[Australia Sucks]

Razor Beast arguments about the quality of GAAP earnings have been going on for decades, nothing new to see here. GAAP earnings are not perfect but there are not much reliable other data available for the market as a whole (as opposed to individual stocks). As for being backward looking if you look a forward indicators such as company earnings guidance and recent PMI figures, consumer confidence figures, etc still suggest a bullish outlook for corporate profits. That being said I think U.S. stocks are overvalued so I do not necessarily expect strong gains to continue but I wouldn't be holding my breath waiting for a crash either. Also aside from the tech sector the rest of the U.S. stock market is still overvalued but its not at hysteria/mania levels yet (the type of hysteria that typically precedes a crash).

Interest rates rising 1% over the course of a year (to well under 2% official fed rate) is hardly enough to crash the market. Even a 2% fed funds rate (won't even get that high for quite a while) is still way below the historical average and still expansionary.

You are essentially agreeing with my point (which I made to Travel Museums) that no hedge fund would really hire a retail investor. I agree with what you said about people needing the right connections to manage money.

Travel museums it took my a lot of reading the first 5 or 6 years to get an understanding of how markets or companies work but now I have sufficient knowledge where the learning curve is less steep now. Currently with a few hours a week of reading I can stay on top of my investments. This is because I have a concentrated portfolio with low turnover. For example if you have owned the same 4 stocks for 5 years that cuts down on research time. No I do not tend to go for large caps. I tend to invest in small and midcap stocks in Australia. I do not own any U.S. stocks. Also investing in companies with simple business models and not too many divisions helps to understand everything and cut down on research time.

For example if you want to invest in Pfizer you would have to understand the huge number of products, the clinical trials, patent expiry, competitor drugs, FDA approvals, regulatory changes, foreign exchange risk, etc. Even after hundreds of hours of research a layman would struggle to understand what is going on. However if you were investing in say a smallish debt collection company or a domestically focused waste management company, or a smallish pure funds management company its a different story. You want to invest in a company without too many moving parts so to speak.

In summary you can beat the market without being glued to a computer by:
a) taking a long term view
b) doing a modest amount of research
c) having a concentrated portfolio
d) investing in simple/easy to understand companies
e) having low portfolio turnover

If you do all the above well you can outperform the market while not spending too much time.

[SamuelBRoberts]

(08-17-2017 04:55 AM)BB1 Wrote:  

(08-16-2017 01:16 PM)Kid Twist Wrote:  

I'm also on record now with BTC, regardless of what you think of it, being the hedge against worries about traditional markets. BTC is here to stay, I'm sad I didn't buy a lot at 2k, which I think was the clear not-so-cheap low that stabilized. It's going to $10k easy, I'll say that right now.

The current crypto market has to many uninformed people getting involved, and FOMO.

I suggest you read "Extraordinary Popular Delusions and the Madness of Crowds" first published in 1841!!

Read the book. Loved it.
Has jack-all to do with Bitcoin.

[churros]

(10-14-2017 02:15 AM)Peregrine Wrote:  

Any discount broker will do. Your short post was enough info for me to know that you have no business actively trading equities though.

Sounds harsh, but I'm saving you money.

Ha, okay I appreciate the honesty. But elaborate?

More likely I would go for index funds. I just assumed it would be straightforward to invest in individual businesses when bad news hits.

[Razor Beast]

(10-15-2017 05:03 AM)Australia Sucks Wrote:  

Razor Beast arguments about the quality of GAAP earnings have been going on for decades, nothing new to see here. GAAP earnings are not perfect but there are not much reliable other data available for the market as a whole (as opposed to individual stocks). As for being backward looking if you look a forward indicators such as company earnings guidance and recent PMI figures, consumer confidence figures, etc still suggest a bullish outlook for corporate profits. That being said I think U.S. stocks are overvalued so I do not necessarily expect strong gains to continue but I wouldn't be holding my breath waiting for a crash either. Also aside from the tech sector the rest of the U.S. stock market is still overvalued but its not at hysteria/mania levels yet (the type of hysteria that typically precedes a crash).

Interest rates rising 1% over the course of a year (to well under 2% official fed rate) is hardly enough to crash the market. Even a 2% fed funds rate (won't even get that high for quite a while) is still way below the historical average and still expansionary.

It's fine to be bullish, that's what makes a market. But you only addressed about one of my 20 or so issues with where the market is at now. I have many more macro concerns I didn't even bother addressing. Simply because the economic data happens to take what is (for now) a temporary shift to the upside, because of what I theorize as a sentiment shift in markets driven by many investors who had been downtrodden, right wing permabears prior to Trump's election doesn't justify the existing euphoria and pepetual multiple expansion. That is my theory for what has created this blow off top over the last year. There were plenty of downtrodden right leaning permabears who were uninvested throughout the recovery from the last financial crisis because they were shell shocked from their prior losses in the first half of the recovery from the last financial crisis and were disenchanted with Obama's failed policies in the second half and saw Trump as a god like figure that would lead them to the promised land of eternal prosperity. In goes all of the rest of the money that had been on the sidelines into the market the last 8 years in wake of the financial crisis in the year after Trump gets elected. Don't get me wrong, the index should definitely should be up for the year so far based on what has transpired to this point, but not anywhere close to the 25-30% or so the indexes seem to be on pace for. Far less than that. What I'm trying to say is the market is reaching what will be seen as an inflection point, and all the stars are aligning to put us on the precipice of a major move. Once confidence in Trump is shaken (which I think will happen fairly soon) this market will take a huge dive. Personally I'm a little upset he has taken the bait of taking ownership of the success of the stock market publicly this year repeatedly because it is a disaster waiting to happen. I know its going to bite him in the end when the opposition uses the end result against him.

And before you flame me - this isn't an attack on Trump, but ultimately there is an enormous expectation gap right now between what he claims he will do and what he will ultimately achieve with respect to the stock market. For masculine men, he's a godsend because he delays the anti-male agenda and plants seeds in the head of the younger generation that will hopefully (in due time) reject the existing feminized and anti-male programming.

In a zero interest rate environment for nearly a decade, its no surprise that many have long disregarded the steadily increasing discrepancy between GAAP and non GAAP earnings. I'm saying its going to come into question as rates normalize. Your argument for shifts in interest rates or rate policy having no impact on the market was very weak. I will assume you are 95% in agreement with me about the risks present since you didn't bother to take a stab at anything else. FWIW I do this for a living and I'm guessing the flag on your profile means you're not an American, so you may have a different perspective if you don't live in the country.

[Travel Museums]

Australia. The average RVF guy isn’t going to have the time or wherewithal to do 5-6 years of work as a financial analyst so he can then autopilot on direct investment. It works for you. But most people can’t do it.

Even if they could. You’re probably getting a marginally better return. So is it REALLY worth it?

How much is 6 year of your youth worth in hindsight?

[Razor Beast]

(10-15-2017 08:53 AM)SamuelBRoberts Wrote:  

(08-17-2017 04:55 AM)BB1 Wrote:  

(08-16-2017 01:16 PM)Kid Twist Wrote:  

I'm also on record now with BTC, regardless of what you think of it, being the hedge against worries about traditional markets. BTC is here to stay, I'm sad I didn't buy a lot at 2k, which I think was the clear not-so-cheap low that stabilized. It's going to $10k easy, I'll say that right now.

The current crypto market has to many uninformed people getting involved, and FOMO.

I suggest you read "Extraordinary Popular Delusions and the Madness of Crowds" first published in 1841!!

Read the book. Loved it.
Has jack-all to do with Bitcoin.

FWIW, if bitcoin is really worth $5000+ a coin, why aren't real assets appreciating substantially along with it? If the dollar couldn't serve as an intermediary for bitcoin, would you really take 100 bitcoins for a 3-4 BR home? Does that sound reasonable to you?

Something has to give. Either prices of real assets are going to skyrocket, or bitcoin is in a bubble. Either way, being positioned long bitcoin at these prices seems to offer the worst risk reward of those options.

If you are just trading bitcoin, whatever. The prices are completely arbitrary then and sure you could flip trades for profit. I could trade and make a profitable market in beach sand, bottled oxygen, fresh water, pretty much anything you can imagine. Makes no difference what we are talking about here in that case.

[SamuelBRoberts]

(10-15-2017 07:06 PM)Razor Beast Wrote:  

FWIW, if bitcoin is really worth $5000+ a coin, why aren't real assets appreciating substantially along with it? If the dollar couldn't serve as an intermediary for bitcoin, would you really take 100 bitcoins for a 3-4 BR home? Does that sound reasonable to you?

I don't understand why you feel that for one asset to rise in price, every other asset must rise along with it.
Can you explain further?

[Peregrine]

(10-15-2017 11:28 AM)churros Wrote:  

(10-14-2017 02:15 AM)Peregrine Wrote:  

Any discount broker will do. Your short post was enough info for me to know that you have no business actively trading equities though.

Sounds harsh, but I'm saving you money.

Ha, okay I appreciate the honesty. But elaborate?

More likely I would go for index funds. I just assumed it would be straightforward to invest in individual businesses when bad news hits.

Because there's no such thing as a straightforward causal relationship like "buy when bad news hits". You might be right in this case, but I could also win on any given hand against Phil Ivey. In the long run though, you're going to be caught out.

Learn the basics first, start actively trading sums that you don't mind losing, and keep an investment/speculation journal detailing when you enter, when you plan to exit, your rationale, etc.

[Razor Beast]

(10-15-2017 08:57 PM)SamuelBRoberts Wrote:  

(10-15-2017 07:06 PM)Razor Beast Wrote:  

FWIW, if bitcoin is really worth $5000+ a coin, why aren't real assets appreciating substantially along with it? If the dollar couldn't serve as an intermediary for bitcoin, would you really take 100 bitcoins for a 3-4 BR home? Does that sound reasonable to you?

I don't understand why you feel that for one asset to rise in price, every other asset must rise along with it.
Can you explain further?

I had a long post drawn up, but I think I'll just keep it simple. It has to do with faith in value of the dollar. There's no major economic use purpose for bitcoin or any other cryptocurrency to exist on a large scale other than for black market transactions, money laundering, or other illicit activities unless there is a collapse in confidence of the dollar and fiat currencies. Bitcoin and real assets are priced in dollar terms. Real assets are NOT being priced in bitcoin terms. The movement of bitcoin would lead one to infer that there is a collapse of confidence in fiat currencies going on. I think that you would be shocked to find out that a very large percentage of individuals, businesses, and governments who hold valuable physical assets and commodities are not going to part with them for the dollar value equivalent of what bitcoin currently trades for if the dollar or other fiat currencies ceased to exist. The small percentage of bitcoin believers on a world scale that are willing to pay anything to be a part of the bitcoin story should not be used to form a basis for establishing a true relative value. The market for bitcoin is enormously more illiquid than that of USD, EUR, CNY, etc based on the number of daily transactions and value of those transactions conducted in each which makes it possible that this type of distortion can exist. The only reason why any type of party uninterested in the speculative nature of bitcoin would accept bitcoin in a transaction would be if they could instantly convert to dollars or some other fiat currency.

[Australia Sucks]

Travel museum you are using straw man arguments. Its not like I locked myself in a room for 5 or 6 years and doing intense study and nothing else. I just pointed out that the initial time investment was higher. 5 years of say 5 or 6 hours a week of reading/study is really not that being a deal. The average person probably spend more amount of time than that per week watching TV/youtube. Basically read one or two books per month (business/finance/economics/investment/history books) as well as some company annual reports, investment newsletters, blogs, watch business news, etc. Do that for a number of years and you will have a reasonable all round level of knowledge to be a competent investor.

Besides my return has not been marginally better than the index, I have absolutely crushed the relevant index (all ordinaries accumulation index). With my current net worth and the trajectory I am heading I expect to be a millionaire by my mid 30s which is nothing amazing, but its a decent achievement for a guy with no real skills or qualifications who has only ever worked dead end entry level jobs. Strop using straw man arguments.

Razorbeast I am not saying rate rises will have no impact on the market. I simply think the negative impact won't be enough to cause a crash (at least until the fed funds rate gets to 3 or 4% or higher even). They might slow the market down a little but given they will be rising in a backdrop of decent economic growth and that the overall level is still low it just won't cause a crash. It is hard to imagine that a 2% fed funds rate could cause markets to crash. Yes, there are plenty of risks in the market but ultimately being bearish too early is the same as being wrong. The same arguments about debts being too high, share buybacks inflating earnings, interest rate normalization, overvaluation, etc have been made by permabears ever since the market crashed and started to recover. Don't become a broken clock perma-bear. The market climbs a wall of worry and currently the wall is not yet so high that the market cannot climb it. Now I am not a perma-bull or anything and I think the U.S.A. stock market will under-perform and have low returns the next 5 years but I just do not yet see the conditions for a crash being present.

[Razor Beast]

(10-16-2017 05:09 AM)Australia Sucks Wrote:  

Razorbeast I am not saying rate rises will have no impact on the market. I simply think the negative impact won't be enough to cause a crash (at least until the fed funds rate gets to 3 or 4% or higher even). They might slow the market down a little but given they will be rising in a backdrop of decent economic growth and that the overall level is still low it just won't cause a crash. It is hard to imagine that a 2% fed funds rate could cause markets to crash. Yes, there are plenty of risks in the market but ultimately being bearish too early is the same as being wrong. The same arguments about debts being too high, share buybacks inflating earnings, interest rate normalization, overvaluation, etc have been made by permabears ever since the market crashed and started to recover. Don't become a broken clock perma-bear. The market climbs a wall of worry and currently the wall is not yet so high that the market cannot climb it. Now I am not a perma-bull or anything and I think the U.S.A. stock market will under-perform and have low returns the next 5 years but I just do not yet see the conditions for a crash being present.

Every historically unprecedented bull market creates a bunch of newly minted genius traders who think they are god's gift to trading and that they are going to end up multi millionaires in "x" amount of time when every stock out there - piece of garbage or not, is headed for the moon. They even plot out all the toys they are going to buy and when. The market has an incredible way of humbling you just when you think you've got it figured out. A good chunk of your wealth can all be taken away from you in an instant. I've known of floor traders that got wiped out and lost everything including their million dollar house. Family members who were paper millionaires in the last dot com bubble who rode it all the way up and were so greedy they ended up riding it all the way back down.

I don't know why you are still trying to debate me regarding interest rates. We are in unprecedented territory here with balance sheet sizing and zirp. Quantitative tightening on this scale has NEVER BEEN DONE. To readily dismiss any potential effects shows your complete ignorance. Add to that it is happening in the middle of a tightening cycle. Of course the Fed is going to say it won't have any effect - if they said it would the market would immediately crash. The Fed still feigns confusion over where inflation is because they won't readily admit the reason they are hiking is to head off runaway asset price inflation. Why else would they price in 3 hikes next year? Read between the lines man, the fed gives fedspeak for a reason...

The irony in your post is that you don't even realize that the permabears have already capitulated. I showed you why things will quickly spiral out of control once there is a reason for everyone to head for the exits at once. The market has never been more leveraged long than it is right now. It's not too hard to figure out what happens in de-leveraging, but you've never seen that before have you. Like I said previously, good luck and I'm sure you've got it all figured out.

My quick read on you is that you're probably a millennial, started trading after 2008, and have only seen a market that goes straight up. Am I right? You're actually trying to say that investing in this environment took skill?

I'm done responding to you. You just shoot down everything I say unsubstantiated. Don't bother replying to my posts anymore starting with this one. I'm not getting any value out of this conversation.

[Australia Sucks]

Razor Beast you are wrong to assume I have never seen deleveraging I already had money invested in the stock market well before the 2008 crash and my portfolio took a big hit (subsequently recovered) during the financial crises. I am not some punk millennial kid who has never seen a bear market. You sound like a perma bear. Tell me how many years have you been bearish on the market for?

Besides its richly ironic that you say that I shoot down everything you say unsubstantiated when none of your arguments have been backed (by relevant web-links, book references, etc) by any kind of facts or figures. You just make broad sweeping generalizations without links to any facts or figures. besides, I already addressed a lot of bearish arguments (including the ones made by you) in this thread using a lot of facts and figures thread-63841.html so I suggest you read it. This thread is not about the direction of the market (whereas the other one is) so I suggest if you want to debate the outlook for the market best to move the discussion to the relevant thread.

As for your claim of quantitative tightening on this scale has never been done, while technically true its an ignorant statement. As a general rule under the fiat currency system the financial world (and the level of debt) gets bigger over time and the boom bust cycles (in raw number terms) get bigger over time also. So this is not surprising and is to be expected.

You seem to be ignore the fact that in an economy like the U.S.A. or Australia, long-term real estate cycles drive the economy and the bullish run for real estate still has a lot longer to continue. In your comments you completely neglected to mention one of the major causes of financial crashes/recessions which is a downturn in land prices. In a fiat currency system in a developed economy land is the primary form of security upon which the majority of credit is created. In the U.S.A. demand for housing is still strong and housing affordability is not too bad, nor is there a generalized oversupply of new dwellings being constructed. Land prices will continue to rise and therefore the stock market is unlikely to crash while this is occurring. I suggest you read up on the work done by land economists like Fred Folvary, Fred Harrison, Phillip J. Anderson, Henry George, etc.

[SamuelBRoberts]

(10-16-2017 01:00 AM)Razor Beast Wrote:  

(10-15-2017 08:57 PM)SamuelBRoberts Wrote:  

(10-15-2017 07:06 PM)Razor Beast Wrote:  

FWIW, if bitcoin is really worth $5000+ a coin, why aren't real assets appreciating substantially along with it? If the dollar couldn't serve as an intermediary for bitcoin, would you really take 100 bitcoins for a 3-4 BR home? Does that sound reasonable to you?

I don't understand why you feel that for one asset to rise in price, every other asset must rise along with it.
Can you explain further?

I had a long post drawn up, but I think I'll just keep it simple. It has to do with faith in value of the dollar. There's no major economic use purpose for bitcoin or any other cryptocurrency to exist on a large scale other than for black market transactions, money laundering, or other illicit activities unless there is a collapse in confidence of the dollar and fiat currencies. Bitcoin and real assets are priced in dollar terms. Real assets are NOT being priced in bitcoin terms. The movement of bitcoin would lead one to infer that there is a collapse of confidence in fiat currencies going on. I think that you would be shocked to find out that a very large percentage of individuals, businesses, and governments who hold valuable physical assets and commodities are not going to part with them for the dollar value equivalent of what bitcoin currently trades for if the dollar or other fiat currencies ceased to exist. The small percentage of bitcoin believers on a world scale that are willing to pay anything to be a part of the bitcoin story should not be used to form a basis for establishing a true relative value. The market for bitcoin is enormously more illiquid than that of USD, EUR, CNY, etc based on the number of daily transactions and value of those transactions conducted in each which makes it possible that this type of distortion can exist. The only reason why any type of party uninterested in the speculative nature of bitcoin would accept bitcoin in a transaction would be if they could instantly convert to dollars or some other fiat currency.

I don't understand the definition of "worth" you're using. An asset, any asset, is worth what someone will pay for it, and there is no other definition that's meaningful. If you mean "if it were impossible to speculate on bitcoin, it would be less valuable" then yes, you're absolutely correct. But what does that have to do with anything?

[Australia Sucks]

SamuelBRoberts you seem to be confusing (market) price and (intrinsic) value. Price is what you pay, value is what you get. Price is what someone is willing to pay for an asset, whereas value can also be defined as "intrinsic value". The intrinsic value of a financial asset is dependent on factors such as value in use, replacement/reproduction value, and or its ability to generate cash flows. The price of Bitcoin is very high whereas its intrinsic value is highly questionable and unknown. To me worth equates to intrinsic value rather than market price.

[worldwidetraveler]

(10-16-2017 05:09 AM)Australia Sucks Wrote:  

Travel museum you are using straw man arguments. Its not like I locked myself in a room for 5 or 6 years and doing intense study and nothing else. I just pointed out that the initial time investment was higher. 5 years of say 5 or 6 hours a week of reading/study is really not that being a deal. The average person probably spend more amount of time than that per week watching TV/youtube. Basically read one or two books per month (business/finance/economics/investment/history books) as well as some company annual reports, investment newsletters, blogs, watch business news, etc. Do that for a number of years and you will have a reasonable all round level of knowledge to be a competent investor.

Besides my return has not been marginally better than the index, I have absolutely crushed the relevant index (all ordinaries accumulation index). With my current net worth and the trajectory I am heading I expect to be a millionaire by my mid 30s which is nothing amazing, but its a decent achievement for a guy with no real skills or qualifications who has only ever worked dead end entry level jobs. Strop using straw man arguments.

Actually, he makes a good point. From what you described, I would consider it a waste of time unless I had a huge chunk of cash that had no home or I was making a large income. I'd probably need a little bit of both before I dedicated 5 to 6 hours a week for 5 years.

If I was working dead end entry level jobs, like you said you are, I would be putting that time into learning skills that would either land me a higher paid job or start a business.

Quote:

The average person probably spend more amount of time than that per week watching TV/youtube. Basically read one or two books per month (business/finance/economics/investment/history books) as well as some company annual reports, investment newsletters, blogs, watch business news, etc. Do that for a number of years and you will have a reasonable all round level of knowledge to be a competent investor.

Now that is a strawman argument. You assume time would be wasted on television instead of building more profitable skill sets. I need to leverage my time. If I have a product that I am selling, my time would be better invested in spending time on marketing education than reading up on stock investing.

[Razor Beast]

(10-17-2017 06:57 AM)SamuelBRoberts Wrote:  

(10-16-2017 01:00 AM)Razor Beast Wrote:  

(10-15-2017 08:57 PM)SamuelBRoberts Wrote:  

(10-15-2017 07:06 PM)Razor Beast Wrote:  

FWIW, if bitcoin is really worth $5000+ a coin, why aren't real assets appreciating substantially along with it? If the dollar couldn't serve as an intermediary for bitcoin, would you really take 100 bitcoins for a 3-4 BR home? Does that sound reasonable to you?

I don't understand why you feel that for one asset to rise in price, every other asset must rise along with it.
Can you explain further?

I had a long post drawn up, but I think I'll just keep it simple. It has to do with faith in value of the dollar. There's no major economic use purpose for bitcoin or any other cryptocurrency to exist on a large scale other than for black market transactions, money laundering, or other illicit activities unless there is a collapse in confidence of the dollar and fiat currencies. Bitcoin and real assets are priced in dollar terms. Real assets are NOT being priced in bitcoin terms. The movement of bitcoin would lead one to infer that there is a collapse of confidence in fiat currencies going on. I think that you would be shocked to find out that a very large percentage of individuals, businesses, and governments who hold valuable physical assets and commodities are not going to part with them for the dollar value equivalent of what bitcoin currently trades for if the dollar or other fiat currencies ceased to exist. The small percentage of bitcoin believers on a world scale that are willing to pay anything to be a part of the bitcoin story should not be used to form a basis for establishing a true relative value. The market for bitcoin is enormously more illiquid than that of USD, EUR, CNY, etc based on the number of daily transactions and value of those transactions conducted in each which makes it possible that this type of distortion can exist. The only reason why any type of party uninterested in the speculative nature of bitcoin would accept bitcoin in a transaction would be if they could instantly convert to dollars or some other fiat currency.

I don't understand the definition of "worth" you're using. An asset, any asset, is worth what someone will pay for it, and there is no other definition that's meaningful. If you mean "if it were impossible to speculate on bitcoin, it would be less valuable" then yes, you're absolutely correct. But what does that have to do with anything?

You're right it is worth what someone is willing to pay for it. But the ubiquity of bitcoin is extremely low. People are not conducting trillions of dollars worth of transactions for real assets in bitcoin every day like fiat currencies. Because of that you have no way of establishing the true value of bitcoin compared to things like USD, EUR, and CNY in relation to real assets. You are extrapolating your value bias over an extremely small sample of the world population to the entire world population.

100% of the world population conducts transactions for real assets in fiat currencies every day. A very small fraction of 1% of the population conducts transactions for real assets in bitcoin every day. You cannot possibly gauge what the equilibrium value of bitcoin in that exchange would be in the absence of fiat currencies to serve as an intermediary when 100% of that fraction of 1% that are willing to accept bitcoin are purely ideologically motivated. The vast majority of the global population who are indifferent to the speculative nature of bitcoin or don't have interest in holding bitcoin currently have no way of having an impact on the value of bitcoin in exchanges for real assets because of its extreme lack of ubiquity.

The extreme value of bitcoin has to do with an ideological motivation to eliminate fiat currencies by a very small part of the population. Contributing factors are a constrained supply, and a low float, which makes bitcoin much more volatile. It is basically a cult movement, which makes it prone to paying any price to enter and there is also a momentum trading aspect where people all pile into the same strategy once a short term direction emerges.

[Striking]

You won't make any money if you diversify, much less with an index fund. You have to grow a pair and pick your stocks - the fewer the better. You can protect yourself by not buying anything with a P/E ratio above 15 and by being emotionally strong, refusing to sell at a loss.

The market is all about managing your emotions.

[CaptainChardonnay]

(08-01-2017 11:38 AM)BB1 Wrote:  

(08-01-2017 07:47 AM)Vicious Wrote:  

(07-31-2017 10:06 AM)BB1 Wrote:  

Actually thrashing the index is ludicrously easy.

Simply put your savings into shares of Berkshire Hathaway (BRK-B).

Long term comparison of Berkshire (blue line) verses the S&P 500 index :

This is called hindsight.

Telling people to pool their savings in one place instead of diversifying is highly dubious. New poster telling people to put all their money in a specific fund - not shady at all.

I consider owning shares of Berkshire Hathaway is less risky that the S&P 500 index. Warren Buffett has engineered the company to be bulletproof.

Lets check back in one year and see which has done the best. As I type BRK-B is $175.91 and SPY is $247.24

Prices on Aug 1, 2018
BRK-B is 197.85, 12.5% return
SPY is 280.68, 13.5% return

Prices today, Aug 28, 2018
BRK-B is 210.87, 19.9% return
SPY is 289.84, 17.2% return

[smashley]

Don't listen to Australia Sucks, indexing works. Last thing you should do is take advice from a guy in his 20's about long term investing. You have been investing the entire time the market has been in a bull run. Last crash 2008. You were born and participated in an era that has been outwardly positive and a complete bull run. You have not lived through cycles. Periods of losses/gains/losses/gains etc. Not to mention include fees etc. for all trades and commissions for mutual funds, etc. Everybody things they are expert stock pickers. The truth is they will only tell you about their wins and not their losses or they're talking about a short to medium run where they have not been tested. This is psychological and ego. Everybody wants to trade and strategize because it romanticizes the idea of making money and competition. This is why vegas exists, every guy thinks he can do it better. I've made this mistake myself and luckily learned it early.

The S&P and passive vs. active strategies have been studied in detail over the long term. See all the articles and formal studies on it:

https://us.spindices.com/documents/spiva...d-2016.pdf

summary articles:

https://www.ft.com/content/e139d940-977d...f38d484582

https://blogs.wsj.com/moneybeat/2017/04/...rformance/

90%-97% of the time index funds outperform actively managed funds. And are you telling me that a 20 year old who invested 4-5 hours a day for a few weeks is better than mutual fund managers with MBA's phd's from top universities with 20 years in the game. I highly doubt it.

I'll stick with what has been studied and proven rather than what someone tells me. Lets see who wins in 20 years. I'll take that bet. I've been investing for 20 years and i've seen this argument so many times.

[CaptainChardonnay]

I've read this whole thread and I simply do not understand what you guys are arguing about. Yes indexing works. It is the safest play however finance is about risk and reward and people who have a higher risk appetite will deploy their funds more aggressively.

There have been many successful and aggressive traders throughout history, a lot of them are low key and unknown however many are very high profile and have made substantial amounts of money. They have been able to make money in both bull and bear markets and over the long term. The only key ingredients needed for this are volatility and liquidity and being able to manage their risks so that their capital doesn't get wiped out. Easier said than done of course.

If you model their actions and behaviours you will be able to succeed also but it will take time and effort and also luck.

[NoMoreTO]

(10-19-2017 06:15 PM)Striking Wrote:  

You won't make any money if you diversify, much less with an index fund. You have to grow a pair and pick your stocks - the fewer the better. You can protect yourself by not buying anything with a P/E ratio above 15 and by being emotionally strong, refusing to sell at a loss.

The market is all about managing your emotions.

Agree on P/E ration. Warren Buffet Style, Bought APPL around 11 PE, seemed low, now its at 19.88 P/E, sold half recently at 80% gain. I'll keep the other half so I don't get upset if it keeps going up. Sold it with a loser (IBM) so I don't have to pay capital gains taxes.

[NoMoreTO]

(10-15-2017 05:03 AM)Australia Sucks Wrote:  

In summary you can beat the market without being glued to a computer by:
a) taking a long term view
b) doing a modest amount of research
c) having a concentrated portfolio
d) investing in simple/easy to understand companies
e) having low portfolio turnover

If you do all the above well you can outperform the market while not spending too much time.

a) taking a long term view - yes
b) doing a modest amount of research - I research or take a viewpoint when I buy, if something changes then I might sell but often just hold and keep diversifying. That said, agreed if you have all your eggs in one basket you watch that basket.
c) having a concentrated portfolio - No, diversify as you grow. If you're flipping one to get into another, too much work.
d) investing in simple/easy to understand companies - No, if you are a couch potato, invest in big companies with products you know
e) having low portfolio turnover - yes, makes doing your research easier.

I have a portfolio with now appx 32 diversified positions. I take on single positions quarterly with some room for market timing but I try to consistently add. Lots of them ETFs and indexes, others large caps (no management fees), and a few mid sized firms. I have a standard position size, and try to keep things roughly equal, but sometimes I take a double position or a half position.

I haven't even read the OP, but index fund is indeed giving up, often in a smart way. I have a background in business, accounting, economics and it teaches you to be humble. All my friends who work in high finance seem to accept it as a bit of a racket and invest conservatively - often with ETFs. I once read a book called random walk down wallstreet, its' an easy read about why its hard to beat the emotions of the market.
>> If your cabby gives you a stock tip, sell. When you see guys in handcuffs, buy.

Index investing is giving up, congrats to those who can actually make money on the market, but I have a full time job and full time play and trying to crack the market is quite the exercise. Put your money somewhere you can see it, where you can influence your investment with your skill and effort if needed. For some people this might be designing a portfolio, but for most - it should be parking your savings in a low cost, diversified portfolio... when its not actually invested in business or real estate. Also, paying debt down never hurts.

>> Don't forget even people who are winning, probably think they know their shit, but might just be getting shit lucky.
>> Then even if they put something together, made some money and understood a trend a couple years back in the markets, it doesn't mean they can or are making the right pick today.

Don't they always say... "Past returns are not an indicator of future returns" haha

[Chetthebaker]

Second what @Smashley said up there.

It can be fun to pick stocks, especially if they go up quickly. But ultimately history has shown time and again that you will not beat Mr Market.
Especially with the bots out there trading against you.
Even Warren Buffet tells his wife that when he kicks it to just put it in an S&P 500 index fund and forget about it.

[Australia Sucks]

Smashley you pretty much ignored most of the points I made in previous posts. So I will just spend a few paragraphs reiterating some of the points I previously made.

It is well documented that the majority of fund managers underperfrom the index. This is also the case for most retail investors. However most retail investors have no discipline or strategy. Retail investors with discipline and focus have huge structural advantages over institutional investors and definitely have a reasonable prospect of outperforming the index.

I am not saying I am smarter than fund managers or analysts. Yes a big team of guys with a lot of training, qualifications and resources can obviously research companies more in-depth/better than I can and can cover more stocks. Also they get better access to private share placements, pre-IPO offerings and can buy large enough stakes to potentially influence the management of companies.

However retail investors have some huge structural advantages which I believe more than outweigh the above factors. Firstly size. being small means you can get in and out of stocks quickly and usually without affecting the price. Also you can put a large percentage of your portfolio into a small company. If for example a managed fund with $300 million dollars in funds under management wants to invest in a micro-cap stock with a market capitalization of $150 million and If they want to put 10% of their portfolio ($30 million dollars) into the stock that means they will have to buy 20% of the company. The daily trading volume/liquidity typical of a company of that size means it could take them 12 months to buy that many shares. Meanwhile while they are slowly accumulating shares the share price could go substantially higher. On the flip side if it turns out the were wrong and they need to sell, they will have a hard time selling the shares without tanking the price.

The second advantage I have over institutional investors is time horizon. I do not have to worry about quarterly or even annual performance. I can afford to take a long-term view of things whereas fund managers have to worry about short-term performance lest their funds under management declines.

Then third advantage is being fully flexible. Most funds have a mandate (or else pressure from unit holders, and investment advisors in the background) to run the fund a certain way. If they hold too much cash they will get slammed by investors who will be upset at paying fees to the manager who then holds cash. They may have restrictions on which markets they can invest in, how concentrated their portfolio can be, ethical restrictions on what types of companies they can invest in, as well as their size (see point 1) restricting them from investing in companies that are too small. As a retail investor none of these restrictions apply to you.

The 4th advantage is lower fees/costs. Obviously not paying fees to a fund manager means you get to keep more of the returns for yourself.

Also as I mentioned before I am not a bull market Johnny-come-lately. I invested in the market well before 2008 and survived that downturn. I have seen both bull and bear cycles.

[Australia Sucks]

As for the market bears in the thread I started this thread more than a year ago and no market collapse has not occurred as of yet. In fact just today the S&P 500 hit another all time record high. Earnings for corporate America are still strong and rising. Consumer confidence is strong, retail spending is rising, housing construction is robust, wages are growing strongly, unemployment generally continues to fall (albeit with some month to month fluctuations). A year after I started this thread (the bears have been wrong to date) I still feel its too early to be bearish on the market.

Yes interest rates are continuing to slowly creep up but the overall level is low (and will remain low for some time yet), and yes the market is somewhat overvalued but earnings are still rising and the prospective returns/yields from equities still look more attractive relative to the returns available from other asset classes such as cash, fixed income products/bonds, property, etc.

With the caveat that nobody can consistently time markets, I cannot see any reason for an imminent market collapse. To me it looks like business as usual at this point. Keep investing (intelligently) no need for panic (or excessive pessimism) just yet.