Let's talk about investing! Stock market, ETF, etc.

[FanboyOf91]

43 minutes ago, Sacks 'n' Stuff said:

It’s botherIng me because a big drop is a near certainty and I want to time it right.

start now

[PeterMP]

23 minutes ago, redskins59 said:

 

Basically, trading stocks is timing it because you are trying to figure out the direction of the stock in the short term.  On the other hand, investing is when you are holding long term.

There are hedge funds out there who have made money for years by trading.  So you can't say that nobody knows how to time it right.  We the normal folks don't know how to do it, no question about it though. We might get lucky, but that's it.

One big name  that has made tremendous amount of $$ is Renaissance Technologies.  

There are many successful traders out there. 

 

I've known some AI academic computer scientists that have done very well in the stock market.  Some of them might be the old with a stadium of people flipping coins some of them are going to get a lot of heads due to random chance, but I'm not at all comfortable saying that's universally true.

 

The other thing I would add is that as trading fees go down and dividends have pretty much disappeared two of the major factors that limited trying to time the market have largely disappeared. 

 

Once upon a time, one of the issues with trying to time the market was that you had to pay pretty large fees to execute a trade.  With the competition between online traders today, those fees are much lower.  And then another issue was even during the down turn, you were making money (to re-invest) through dividends, but things like S&P 500 dividend yields are at near historic lows.  If I did sell and then re-buy, what I'm losing in terms of dividends is pretty minimal.

 

I'd like to see an analysis of long term how good you had to be at timing the market based on historic market movement using today's fees and likely dividend payments.  I'd be willing to bet that you need a lot less accuracy to move in and out today than you did 30 years ago to break even.

 

We've seen changes that have pushed the envelope to timing vs. investing.

Edited February 5, 2018 by PeterMP

[PeterMP]

I'm an investor, but I suspect that many of the people pushing that timing is a losers game aren't as right as they think they are.

 

And when you get into high speed trading, that's a completely different animal.

 

**EDIT**

Somebody that is buying and selling stocks at the level of days, months, and maybe even years (but not decades) is not the same thing as the person that is buying and selling stocks in minutes or even seconds.  When we talking about trading, we're not talking about high speed trading.

Edited February 5, 2018 by PeterMP

[Corcaigh]

26 minutes ago, redskins59 said:

 

Basically, trading stocks is timing it because you are trying to figure out the direction of the stock in the short term.  On the other hand, investing is when you are holding long term.

There are hedge funds out there who have made money for years by trading.  So you can't say that nobody knows how to time it right.  We the normal folks don't know how to do it, no question about it though. We might get lucky, but that's it.

One big name  that has made tremendous amount of $$ is Renaissance Technologies.  

There are many successful traders out there. 

 

Hedge funds with their 2 and 20 commission model make tremendous amounts for themselves.   The question is how many have beat the market, after fees, over the last 15-20 years. And will they guarantee it for the next 20 years?

 

I saw a report that showed index funds beat  ~ 95% of actively managed funds over 15 years. And that was a low number as many actively managed funds had closed over the period due to poor performances, so that 95% win rate was against the more successful active funds that were still in business.

[techboy]

1 hour ago, Sacks 'n' Stuff said:

I AM A STOCK MARKET GOD! 

 

Carry on then, your worship. 

 

34 minutes ago, redskins59 said:

There are hedge funds out there who have made money for years by trading. 

 

There's a 2017 version more recently too. http://www.etf.com/sections/index-investor-corner/swedroe-lessons-2017-part-3?nopaging=1

 

Check #8:

 

Lesson 8: Hedge funds are not investment vehicles, they are compensation schemes.

 

This one has been appearing as regularly as the lesson that active management is a loser’s game. Hedge funds entered 2017 coming off their eighth-straight year of trailing U.S. stocks (as measured by the S&P 500 Index) by significant margins. And investors noticed.

 

In 2016, poor performance and withdrawals led to the closing of 1,057 hedge funds, the most since 2008. However, even after withdrawals of about $70 billion, that still left about 9,900 hedge funds (729 new hedge funds were started) managing just more than $3 trillion as we entered last year.

 

Unfortunately, the losing streak for hedge funds continued into a ninth year as the HFRX Global Hedge Fund Index returned just 6.0% in 2017, underperforming the S&P 500 Index by 15.8 percentage points.

 

Of course, you can always point to individual hedge fund that have done better. A lot of that is because the ones that do worse just close.

 

6 minutes ago, PeterMP said:

And when you get into high speed trading, that's a completely different animal.

 

Yeah, it is. And if you have dedicated cable laid directly to the stock exchange from a block away and pay said exchange for the advantage of having the news and prices a split second before everyone else, and you have the computers necessary to turn that advantage into an edge, knock yourself out.

[redskins59]

One of the hedge funds that Renaissance Technologies has generates 40% returns annually.  They have been doing it for so long that it cannot be luck.  One of the founders of the company(James Simone?)  is supposed to be some sort of mathematical genius.

Making money by trading is possible if you have a mathematical brain.  There is a reason quants are so sought in the financial world.

Of course, commission has a lot to do with it.  These days, even Ameritrade commission is pretty low.  75 cents per contract for options? Trading stocks is 10 bucks I believe.  I don't remember, but it isn't too high. 

Mathematicians and Algo traders can make money from home.

I won't be able to do it, bit there are high IQ mathematicians out there.

Edited February 5, 2018 by redskins59

[techboy]

10 minutes ago, redskins59 said:

Making money by trading is possible if you have a mathematical brain.  There is a reason quants are so sought in the financial world.

 

It makes intuitive sense.

 

And yet, there are a lot of people with mathematical brains out there trying to do just that, and yet in an earlier part of the same article, lesson 1 tells us that  http://www.etf.com/sections/index-investor-corner/swedroe-lessons-2017-part-1?nopaging=1

 

Lesson 1: Active management is a loser’s game.

 

Despite an overwhelming amount of academic research demonstrating that passive investing is far more likely to allow you to achieve your most important financial goals, the vast majority of individual investor assets are still held in active funds. Unfortunately, investors in active funds continue to pay for the triumph of hope over wisdom and experience.

 

Last year was another in which the large majority of active funds underperformed, despite the great opportunity active managers had to generate alpha through the large dispersion in returns between 2017’s best-performing and worst-performing stocks. For example, while the S&P 500 returned 21.8% for the year, including dividends, in terms of price-only returns, 182 of the companies in the index were up more than 25%, 49 were up at least 50%, 10 were up at least 80.9%, and three more than doubled in value. 

 

To outperform, all an active manager had to do was to overweight those big winners. On the other hand, there were 125 stocks within the index that, on a price-only basis, were down for the year. Fifty-nine stocks lost at least 10%, 20 were down at least 25%, and the 10 largest losers (see the following table) lost at least 44.2%. 

 

To outperform, all an active manager had to do was to underweight these dogs.

It’s important to note that this wide dispersion of returns is not at all unusual. Yet despite the opportunity, year after year, in aggregate, active managers persistently fail to outperform.

 

I'm pretty sure most of those fund managers understood math. The problem is that they're all competing with each other.

 

Compounding this problem is the math shown here by William Sharpe: https://web.stanford.edu/~wfsharpe/art/active/active.htm 

 

He's a Nobel Laureate, but a third grader could do the math that leads him to this:

 

If "active" and "passive" management styles are defined in sensible ways, it must be the case that

 

(1) before costs, the return on the average actively managed dollar will equal the return on the average passively managed dollar and

 

(2) after costs, the return on the average actively managed dollar will be less than the return on the average passively managed dollar

 

These assertions will hold for any time period. Moreover, they depend only on the laws of addition, subtraction, multiplication and division. Nothing else is required.

 

Finally, just remember there are powerful cognitive biases at play here. Buffett talked about it in the letter I referenced earlier, in that people expect that more money and skill can buy and earn better results, as it is in most ways in life. Kahneman won a Nobel studying them. It's worth looking at this article again too: http://www.nytimes.com/2011/10/23/magazine/dont-blink-the-hazards-of-confidence.html?_r=1&pagewanted=all

 

More important, the year-to-year correlation among the outcomes of mutual funds is very small, barely different from zero. The funds that were successful in any given year were mostly lucky; they had a good roll of the dice. There is general agreement among researchers that this is true for nearly all stock pickers, whether they know it or not — and most do not. The subjective experience of traders is that they are making sensible, educated guesses in a situation of great uncertainty. In highly efficient markets, however, educated guesses are not more accurate than blind guesses.

 

and 

 

What we told the directors of the firm was that, at least when it came to building portfolios, the firm was rewarding luck as if it were skill. This should have been shocking news to them, but it was not. There was no sign that they disbelieved us. How could they? After all, we had analyzed their own results, and they were certainly sophisticated enough to appreciate their implications, which we politely refrained from spelling out. We all went on calmly with our dinner, and I am quite sure that both our findings and their implications were quickly swept under the rug and that life in the firm went on just as before. 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 general facts that people will ignore if they conflict with their personal experience.

 

The next morning, we reported the findings to the advisers, and their response was equally bland. Their personal experience of exercising careful professional judgment on complex problems was far more compelling to them than an obscure statistical result. When we were done, one executive I dined with the previous evening drove me to the airport. He told me, with a trace of defensiveness, “I have done very well for the firm, and no one can take that away from me.” I smiled and said nothing. But I thought, privately: Well, I took it away from you this morning. If your success was due mostly to chance, how much credit are you entitled to take for it?

 

But I think I am getting a bit strident again, so anyone reading this has the information, and can make his or her own decision about how to proceed.

 

Good luck.

 

 

 

 

 

 

 

[redskins59]

@techboy I generally agree that for a guy like me, passive investing is the way to go.  It is also a fact that the majority of active investors underperform indexes.  Heck, I would never put my money in a hedge fund due to the fees involved.  However, that does not mean that everybody fails.  Yes, some of the people who do well have been lucky.  It does not mean that they have all been lucky.  There are people out there who know what they are doing.

Machine learning has become much more powerful these days due to something called deep learning. Thousands of papers come out about artificial intelligence every year.  So someone with knowldge in this field can have a good chance.  How many people know machine learning algorithms?  And anyways, some of them have the ability to write their own models.

When I talk about mathematically good, I am talking almost genius-like.  The founder of Renaissance Technologies I believe has Phd in mathematics.  Prior to starting Renaissance Technologies, he was I believe a renowned professor.

Another example is Robert Mercer.  He was also using some kind of statistical model, and he is a billionaire.

I think the quants (mathematical geniuses, physicists, computer scientists)  can make money by trading.

I know I can't.  I am saying that there are people out there who have developed models or algorithms that can generate excess returns.

[Springfield]

 

This was trading at over $100 just this morning.  Murked.

 

[redskins59]

Credit Suisse, which owns XIV is down 6% in the after-hours. They own $500 million worth of XIV, which is predicted to hit zero tomorrow.  We'll see if that is true.

 

What are the chances of a market contagion?  Probably not a whole lot, but they just lost a lot of money.

[PeterMP]

6 hours ago, techboy said:

Yeah, it is. And if you have dedicated cable laid directly to the stock exchange from a block away and pay said exchange for the advantage of having the news and prices a split second before everyone else, and you have the computers necessary to turn that advantage into an edge, knock yourself out.

 

Okay, but some companies/funds are doing it, and it is possible that the people redskins59 is talking about are doing high speed trading.

[zoony]

This correction was overdue and necessary.  Market has been way oversold

[Springfield]

https://money.usnews.com/investing/news/articles/2018-02-06/inverse-vix-etfs-halted-from-trading-after-heavy-losses

 

LONDON (Reuters) - Three U.S.-listed inverse VIX ETFs were halted from trading on Tuesday after suffering heavy losses on Monday when a spike in U.S. stocks volatility caused a violent unwind of trades betting volatility would stay low.

Trading in the VelocityShares Inverse Vix Short-Term ETN , ProShares Short VIX Short-Term Futures ETF and VelocityShares Daily Inverse VIX Medium-Term ETN was halted and all three products had a short sell restriction placed on them, Thomson Reuters data showed. 

"Trading is halted pending the release of material news," Nasdaq said on its website.

Yesterday's spike in the VIX gauge of U.S. stocks volatility <.VIX> sent the VelocityShares Daily Inverse VIX Short-Term ETN down 84 percent in after-hours trading, while the ProShares Short VIX ETF fell nearly 79 percent.

[tshile]

http://www.calculatedriskblog.com/2018/02/market-update.html

 

 

Quote

Market Update

 

By request - following the market sell off today - here is a stock market graph. This graph shows the S&P 500 since 1990 (this excludes dividends).

The dashed line is the closing price today. The market is off 0.9% year-to-date.

Not very scary - at least not yet.

 

 

 

 

[Sacks 'n' Stuff]

So, what’s everyone thinking? Off a bridge? Tall building? Car running in the closed garage is where I’m currehtjy leaning.

[Burgold]

29 minutes ago, Sacks 'n' Stuff said:

So, what’s everyone thinking? Off a bridge? Tall building? Car running in the closed garage is where I’m currehtjy leaning.

Historically, corrections are pretty healthy and we haven't seen one in a long time. The question is what is the market telling us. If this is just about the market getting overvalued and profit taking then all is good. If it's about the fact that we are one year into Trump and the Market is beginning to feel the impacts of the GOP policy then we may all be screwed.

 

I am leaning towards correction, but I don't know how steep it might be. This could be a shopping opportunity on some previously expensive stocks and a good time to get in. Do your homework though. Chances are, we're in for a period of choppy water.

[Springfield]

1 hour ago, Sacks 'n' Stuff said:

So, what’s everyone thinking? Off a bridge? Tall building? Car running in the closed garage is where I’m currehtjy leaning.

 

I haven’t even bothered looking at my play portfolio today.  I’m certain that it’s really, really bad.

[Sacks 'n' Stuff]

2 hours ago, Burgold said:

Historically, corrections are pretty healthy and we haven't seen one in a long time. The question is what is the market telling us. If this is just about the market getting overvalued and profit taking then all is good. If it's about the fact that we are one year into Trump and the Market is beginning to feel the impacts of the GOP policy then we may all be screwed.

 

I am leaning towards correction, but I don't know how steep it might be. This could be a shopping opportunity on some previously expensive stocks and a good time to get in. Do your homework though. Chances are, we're in for a period of choppy water.

Thanks for talking me down B. I hope you'll also be there when it's time for someone to kick the chair out from underneath of me.

[Burgold]

59 minutes ago, Sacks 'n' Stuff said:

Thanks for talking me down B. I hope you'll also be there when it's time for someone to kick the chair out from underneath of me.

Might have to do a mutual kick. I'm pretty invested too.

[Springfield]

Honestly, not sure what I’m gonna do with my 20% of what I originally had.  I think I’ll just sit on it until the market calms down.  Pump some more cash in once it seems to be clear.

[PeterMP]

4 hours ago, Burgold said:

The question is what is the market telling us.

 

The economy is not as strong as it appears.  The Personal Saving Rate has only been lower in 2005.  The growth we've seen is based on people spending money they don't really have and is unsustainable.

 

https://fred.stlouisfed.org/series/PSAVERT

 

(And deep down the people with money and doing the most trading (where they buy and sell regularly) know it.)

 

And I suspect if you look at Europe and much of Asia the same is true.

 

**EDIT**

Pretty much the same in the EU.

 

https://tradingeconomics.com/european-union/personal-savings

 

Asia's a mixed bag.

 

(At least in 2005, much of it was going to homes, which are something you keep long term.  I'm not even sure what it is going to now.)

Edited February 9, 2018 by PeterMP

[LD0506]

[techboy]

 

 

 

[twa]

http://money.cnn.com/2018/02/11/investing/stocks-week-ahead-bond-market/

Knowing how much they can earn from "risk-free" Treasury bonds allows investors to determine the cost of stocks and other riskier assets. Treasuries serve as the benchmark for all other forms of credit, from junk bonds to mortgages.

"The 10-year Treasury sets the price for every asset in the world," said Brent Schutte, chief investment strategist at Northwestern Mutual.

That means the surge in the 10-year yield — from 2.4% earlier this year to about 2.8% now -- has increased the cost of money generally

[Sacks 'n' Stuff]

If we have a good day tomorrow or even if it just holds steady, I'm getting out.

 

Therefore, expect another 1000 point drop.