, but we decided to use the extra time to do
| more work, not do the same amount of work and take the rest
| in leisure.
|
| There's nothing that says that we as a civilization
| couldn't decide to slow down and relax more. I know that
| this won't happen; capitalists run the world, and they'll
| never accept this sort of arrangement. But it's not like
| this is some sort of inherent natural must-do state of
| existence.
| tlarkworthy wrote:
| I believe human ingenuity and power over the elements goes up
| 7% a year, of which, the stock market is a proxy for. We are a
| networked organism and good at leveraging innovation at a
| global scale through supply chains. I see no reason to be
| pessimistic, we have AI, we have better space flight, we
| constantly improving energy sources.
| vineyardmike wrote:
| One thing to consider though is that our nation has taken a
| lot of debt -in many philosophical forms- to fuel that
| growth.
|
| Government deficit spending of course helping the economy.
| But we eventually have to pay taxes to cover that.
|
| Citizens debt fueled spending on homes and goods. Corporate
| debt similarly. Student loans of course. Individuals and
| companies can only tolerate so much debt.
|
| Our oil dependence never accounted for the cost of global
| warming and pollution, but we're about to pay for that soon.
| This applies to many materials we consume, oil being the most
| prominent.
|
| Corporations have systematically slowed pay growth while
| increasing prices, eventually consumers will be unable to
| afford enough goods to keep the machine spinning at full
| (growing 7%) capacity.
|
| Our shrinking population from historic highs means each
| working person will need to contribute a bigger share to
| reach that 7%, while having more people to support.
| wolverine876 wrote:
| Then why didn't the markets go up in Japan and Europe (per
| the GP)? Also, why do the US (and maybe other) securities
| markets increase when the underlying economy is performing
| poorly?
| nickpp wrote:
| Differences between countries, cultures and people do
| exist. These differences will manifest themselves as
| variations in productivity, ultimately leading to unequal
| growth rates.
| [deleted]
| Findeton wrote:
| What is "the markets" for you? If you mean the stocks in in
| indexes you're right, but that's not the whole market.
| tchaffee wrote:
| US companies provide the most valuable services and
| products by a long shot.
|
| https://companiesmarketcap.com/
| pixl97 wrote:
| >Then why didn't the markets go up in Japan and Europe
|
| Population aging and growth uncertainty is a big guess on
| my part.
|
| https://www.imf.org/en/News/Articles/2020/02/10/na021020-ja
| p...
|
| The US is highly dependant on massive amount of immigration
| to maintain demand. Couple that with a few other things,
| such as the petrodollar, and you have the US behaving in an
| odd manner that I don't believe will last forever.
| ProjectArcturis wrote:
| Productivity and GDP, which the stock market is a better
| proxy for, do not rise 7% a year.
| paulddraper wrote:
| > I can't believe how much people take for granted that stock
| markets "usually go up 7% a year" or whatever.
|
| Decades of something being true will do that
| warner25 wrote:
| I agree that the American stock market has been an outlier, and
| most Americans don't realize the extent to which that is true;
| it's good that you do. But compared to buying and holding a
| widely diversified and low cost portfolio, what was the better
| strategy for investors in other markets? What would be the
| better strategy for Americans over the next 40 years (not
| knowing if it will be a miserable time or not)?
|
| I think this is a case of "time in the market" being the least
| worst option. The market may reward it, or it may not, but hard
| times are hard times and I don't see any obvious way to avoid
| them without exposing yourself to a lot more risk in other
| ways.
| oceanplexian wrote:
| People keep talking down the US but the only advanced economy
| reliably innovating at scale. Especially in the post-COVID
| era, as China faces growth collapse.
|
| You don't have to look far to see that all the major tech
| developments of our species are coming out of the US:
| Generative AI, Reusable Rockets, self-driving cars, mRNA,
| Genetic Engineering, NIF Fusion, VR, etc. The US could strike
| it out on any single item and spark another industrial
| revolution.
|
| Plus we're still king of the hill in so many other categories
| (World's largest producer of energy, world's largest
| agriculture producer, world's largest military, etc.) If
| you're an investor, the idea that you'd bet against the US
| economy is a hilariously bad take.
| reducesuffering wrote:
| Good investing has never been about X will make a lot of
| money, buy X. It's about what price are you buying the
| money that X will make. Right now, a lot of future money US
| will make is baked into the price of those US companies.
| You'll pay $100 for $4 of US earnings or $8 of
| UK/Japan/Netherlands/Canada/Sweden/etc. earnings. People
| already expect US earnings growth to be almost double. The
| question is do you think it will outpace even that? Even if
| you think US earnings growth will be somewhat better than
| the rest of developed economies, it's a worse investment.
|
| For example, developed economies index, VEA, outperformed
| US, VTI, last year.
| WXLCKNO wrote:
| This is what I think too. Now obviously we're possibly on the
| verge of another massive change in tech with AI but there's
| still nothing that guarantees that the market has to go up.
| blibble wrote:
| > Now obviously we're possibly on the verge of another
| massive change in tech with AI
|
| could easily turn out to be another nft style "boom"
| pixl97 wrote:
| It could be a massive nft style boom, but if it is an nft
| style boom, expect a massive nearly worldwide economic
| collapse due to growth constraints around population
| issues.
| brigadier132 wrote:
| The market is composed of companies, each of these companies
| are composed of people trying to better their own lives by
| working hard. When you buy an index fund you are essentially
| betting on all these people collectively working hard to
| improve their lives and if incentives are correctly aligned
| this should also mean the value of these businesses growing.
| wolverine876 wrote:
| > The market is composed of companies, each of these
| companies are composed of people trying to better their own
| lives by working hard.
|
| They are composed of people doing that, people rigidly
| protecting their incomes and/or status, people cheating
| others, and especially these days, people trying to squeeze
| every drop of blood out of every other stakeholder
| (investors, customers, employees).
| 1270018080 wrote:
| > No one really knows but it wont be as good as the last few
| decades.
|
| A little bit contradictory.
|
| If you don't think the stock market is going to appreciate then
| it's not for you. Don't invest in it at all. You can stick with
| savings accounts, gold, and crypto scams.
| theptip wrote:
| > No one really knows but it wont be as good as the last few
| decades.
|
| Such confidence! The first part is of course true, but you'll
| make money teaching the market that you are smarter if the
| latter is true.
|
| Perfectly possible that AI kicks the economy into overdrive in
| the next few years and growth increases. I wouldn't bet my
| house on it, but also wouldn't bet my house against it either.
| Findeton wrote:
| Absolutely no chance that AI is able to do that. Investing
| decisions are too subjective for the current state of AI. A
| good value investor knows this... and also knows that you
| don't need a bull market to make decent returns.
| danans wrote:
| > Investing decisions are too subjective for the current
| state of AI
|
| I think they are talking about AI driving growth in the
| broader economy, not making investment decisions.
|
| Even still, it's not clear that AI will drive that kind of
| growth.
| galaxyLogic wrote:
| It is not clear exactly how, but kind of makes common
| sense.
|
| Productivity is about producing the same things faster.
| If AI can do part of our work for us it means we can
| accomplish more with the time saved.
| bumby wrote:
| Or, fewer and fewer people are needed for approximately
| the same amount of production. This may lead to a further
| bifurcated society.
|
| I do think that a service-oriented economy has many, many
| more nooks and crannies to hide non-productive jobs,
| though, and that could perpetuate the "bullshit job
| economy" hypothesis.
| danielmarkbruce wrote:
| The number of people on planet earth who deeply understand
| the current state of the art in LLMs, the available
| information in a format an LLM can "reason about", good
| ways to condense information so that X v Y decisions can be
| made across a lot of Xs and Ys, and deeply understand how
| to do value investing in a practical way and enough about a
| set of industries to pull it off, is about zero.
|
| Regardless, I'd happily take a bet at even money up to a
| reasonable sum that we'll wake up in 20 years to find that
| a system using LLMs has just destroyed the market doing
| fundamental analysis, for 15 years.
| rubicon33 wrote:
| How would AI do that?
| dannyw wrote:
| I'm genuinely a little bit more productive with ChatGPT. A
| lot of tasks I do take 30 mins or a hours less, several
| times per week.
| ghaff wrote:
| So a basically trivial improvement in other words.
| the_sleaze9 wrote:
| I believe his statement lies in the fact that wealth is
| not money, but productivity.
|
| He's saying if every atom of the economy is n% more
| productive, that will grow the economy by n%.
| popinman322 wrote:
| Half an hour of time recovered using a system not
| specialized to the work at hand. With better tooling and
| integrations that could scale to several hours a day
| spent doing more valuable work.
| danielmarkbruce wrote:
| I save at least 10 hours a week using ChatGPT. Likely
| more.
| CamperBob2 wrote:
| With the first generation of tools.
|
| If there's a sure-fire early way to make money from AI,
| it's going to involve betting against people who blow it
| off.
| ghaff wrote:
| I don't blow off the future. But I do think there's a lot
| of excess hype currently.
| thfuran wrote:
| How is that trivial? Even one task done a few times a
| week taking half an hour less is at least a 2% increase
| in productivity (assuming these tasks are work related
| and a 40 hour work week). "A lot" of such tasks would
| easily add up to 10%+.
| theptip wrote:
| Automating knowledge work -> increasing labor productivity.
| kjkjadksj wrote:
| Part of the reason for the bull run is that people have 401ks.
| They have IRAs. They buy index funds. In either case the amount
| of americans who automatically devote a portion of their pay to
| buying equites has probably never been higher.
| samjmck wrote:
| Isn't that only a problem if you are only invested in the US?
| There exists ETFs that are invested in multiple developed
| countries, such as index funds that track the MSCI World.
| rr808 wrote:
| Yes. After continued under performance of non-US markets, not
| many people have a significant exposure to those places.
| malfist wrote:
| Are you sure about that? The standard boglehead portfolio
| has ~1/3 of stock holdings in non-us funds.
| bannedbybros wrote:
| [dead]
| shagmin wrote:
| There are probably multiple layers of feedback loops going on,
| who knows how things will pan out. There's a sufficiently large
| enough pool of investors out there that will buy broad ETFs
| like SCHB, SPY, VT, VTI, etc., on any dip or just continue to
| DCA a little of every paycheck into those just due to its
| history. The US is geographically isolated from potential
| threats for the most part unlike Europe and Japan, is
| relatively self-sufficient, super diversified and lots of
| international exposure, and no country has as much clout on the
| international stage as the US for the time being so I think it
| makes sense the US continues to do much better. Sometimes you
| have trends like emerging markets, cryptos, etc., but broad US
| stock market seems like the default choice for high returns so
| long as there is capital to be allocated.
|
| Interest rates are the thing I think could change things, but
| who knows. If you can get a guaranteed 5% return that's pretty
| nice, but it's possible we just slide into being a more
| corrupt/untrustworthy country for investments or baby boomers
| suddenly taking a disproportionate amount of money out of the
| market as they retire, etc.,.
| reiderrider wrote:
| Generally good advice but some major investment decisions may not
| fit the fact pattern. The results can vary substantially, for
| example:
|
| - Buying real estate before or after the 2008 real estate crash
|
| - YOLO'ing on a specific stock/company/crypto before or after a
| bull run
|
| I presume their advice becomes more solid the more you trade and
| the more diversified the investment is.
| quickthrower2 wrote:
| Which is why better late than never I am overpaying into pension
| and chucking that on a far/wide international index. My calcs say
| I won't retire rich but I will still most likely have the money
| and beat inflation. And not spend it lol!
|
| The real issue for the average Jo seeking alpha is you often need
| to pay the house (your government!) for the privilege.
|
| In Australia you trigger capital gains tax when you sell. And if
| you buy and sell alot they may audit you and consider it income
| from professional trading!
| golemiprague wrote:
| The problem in Australia is that they still tax you if you rent
| your house to someone and then use the money to rent for
| yourself. So if you need to move or change house size you must
| sell and buy. However if you buy an investment house you can
| get tax deduction on the interest of the mortgage. They
| basically tax people with one house but give deductions to
| people with multiple houses.
| quickthrower2 wrote:
| Yes. I think that is silly as they should encourage freedom
| to move. You should just get taxed on the "profit" you make
| if you find somewhere cheaper to rent than what you get. The
| workaround is buy to rent out a property you never live in
| then just rent and move around as normal. But then you lose
| out on the primary residence capital gains exemption. A work
| around to that is to never sell and use the death trust to
| pass that on to your kids. All this stuff takes a lot of
| planning and thinking about.
|
| Another weird thing: transfer your house to your spouse and
| pay stamp duty! Stamp duty itself is regressive and should be
| replaced by a smaller annual property tax or just another
| form of tax (but given that property ownership tends to
| create wealth inequality probably good to tax ownership
| rather than add more income tax)
| reedf1 wrote:
| You are probably not finding alpha as a retail investor -
| probably just some form of beta.
| quickthrower2 wrote:
| Yes - what I am saying is I prefer my E(X) of beta over
| maybe-alpha minus additional taxes.
|
| (Assuming you meant indexes = beta... ?)
| maddynator wrote:
| While I agree with the general principle of the post, I am
| skeptical of the fact that schwab published it. If it was done
| third party research, I would trust it more.
|
| (Internet has made me skeptical)
|
| However, the only incentive I can think of schwab is to encourage
| people to invest ASAP they have cash so schwab can get that money
| in their system so they can charge fees/still services.
|
| But that's just normal business
| anonu wrote:
| Schwab would rather you have cash in your account than be
| invested in securities. This is how their cash sweep works.
|
| The article is educational and generally stands up to the
| research on the topic. It is designed to build trust with
| clients so they invest in Schwab.
| TacticalCoder wrote:
| > Schwab would rather you have cash in your account than be
| invested in securities
|
| Compared to IBKR which gives "benchmark - 0.5%" on your NAV
| in USD, what does Schwab give for your USD sitting idle?
| tylergetsay wrote:
| Schwab gives a similar return, they don't offer any high
| yield savings
| matwood wrote:
| It's not an automatic sweep, but anyone holding cash at
| Schwab moves it to something like SWVXX [1] paying ~5%
| right now.
|
| [1] https://www.schwabassetmanagement.com/products/swvxx
| everybodyknows wrote:
| Beware that such a mutual fund _buy_ transaction closes
| at end of day. A sale of a stock or ETF closes 2-3 days
| in the future. So if you place both orders concurrently
| in your margin account, you may find you 've borrowed
| from Schwab for those 2-3 days _on margin_ , at a rate of
| ~10%. Schwab's order screen will not warn you of this in
| advance.
|
| What happens if you make this mistake in a "cash account"
| i.e. no margin allowed I do not know and hope not to find
| out by means of usual accidental carelessness.
|
| An alternative to SWVXX is VUSB, which trades with
| standard ETF timing.
| anonu wrote:
| Cash sweep in Schwab is like 0.5%, it's nothing. But this
| is how they make their money, turning around and lending at
| 8%.
|
| But you can just as easily buy a short duration Treasury
| ETF yielding 5%+ or a CD.
| zie wrote:
| Or even Schwab MMF's, which are reasonable. It's mostly
| just the default that's terrible on return.
| nly wrote:
| A catchy blog post on this subject;
|
| Even God Couldn't Beat Dollar-Cost Averaging
|
| https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...
| throw0101c wrote:
| Also from Nick Maggiulli, the author:
|
| > _For example, any competent basketball coach could tell you
| whether someone was skilled at shooting within the course of 10
| minutes. Yes, it's possible to get lucky and make a bunch of
| shots early on, but eventually they will trend toward their
| actual shooting percentage. The same is true in a technical
| field like computer programming. Within a short period of time,
| a good programmer would be able to tell if someone doesn't know
| what they are talking about._
|
| > _But, what about stock picking? How long would it take to
| determine if someone is a good stock picker?_
|
| > _An hour? A week? A year?_
|
| > _Try multiple years, and even then you still may not know for
| sure. The issue is that causality is harder to determine with
| stock picking than with other domains. When you shoot a
| basketball or write a computer program, the result comes
| immediately after the action. The ball goes in the hoop or it
| doesn't. The program runs correctly or it doesn't. But, with
| stock picking, you make a decision now and have to wait for it
| to pay off. The feedback loop can take years._
|
| > _And the payoff you do eventually get has to be compared to
| the payoff of buying an index fund like the S &P 500. So, even
| if you make money on absolute terms, you can still lose money
| on relative terms._
|
| * https://ofdollarsanddata.com/why-you-shouldnt-pick-
| individua...
| wizofaus wrote:
| Surely if you know exactly when the market will reach a low point
| you can buy put options to capitalise on that? Or at least ensure
| that you use times where you're expecting the market to fall to
| spend money on non-appreciating essentials (cars, house
| renovations etc.)?
| zee2345 wrote:
| [flagged]
| matt3210 wrote:
| Long game or insider trading is the only reliable strategy.
| abcd_f wrote:
| RenCap begs to differ.
| gtani wrote:
| There's nuanced market timing, somebody reads WSJ and Barrons,
| watches Trade brigade and Tastylive analysts on YT and decides on
| overall cash/stock/bond %ages, that should have kept you out of
| bonds and out of the Bogleheads situation in the past year. Also
| last January you would have been looking at bitcoin, TSLA, NVDA
| and thinking these are going to have some kind of recovery, V
| shaped or long and grinding, but some kind...
|
| Then there's the opposite question, how many active/day traders
| are consistently profitable, i think the answer is less than 5%
| of everyboedy that tries, the ideal is that somebody realizes
| they're not going to make it while replay/sim / paper trading, or
| people get stopped out quickly on substantial positions.
| greatpostman wrote:
| For people with the intellect to understand the economy it does.
| Just very few of those people
| neogodless wrote:
| This statement is (likely) unfalsifiable. That is, it would
| have to come from someone who does this successfully, and could
| offer up some evidence of having done it, and what system and
| logic they use to _understand the economy_ and thus know when
| equities are high and low, when to sit on the sidelines, etc.
|
| Few people doing so well would share such a process, but in
| theory, if they did, and it worked, it would likely trigger a
| flood of followers, and the behavior of the markets would shift
| alongside it.
|
| Presumably someone making this claim is a billionaire. Or
| they've being doing well in stocks for a short enough time that
| it's yet to be proven if they are as good at timing the markets
| as they think they are.
| greatpostman wrote:
| People like George soros, bill gross, a bunch of them
| worik wrote:
| > people with the intellect to understand the economy
|
| Those people (we people) know not to try.
| greatpostman wrote:
| No there are people that can time the market.
| vikingerik wrote:
| There are people that _have_ timed the market, but we can
| 't distinguish if that came from actual predictive ability
| or just getting lucky.
|
| And if it did come from predictive ability, then everyone
| would just copy their predictions and arbitrage it out.
| staplers wrote:
| People successfully time the market all the time (some
| more than others). Only fools broadcast their intentions.
|
| If they are broadcasting it, the broadcast is part of the
| strategy.
| Animats wrote:
| > No there are people that can time the market.
|
| The guy who could died last year.[1]
|
| [1] https://dailyprofitcycle.com/market-commentary/the-
| legacy-of...
| refurb wrote:
| Such as?
| medellin wrote:
| If this was true wouldn't you have many more economists with
| multiple mullions just from market timing? Even if you can
| predict the market and you are correct it can stay irrational
| so i think this comment is completely incorrect
| reedf1 wrote:
| Yes, and they do work for fixed income hedge funds.
| nyssos wrote:
| Maybe the economists who study asset pricing in financial
| markets should, but that's just one subfield among many. No
| one is beating the S&P with their knowledge of Japanese labor
| market dynamics or the 19th century Spanish wool industry.
| lend000 wrote:
| That's more of an indictment of the field of economics than
| anything else. The most talented leave to make better money
| in markets and hedge funds and the remaining academics get to
| set our public policy. There are plenty of consistently
| performing funds. Successful "applied economists" include Ray
| Dalio and Jim Simons.
| greatpostman wrote:
| No becabuse academic credentials don't mean anything
| shric wrote:
| Those who understand the economy know it's a poor predictor of
| market returns.
| greatpostman wrote:
| They don't understand the economy then, they just know how to
| analyze it in hindsight
| gizajob wrote:
| Same as every economist
| shric wrote:
| Stock market prices are based on expected future returns.
| Any anticipated future economic movement is more or less
| priced in. You can have a perfect understanding of the
| economy and not be able to predict future market movements
| as large short term movements in stocks are in response to
| unpredicted events.
| bob1029 wrote:
| Timing absolutely doesn't work in my experience. This effectively
| makes many forms of derivative instrument worthless to me. There
| are only a few targeted situations where I believe something
| might happen within a certain window, but I absolutely wouldn't
| bet more than 1-2% of my portfolio on anything with time decay
| attached to it.
|
| What works better for me is joining in on earnings calls and
| reviewing presentation materials. Getting a sense for product
| roadmap, markets, competition, etc. This is the space where you
| can actually develop meaningful hypotheses regarding what might
| happen. Those who are performing time series astrology likely do
| not have the patience to go about things this way.
|
| If you don't have time to spend about a day per quarter reviewing
| your portfolio, then you probably shouldn't be playing in traffic
| with individual stock picks, much less options contracts. If you
| think this is an unreasonable amount of time to spend playing
| investor, then perhaps you should just buy a little bit of
| something like $QQQ every day and focus on those other parts of
| life that are clearly more important to you.
|
| Or, just contribute max to your 401k and close that distracting
| Robinhood account. Most people would do better over the long haul
| if they followed that bit of advice. Monkey brain is much more
| dangerous than losing a few % APY to fund management fees and
| sub-par allocations.
| wolverine876 wrote:
| > This effectively makes many forms of derivative instrument
| worthless to me.
|
| Derivatives have another, much more valuable use: They enable
| you to hedge your investment, essentially insurance.
|
| For example, if you invest heavily in agriculture in Iowa, you
| might buy derivatives tied to the weather and to the price of
| whatever you grow - derivatives that pay if those things go
| bad. You lose a little if things go well, but that's just the
| cost of insurance. Similarly, if you invest heavily in electric
| vehicles, you might by a derivative tied to the price of key
| inputs, such as metals for batteries.
| bartwr wrote:
| I keep telling my friends who get really into stock investment,
| read some stuff, invent strategies - and end up much worse
| (sometimes losing money) than me just dumping everything into a
| few almost random indices: 1. Greed (not as a pejorative or a
| judgmental term, just this itchy feeling that you want more
| than you have even if you gain and are not satisfied) is the
| fastest way to lose money, whether through a poor investment or
| being scammed. 2. When you decide to play a game of stock
| investment, who are you playing it against? Being better than
| average (just market returns) means being better than the
| average (not median!) player, who in this case is some
| institutional investor. Do they really think that with a few
| online courses they can be consistently better than people who
| do this stuff for a living?
| jraby3 wrote:
| QQQ went like 17 years from its 2001 high till it made it back
| to the same price. S&P is probably less stressful for the type
| of investor you are talking about.
| Arainach wrote:
| >Monkey brain is much more dangerous than losing a few % APY
|
| ....and you don't even need a few percent to throw it in a
| target date fund that regularly rebalances for you
| satvikpendem wrote:
| Target date funds usually do worse than throwing everything
| into VTI and holding for 30 years.
| voidfunc wrote:
| Isn't that expected because of the automatic re-balancing
| to minimize risk? I don't think anyone goes with target
| date funds thinking they are going to maximize returns
| because it's a tool to buy and forget.
| satvikpendem wrote:
| But buying VTI is also a tool to buy and forget _and_ it
| maximizes returns compared to target date funds. They 're
| lower due to fees as well as investing too much into
| bonds when young when it's not necessary, one should
| invest in bonds when closer to retirement instead.
| jgalt212 wrote:
| One cynical side of me things you can, and on cynical side of me
| thinks you cannot.
|
| Anecdata: During my banking days, any time I received an outsized
| bonus it did seem to occur at a local market maxima. I had
| noticed this, and I was like I should have worked in
| entertainment as their earnings and thus investment opportunities
| were largely uncorrelated to the price of the stock market. Of
| course, this did change a bit when the stock market fueled
| streamers started spending money like drunken sailors on
| "content".
| shrimpx wrote:
| Although when the s&p dropped 20% in a few days in March 2020 --
| that was clearly a buy signal. And when tech stocks dropped by
| 70-90% in Nov 2022. Those stocks are now up 2x/3x from bottom.
| Sure, long term it probably doesn't work out to time the market
| but sometimes it's pretty obvious what's happening.
| vikingerik wrote:
| The March 2020 drop was from the pandemic lockdowns. In that
| moment, nobody knew that was a buy signal. Nobody knew then
| when economic activity would recover, if the pandemic would
| pass in two weeks or several months or many years.
| herval wrote:
| "nobody knew" doesn't mean nobody acted. The rational actors
| that act only on information "everybody knows" are usually
| late to the game
| thakoppno wrote:
| You're correct and the parent comment is too.
|
| Timing the market to some requires complete prescience.
|
| To others it may not.
| corey_moncure wrote:
| For every sell, there is a buy
| lend000 wrote:
| The difficult part was knowing where to sell so you could have
| money on the sidelines before the market dropped. Was it right
| when lockdowns started? In that case, you already lost a fair
| amount from the top.
|
| I do believe that markets can be beat, but by definition, you
| need to be "smarter" than the average capital, where more than
| half of the capital in the market on a given day is controlled
| by somewhat sophisticated investors. I don't think it's
| worthwhile for a retail trader to try their hand unless they
| are putting considerable effort into developing their alpha and
| either have automation skills or exceptional discipline.
| kqr wrote:
| > where more than half of the capital in the market on a
| given day is controlled by somewhat sophisticated investors.
|
| It's worse than that! The average estimation performs on the
| level of superforecasters, thanks to the wisdom of the crowd.
|
| The priced-in evaluation beats even most sophisticated
| investors! ("How is that mathematically possible?" About half
| of the investors are on the lucky side, but not
| consistently.)
| mr_mitm wrote:
| I bought when it dropped 5% because I thought it was "a clear
| buy signal". Then it dropped even more and I couldn't spare any
| cash to buy more. How could you have known at the time that 20%
| was the bottom?
| shrimpx wrote:
| Anything on the way down in a steep selloff is a good buy, so
| you did good. Also WRT the pandemic it was pretty clear that
| there was going to be panic selling, as soon as a pandemic
| was announced. What wasn't clear was where the bottom was and
| how long the recovery would be. Some waited for a deeper
| bottom and missed out on the vertical recovery.
| jatins wrote:
| > Also WRT the pandemic it was pretty clear that there was
| going to be panic selling, as soon as a pandemic was
| announced.
|
| If you were this sure, did you take a short position when
| pandemic was announced? Hindsight is 20/20.
|
| Also not sure what you meant by when pandemic was
| "announced" but I guess you are referring to March 2020
| broadly
| shrimpx wrote:
| Yeah March 2020. I was not actively trading stocks back
| then so I watched passively. I do think market timing is
| bad as a general strategy but _sometimes_ the writing is
| on the wall. I have timed the market successfully since
| then though, when seeing glaring trends or decisions
| whose impact I thought was obvious. But that 's small
| amounts of money at stake, and once in a great while.
| fauigerzigerk wrote:
| I don't believe in buy signals. You never know whether any
| particular level is the bottom. But that doesn't mean the
| opportunity is the same when the market is down 5%, 20%, 40%
| and 60% respectively. Of course a massive crash is a greater
| opportunity than a small correction regardless of how much
| further prices fall.
|
| But the real question is whether it makes sense to keep cash
| on the side in order to wait for one of these relatively rare
| crashes. The answer is probably no.
| roland35 wrote:
| Exactly the problem! When talking about market timing you
| can't just be correct in the direction but also be close to
| exact on the time!
| idontwantthis wrote:
| But the problem is that if you are waiting now, is that massive
| buy signal going to come next year or in 10 years? And if you
| keep cash for 10 years and then buy at the right time, is that
| going to be better than having been invested for the whole ten
| years already?
| anonu wrote:
| Totally agree on not timing the market and staying invested.
| Nonetheless this analysis raises more questions than answers for
| me.
|
| First, as you often see in these studies, they use the S&P500
| which has returned a 9 or 10% annualized rate for decades now.
| How realistic is it to see someone's entire wealth invested in
| just this benchmark? Diversification will almost always mean
| returns lower than than the S&P. Ultimately this erodes at the
| findings of the study.
|
| Second, there's no mention of yield which is basically the
| guaranteed portion of the return. This portion alone accounts for
| a quarter of your annual return making it another compelling
| reason to be invested early.
| alpark3 wrote:
| Most derivatives traders I know in the industry do some version
| of buy-and-hold for their personal portfolios, but one of the
| best I know does something completely different. He sticks to a
| philosophy of scanning multiple "small" cap companies(<50-100mm
| mktcap) until he finds one he generally likes, then figures out
| absolutely everything he can about them. Every piece of
| information available, down to calling whoever he can in
| management. Then once he decides he likes it, he commits 20-30%
| of his portfolio into them, often becoming a small, but notable
| investor in the company itself.
|
| He's made massive amounts of money from this. He admits that it's
| basically a second job in terms of time and effort spent, but
| believes that it's replicable because no institutional investor
| is actually looking at these stocks, leading to hypothetical
| mispricings.
| [deleted]
| neilv wrote:
| They didn't discuss Peter Perfect's sister, Petra Perfect, who --
| rather than just wait for the one bottom day for the year --
| instead buys and sells repeatedly, throughout the year, at more
| local lows and highs.
|
| Is that also considered market timing?
| rwmj wrote:
| At a guess they'd lose all their money in transaction costs.
| thakoppno wrote:
| Transaction cost is little O of most significant trading
| strategies, imho.
| nyssos wrote:
| Depends heavily on the timescale. 0.1% slippage is
| irrelevant if you hold for years but a serious problem if
| you trade every hour.
| kleene_op wrote:
| That sure counts as market timing.
|
| Pulling out such a strategy would make you insanely rich.
| ttyprintk wrote:
| To quantify "insanely",
|
| $1 in the 1900 stock market would be $52000 today. In the
| 1900 T-bill market, $58. If you knew how to perfectly
| rebalance every Jan 1, $22.3m.
| abm53 wrote:
| How do you know that you're currently at a local low/high?
| neilv wrote:
| In the article, Peter Perfect has perfect market timing, but
| only buys once.
|
| Petra Perfect also has perfect market timing, but can buy and
| sell repeatedly.
| abm53 wrote:
| Sorry, then yes to answer your actual question, I don't
| think that would commonly be called "market timing"
| (although of course the phrase could be an apt description
| of that strategy).
|
| All the uses of that expression that I see refer to an
| investor whose principal aim is to buy-and-hold to capture
| beta, but simply wants to try and pick the right moment.
| [deleted]
| anonu wrote:
| I'll tell you the result: Petra would blow all the results out
| of the water with massive returns. But Peters results are
| theoretically somewhat more believable because he only needs to
| be lucky on one trade a year.
| lencastre wrote:
| A decade or so ago I heard an investments prof liking it to
| "(...) picking pennies in front of the steam roller" which is
| fitting I guess. Unless you become a market maker, then by all
| means you are sitting on the steam roller.
| creakingstairs wrote:
| One of my family members is absolutely convinced that they can
| time the market and it kinda drives me up the wall every time it
| comes up. They will use all these "techniques" to draw arbitrary
| lines on the chart to establish a trend in the market while
| watching the news like a hawk everyday.
|
| Meanwhile I just get on with my day with index funds and get
| better returns.
| envsubst wrote:
| Why do you feel so convinced they can't?
| creakingstairs wrote:
| 1. Their reasoning is arbitrary. They pick and choose factors
| to justify their analysis.
|
| 2. They would be much richer if they could.
| andsoitis wrote:
| because you can't _know_ the future
| envsubst wrote:
| Every scientific endeavor is about predicting the future.
| Imagine your 3 closest friends wanted you to invest in your
| business. Could you predict which of them would likely do
| better than the others?
| HarryHirsch wrote:
| Politically connected people can _shape_ the future. Nancy
| Pelosi 's stockpicking skills are legendary.
| the_sleaze9 wrote:
| Not even close to being a single-party problem. I know
| it's almost Halloween but you can do better than jumping
| out from around the corner yelling "Nancy Pelosi!"
|
| > https://www.nytimes.com/interactive/2022/09/13/us/polit
| ics/c...
| Der_Einzige wrote:
| Actual "timing the market" does exist but it's illegal. We call
| it insider trading.
| ignoramous wrote:
| > _Buffett 's ultimately successful contention was that,
| including fees, costs and expenses, an S&P 500 index fund would
| outperform a hand-picked portfolio of hedge funds over 10
| years. The bet pit two basic investing philosophies against
| each other: passive and active investing._
|
| https://www.investopedia.com/articles/investing/030916/buffe...
| envsubst wrote:
| Buffett says this kind of stuff publicly. But his own fund
| moves in and out of investments all the time.
| zie wrote:
| Sort of, not really? Most of BRK is invested in 100% wholly
| owned companies. They do have a "small"[0] public equity
| portfolio, that does change investments periodically, but
| most of those investments are also pretty long term, if you
| go look.
|
| Wholly owned companies list:
| https://berkshirehathaway.com/subs/sublinks.html
|
| 0: In terms of BRK's overall wealth, it's still in the many
| billions of dollars.
| the_gastropod wrote:
| Buffet is arguably the best who's ever done it. He can do
| things your layperson shouldn't try. Just because Bruce Lee
| could do an impressive spin kick, it doesn't make spin
| kicks a good idea for 99% of people to try in a self
| defense situation.
| envsubst wrote:
| I completely agree. This is true of most fields, which is
| why you can pay a professional for their special skills.
| tim333 wrote:
| He also said
|
| >But it's true. I could name half a dozen people that I
| think can compound $1 million at 50% per year -- at least
| they'd have that return expectation -- if they needed it.
| They'd have to give that $1 million their full attention.
| But they couldn't compound $100 million or $1 billion at
| anything remotely like that rate.
|
| A lot depends on the details of who's doing what.
| envsubst wrote:
| Yep, you also wouldn't give the same computer/software
| advice to your grandma as you would a peer at work.
| Buffet is telling us to leave trading to the pros, but he
| absolutely trades.
| bumby wrote:
| Isn't a large part of the underperformance of the hedge funds
| due to their fee structure? Investors lose 20%+ of the
| profits just in fees. While I don't think stock picking is a
| great idea for the layman, that fee structure isn't
| generalizable to the average Joe picking stocks.
|
| I believe there's some evidence that low-volatility trading
| has been shown to beat the market over long periods of time.
| Although, "picking stocks for volatility" may be different
| than "timing stock picks"
| Centigonal wrote:
| IMO, this is a much more comprehensive article on the same topic:
| https://www.aqr.com/-/media/AQR/Documents/Insights/White-Pap...
|
| For unsophisticated investors, timing the market tends to keep
| money on the sidelines during growth periods, eroding long-term
| returns. This is part of why it's considered an investing sin -
| "time in the market beats timing the market." Sophisticated
| systematic investors can probably get good results with certain
| momentum-based market timing strategies, but most of us aren't
| sophisticated systematic investors.
| porknubbins wrote:
| This has been my experience too, I missed out more by being
| sidlined during good times than I saved. Personally as an
| engineering mindset person I am good at identifying likely
| failure modes of companies (i.e. reality) but rarely anticipate
| how much things will go up during good times which is more of a
| social phenomenon (hype).
| henry2023 wrote:
| It seems like identifying failure modes could work if you
| could model the likelihood of the company going bankrupt in a
| certain amount of time because even if the enterprise is
| working on failure mode, public markets have been popularity
| contests for a really long time.
| tomatocracy wrote:
| Understanding potential failure modes for companies is a much
| more important part of credit investing (this is what I do
| for a living these days, though I've done equity investing as
| well).
|
| Unfortunately a very large part of the credit universe is
| very difficult to access if you're a non-professional
| investor though.
| veqq wrote:
| To go into further detail about systemic investing:
|
| There have been experiments like the turtle traders ^ 1 who
| applied "trend following", used today by many CTAs on exotic
| markets. For this, an investor taught some people his
| strategy/rules, gave them his money and they've shined for 40
| years. The fundamental strategy still works today (updated).
| Fundamentally, it's a method to ride momentum in different ways
| (e.g. crossectional.) Hedge fund managers like Rzepczynski, Cem
| Karsan, Alan Beer... Richard Brennan is the most insightful of
| them who shares his methods freely. N.b. trend following
| doesn't work well in stock markets, but flourishes in Mexican
| rate swaps, orange juice futures, London sugar... combined in
| ensembles.
|
| Traditional value investors, building on the Intelligent
| Investor, have always done well over samples above a few years.
| (N.b. Warren Buffet hasn't been a value investor for a long
| time, because he has too much to manage. He was strongly
| inspired by Fisher's Common Stocks and Uncommon Profits, which
| gave us the concept of "growth stocks".) (N.b. 2, value
| investing ETFs are mostly terrible, fundamentally not investing
| in value stocks due to their structures.)
|
| Carisle's Acquierer's Multiple is the most recent development
| in systemic value investing (he also runs an ETF or two along
| these lines). "Magic formula investing" even holds up too!
|
| In the mining space, you also get discretionary (not purely
| systematic) investors like Rick Rule openly discussing their
| methodologies, successful for decades and decades.
|
| Here's an interesting paper ^ 2 (exec summary pages 5-6). Note
| that 70% of underperformance is due to investors withdrawing
| funds during times of market crisis. Fund fees also drive the
| majority of underperformance. N.b. most wealth managers can't
| legally follow such strategies because of the prudent person
| rule. They are legally forced to underperform typical indices -
| and the majority of research has focused on them, distorting
| the data pool.
|
| [1] https://www.investopedia.com/articles/trading/08/turtle-
| trad...
|
| [2] https://wealthwatchadvisors.com/wp-
| content/uploads/2020/03/Q...
| lend000 wrote:
| The fact that you're being downvoted for factual
| contributions kind of explains why it's possible to beat the
| markets. Most people refuse to believe it.
|
| No public strategies are going to beat the market by a huge
| amount, and having the discipline to execute them manually
| isn't easy, but it has been clearly shown to be possible.
| zer0tonin wrote:
| The dogma that it's impossible to beat the market is
| frankly weird at this point.
|
| If the markets were truly efficient, randomly picking
| stocks would beat SPX ~50% of the time. Since markets are
| not super efficient, basic exposure to performance factors
| (small cap, value, momentum...) puts you at a fairly high
| likelyhood of beating SPX.
| kajaktum wrote:
| I think the reason why "you can't beat the market" is the
| simple fact that you are part of the market. If you are
| very, very good, such that any trade you make will always
| win, then the market just don't want to play any more.
| The feedback response from the market is extremely
| precise; do you make money or not? If you don't, you will
| change your strategy until you start making money or you
| just stop playing. The moment you start benefiting from
| some exploit, the market will immediately response to
| their loss by changing their strategy.
|
| This is of course assuming that we are at a level playing
| field. I don't believe for one second that insider
| trading is not prevalent.
| auxym wrote:
| > If the markets were truly efficient, randomly picking
| stocks would beat SPX ~50% of the time. Since markets are
| not super efficient, basic exposure to performance
| factors (small cap, value, momentum...) puts you at a
| fairly high likelyhood of beating SPX.
|
| This assumes that the expected return of a single,
| randomly-picked stock is symmetrically-distributed. It is
| not, single stock returns are highly skewed and "lottery
| like". Index returns come from the fact that a small
| number of stocks do exceptionally well, while most of
| them do poorly.
|
| This becomes even worse if we talk about timing: stock
| returns come from relatively short periods of doing
| really well, if you miss that because you are out of the
| market for some reason, you lose out on the vast majority
| of the index return.
|
| Sorry, I don't have specific sources to cite. This comes
| from stuff I've picked up listening to the Rational
| Reminder podcast (https://rationalreminder.ca/podcast-
| directory), which have very well researched episodes as
| well as guest interviews with leading academic finance
| researchers. I'll try to dig up the relevant episodes,
| which do cite sources.
|
| Edit: here is some sources:
|
| 1. https://www.dimensional.com/us-en/insights/singled-
| out-histo...
|
| 2. https://assets.jpmprivatebank.com/content/dam/jpm-wm-
| aem/glo...
|
| Quote from this last one: "[...] around 40% of the time a
| concentrated position in a single stock experienced
| negative absolute returns, in which case it would have
| underperformed a simple position in cash. And around 2/3
| of the time, a concentrated position in a single stock
| would have underperformed a diversified position in the
| Russell 3000 Index. While the most successful companies
| generated massive wealth over the long run, only around
| 10% of all stocks since 1980 met the definition of
| "megawinners"."
| RivieraKid wrote:
| I've watched all of the videos on Ben Felix's channel and
| generally share his worldview. But I've been having some
| doubts about market efficiency and active investing being
| extremely hard.
|
| There were 4 moments when I thought - I should buy this
| stock for some reason, e.g. after ChatGPT I thought about
| buying NVidia. But I decided to continue being a purely
| passive investor. Now I regret that decision because all
| of those stocks overperformed.
|
| I also correctly guessed that 3 out of 4 stocks would
| underperform (TSLA was the wrong call). It seemed obvious
| that the market was dumb about GME, AMC and TLRY.
|
| Sure, many active investors are extremely sophisticated
| but what if the average invested dollar is kind of
| stupid?
|
| Also, one minor nitpick about Ben Felix's content is
| focus on historical statistics. I think this gives you a
| false sense of confidence and security.
| Aunche wrote:
| It doesn't count as beating the market unless if you're
| doing so due to skill. It's not particularly unusual to
| beat the market and come out of a casino positive. On the
| other hand, bragging about how good you are at slots, is
| what will get you "weird dogmatism."
| zer0tonin wrote:
| Dang, I guess I will go tell my quant friends their
| knowledge of probabilities doesn't count actually, they
| should try having "skill".
| the_sleaze9 wrote:
| Exactly. That's why I only play the `Skill Games` at the
| back of the gas station with my savings.
| TacticalCoder wrote:
| > The dogma that it's impossible to beat the market is
| frankly weird at this point.
|
| I agree.
|
| Meta was literally priced below $90 not even a year ago
| (I entered at about $100 FWIW, which was my nice and
| round number). Now at $315. Anybody who believes the
| market is efficient is on some serious drugs.
|
| The market correctly valued Meta a $380 or so before the
| crash (because "TINA" I'm supposed to believe), then
| correctly valued it a few months later at $100, then now
| is again correctly valuing it at $315?
|
| Please. Just please.
|
| I'll go much further: _none_ of these valuation are
| correct. The market is highly inefficient.
| blitzar wrote:
| The market _correctly_ valued Meta a $380.
|
| Then Meta announced they were going all in on the
| Metaverse, had set fire to $100bn so far and were going
| to continue to throw ~$20bn a year into the Metaverse -
| the market _correctly_ valued Meta a $100.
|
| Meta announded they were going all in on the Ai - the
| market _correctly_ valued Meta at $315.
|
| You have picked a poor example; the moves in the stock,
| are primarily the fault of themselves. Those that saw the
| emergence of Ai and Zuckerberg as one of the leaders in
| the space got a nice 3x. If it didnt happen, Meta stock
| would probably be worth about as much as MySpace.
|
| fwiw I said they were going to zero when they rebranded
| to Meta. Turns out I was wrong.
| paulpauper wrote:
| Meta had about a zero percent chance of dying like
| MySpace. Meta has tens of billions of dollars of annual
| profits (2x of Walmart, amazingly, $30 billion vs $15
| billion) near total dominance of social networking,
| mobile advertising, etc. MySpace had none of those.
| crazygringo wrote:
| You've provided zero evidence for them being incorrect,
| though.
|
| There's nothing wrong with 3x changes. A lot can happen
| in a year to diminish or improve a company's outlook --
| even a large company. And yes, by 3x -- or even much
| more.
|
| The onus of proof here is on _you_ to explain why those
| _don 't_ reflect largely realistic estimations of NPV of
| future profits, and to explain why you think you have
| better information, experience and judgment than the
| market.
| thelastgallon wrote:
| Price and valuation are very different. Aswath Damodaran
| explains this well:
| https://www.youtube.com/watch?v=DeChWXTg7Og (skip to
| 19:29)
| paulpauper wrote:
| same here. meta's core business was unhurt by metaverse
| losses
| matwood wrote:
| Usually what's meant is that it's impossible to beat the
| market over time. I also saw Meta completely oversold and
| bought in. As someone who follows tech, it seemed obvious
| to me that Meta's impending death was _greatly_
| exaggerated. The problem is, can I do that over and over
| across the entire market? Nope.
| auxym wrote:
| The EMH is a model, and like all models: none are
| correct, but some are useful (to understand some
| phenomena).
| overtomanu wrote:
| SPX index is also weighted (I think by companies market
| cap), which means some of the stocks have greater effect
| on the returns of the index. Also companies are
| periodically added/removed from the index as per their
| market cap which I think weeds out low performers without
| any bias that active fund managers/humans tend to have.
| [deleted]
| throw0101c wrote:
| > _If the markets were truly efficient_ [...]
|
| And who is arguing that they are perfectly efficient?
| Markets work on information, which is not (initially)
| evenly distributed and because of the physics can only
| spread at the speed of light once it is known.
|
| The latter was used to detect insider trading:
|
| * https://www.npr.org/sections/alltechconsidered/2013/09/
| 24/22...
|
| For the former, people are renting satellite time to get
| to information that no one else has to determine trades:
|
| * https://newsroom.haas.berkeley.edu/how-hedge-funds-use-
| satel...
|
| > _Since markets are not super efficient, basic exposure
| to performance factors (small cap, value, momentum...)
| puts you at a fairly high likelyhood of beating SPX._
|
| Two of the proponents efficient markets explain why (and
| shared a Nobel for the work):
|
| * https://en.wikipedia.org/wiki/Fama-French_three-
| factor_model
|
| The two are not mutually exclusive, and there is
| published literature on it.
|
| Good interview with Fama (audio, video, transcript):
|
| * https://rationalreminder.ca/podcast/200
| zer0tonin wrote:
| Yes, that was basically my point. Thanks for providing
| the sources.
| blitzar wrote:
| Many public strategies beat the market by a reasonable
| amount; the consistent and disciplined application of them,
| however, is rare.
|
| There is also a lack of consistency about what it is to
| "beat the market", in the world of clickbait headlines and
| armchair twitter dd - the benchmark each year (with
| hindsight) is the highest performing asset.
| mettamage wrote:
| Fun! I'll save your comment (and upvoted it). Curious to see
| where this rabbit whole goes. On another point, I'd like to
| suggest you reference as follows [1]. I found that syntax to
| be more prevalent on HN than ^ [2]. It's easier to parse,
| since you know it's separate from the sentence. Whereas if I
| write that I have a reference like ^ 3 then it is harder to
| see that ^ 3 is apart from the sentence or part of it.
|
| [1] This part you did do that way, haha.
|
| [2] I haven't done a formal count, but I'm sure some regex
| search engine will give you many hits if you search for
| \\[[0-9]\\].
|
| [3] That last sentence still confuses me.
| throw0101c wrote:
| > _Traditional value investors, building on the_ Intelligent
| Investor, _have always done well over samples above a few
| years._
|
| From the last published interview with Benjamin Graham,
| author of _II_ ( "A Conversation with Benjamin Graham",
| _Financial Analysts Journal_ , September-October 1976)
|
| > _> In selecting the common stock portfolio, do you advise
| careful study of and selectivity among different issues?_
|
| > _In general, no. I am no longer an advocate of elaborate
| techniques of security analysis in order to find superior
| value opportunities. This was a rewarding activity, say, 40
| years ago, when our textbook "Graham and Dodd" was first
| published; but the situation has changed a great deal since
| then. In the old days any well-trained security analyst could
| do a good professional job of selecting undervalued issues
| through detailed studies; but in the light of the enormous
| amount of research now being carried on, I doubt whether in
| most cases such extensive efforts will generate sufficiently
| superior selections to justify their cost. To that very
| limited extent I'm on the side of the "efficient market"
| school of thought now generally accepted by the professors._
|
| * http://www.grahamanddoddsville.net/wordpress/Files/Gurus/Be
| n...
| rocqua wrote:
| I wonder if there is a fixed buy date that outperforms dollar
| cost averaging. Something like "around new years lots of people
| get money they invest, so prices tend to pop, so buy in november'
|
| There just needs to be some kind of yearly pattern for such a
| strategy to exist. I even recall reading about it on money-stuff.
| But I can't remember the months.
| veqq wrote:
| There are a lot of these. Nowadays, gamma flows are discussed a
| lot in public spaces. Ignoring most of the topic, combining
| options expiry dates with typical fund rebalancing dates is
| simple. (Buy in the last week of the month, basically.)
|
| Historically, April, July, November are the best, while
| January, June and September are the worst. "Sell in may" and go
| away used to be a common phrase too.
|
| But if you are purely DCAing, such points don't make much
| sense. Following the interest rate cycle or business cycle is
| straight forward, or cycles in your own industry. Oil, shipping
| and microprocessor companies for example forecast years out
| when their profitable and unprofitable periods will be, so you
| can move your capital in and out for much higher performance.
| ttyprintk wrote:
| I'd rather see a study where September and November are chosen
| for gold bullion, and other months for equities. I've heard
| this coincides with the wedding season in India --- maybe
| someone can confirm.
| PaulDavisThe1st wrote:
| If there was such a pattern, and then a strategy to exploit it,
| the pattern would change.
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