7 ms·

My favorite economics quote: "the market can stay irrational longer than you can stay solvent." Also known as: "you can lose a lot of money by being right at t

My favorite economics quote: "the market can stay irrational longer than you can stay solvent." Also known as: "you can lose a lot of money by being right at the wrong time." It's doubly true when the market is as heavily manipulated as it is today. There's no point in trying to game or predict it at the scale of an individual investor, unless you enjoy the thrill of gambling.

javert 7y ago
I don't believe the second quote is equivalent to the first quote. > There's no point in trying to game or predict [the market] at the scale of an individual investor, unless you enjoy the thrill of gambling. I don't agree with that, either. You can expect the value of stocks in general to go up over time in proportion to the growth of the global economy, which has been broadly predictable since the industrial revolution. You can also hedge risk; not all investments are about making money. Finally, you can certainly outperform the market if you have expertise in a certain sector of the economy. Your complete dismissal of all investing as "gambling" is flippant and incorrect. Warren Buffet is wealthy for a reason. There is a kernel of truth in what you said if it is restated as: amateur investors should not expect to outperform the market.
- deleted 7y ago
  [deleted]
- SquishyPanda23 7y ago
  Certainly not all investing is gambling, but picking individual stocks and timing the market are pretty close to gambling. Warren Buffet started and made much of his fortune when there were more inefficiencies in the market. It's not clear that the same method would work today. With all of he data and speed that goes into trading, it's pretty unlikely that you have an informational edge unless you're able to pay for more data sources than everyone else and you have an army of humans looking for patterns for you. That is you need to spend a great deal of money getting that edge. Presumably that is somewhat what Renaissance is doing. Even then you have to deal with the fact that insider trading is essentially instantaneous with modern communication and trading platforms.
  - javert 7y ago
    I think you are not making enough of a distinction between short-term trading based on technical factors and long-term value investing, which is what Warren Buffet did/does.
    - dmix 7y ago
      > which is what Warren Buffet did/does. It's what the vast majority of people and businesses do with their money. Only a small percentage are investing in risky trades. And the ones that do that have plenty of money to spare and are well aware of the risk models.
      - stouset 7y ago
        If only that were true. Just look at RobinHood, for starters.
        dmix 7y ago
        Just look at a rare unicorn in Silicon Valley that immediately drew SEC scrutiny? What does that have to do with the average investor?
        Nasrudith 7y ago
        I believe the investors were the ones to look at. The infamous /r/wallstreetbets in addition to self-deprecating jokes about themselves being basement dwellers essentially engage in outright gambling on shorter term swings and hunches to make and lose big - mostly the latter.
      - orwin 7y ago
        > It's what the vast majority of people and businesses do with their money. The vast majority of people invest in founds that deals with short-term gambling. Heard of LTCM?
        7y ago
- leggomylibro 7y ago
  You're right, that sentiment was probably too cynical and defeatist. It just feels like one of those cases where the playing field isn't anywhere close to level, and even if playing the game is rational sometimes, you still reinforce the systemic imbalances which tilt the field by doing so. Oh, well.
- snewman 7y ago
  I agree that "you can expect the value of stocks in general to go up over time in proportion to the growth of the global economy", but this does not contradict "There's no point in trying to game or predict [the market]". Parent is not saying to avoid the stock market. Parent is saying you should not try to outperform the market by making targeted stock picks or getting in and out of the market at targeted times.
  - javert 7y ago
    I don't understand why you are saying that.
- malteof 7y ago
  > Warren Buffet is wealthy for a reason. Is it because of luck? Not trying to be silly, but how would you truly know it isn't just luck? E.g. read Fooled by Randomness for more background.
  - javert 7y ago
    Buffet has a methodology that makes sense. That is a better explanation of his success than positing that it was random luck. In general, though, if you look at mutual funds and hedge funds, I suspect that a lot of the winners and losers can best be explained by random luck. So in that sense, I agree with you. I haven't read Fooled by Randomness yet but it's on my bookshelf ;)

javert 7y ago

I don't believe the second quote is equivalent to the first quote. > There's no point in trying to game or predict [the market] at the scale of an individual investor, unless you enjoy the thrill of gambling. I don't agree with that, either. You can expect the value of stocks in general to go up over time in proportion to the growth of the global economy, which has been broadly predictable since the industrial revolution. You can also hedge risk; not all investments are about making money. Finally, you can certainly outperform the market if you have expertise in a certain sector of the economy. Your complete dismissal of all investing as "gambling" is flippant and incorrect. Warren Buffet is wealthy for a reason. There is a kernel of truth in what you said if it is restated as: amateur investors should not expect to outperform the market.

deleted 7y ago
[deleted]
SquishyPanda23 7y ago
Certainly not all investing is gambling, but picking individual stocks and timing the market are pretty close to gambling. Warren Buffet started and made much of his fortune when there were more inefficiencies in the market. It's not clear that the same method would work today. With all of he data and speed that goes into trading, it's pretty unlikely that you have an informational edge unless you're able to pay for more data sources than everyone else and you have an army of humans looking for patterns for you. That is you need to spend a great deal of money getting that edge. Presumably that is somewhat what Renaissance is doing. Even then you have to deal with the fact that insider trading is essentially instantaneous with modern communication and trading platforms.
- javert 7y ago
  I think you are not making enough of a distinction between short-term trading based on technical factors and long-term value investing, which is what Warren Buffet did/does.
  - dmix 7y ago
    > which is what Warren Buffet did/does. It's what the vast majority of people and businesses do with their money. Only a small percentage are investing in risky trades. And the ones that do that have plenty of money to spare and are well aware of the risk models.
    - stouset 7y ago
      If only that were true. Just look at RobinHood, for starters.
      - dmix 7y ago
        Just look at a rare unicorn in Silicon Valley that immediately drew SEC scrutiny? What does that have to do with the average investor?
        Nasrudith 7y ago
        I believe the investors were the ones to look at. The infamous /r/wallstreetbets in addition to self-deprecating jokes about themselves being basement dwellers essentially engage in outright gambling on shorter term swings and hunches to make and lose big - mostly the latter.
    - orwin 7y ago
      > It's what the vast majority of people and businesses do with their money. The vast majority of people invest in founds that deals with short-term gambling. Heard of LTCM?
      - 7y ago
leggomylibro 7y ago
You're right, that sentiment was probably too cynical and defeatist. It just feels like one of those cases where the playing field isn't anywhere close to level, and even if playing the game is rational sometimes, you still reinforce the systemic imbalances which tilt the field by doing so. Oh, well.
snewman 7y ago
I agree that "you can expect the value of stocks in general to go up over time in proportion to the growth of the global economy", but this does not contradict "There's no point in trying to game or predict [the market]". Parent is not saying to avoid the stock market. Parent is saying you should not try to outperform the market by making targeted stock picks or getting in and out of the market at targeted times.
- javert 7y ago
  I don't understand why you are saying that.
malteof 7y ago
> Warren Buffet is wealthy for a reason. Is it because of luck? Not trying to be silly, but how would you truly know it isn't just luck? E.g. read Fooled by Randomness for more background.
- javert 7y ago
  Buffet has a methodology that makes sense. That is a better explanation of his success than positing that it was random luck. In general, though, if you look at mutual funds and hedge funds, I suspect that a lot of the winners and losers can best be explained by random luck. So in that sense, I agree with you. I haven't read Fooled by Randomness yet but it's on my bookshelf ;)