8 ms·

Any examples of how a retail investor would play this?

by dman 7y ago

davidw 7y ago
Buy an index fund. Do you think you can compete with that big investment outfit that has people working on this stuff full time?
- tempsy 7y ago
  everyone says this but so long as you aren't day trading this is mostly untrue buying individual stocks is not akin to gambling.
  - et2o 7y ago
    A substantial amount of evidence disagrees with you. Active traders (day traders or not) almost always underperform the market in the long run.
    - tempsy 7y ago
      ok. underperforming does not mean "gambling". i buy what i personally like and use and have made substantially more than the market on Apple, Amazon, Starbucks, PayPal, etc. am I a professional equity analyst? no. but is this "gambling"? I don't think so.
      - et2o 7y ago
        Tech has done very well the past few years. In the long run, who knows. Gambling is taking on excess risk for excess profit, especially when the odds are against you (expected value is negative). This could be poker or active trading. It's gambling.
        tempsy 7y ago
        Buy and hold long term is not active trading. You’re conflating two completely different things. It’s odd when I find HN to be so risk adverse when working in tech is all about risk. Fortunes are made with risk. Then as an industry we’re apparently all just degenerate gamblers if buying and holding Apple stock is akin to playing roulette.
        et2o 7y ago
        Yes, that is the definition of active trading. I suggest you do more research. Active trading is contrasted to passive trading (index funds). It’s akin to roulette in that it’s statistically non-optimal, not that the level of risk is the same. HN readers tend to be focused upon evidence and mathematically inclined.
        tempsy 7y ago
        If that were true literally no HN reader would work at a startup, but we know that isn't the case. Or take any compensation in the form of equity in one company, even at a large one.
        pm90 7y ago
        That would be true iff compensation were the only reason for joining startups.
        RussianCow 7y ago
        First of all, financially and statistically speaking, working at a startup almost never makes sense compared to working at a FAANG or similarly high-paying company. (There have been countless articles and discussions about this on HN, so I won't rehash the arguments.) Second, there are other reasons for working at a startup that have little or nothing to do with money (it's more fun/rewarding, you learn more, work/life balance, etc). The latter doesn't really have a parallel in investing unless you only invest in sustainable/ethical companies or something like that, but then the conversation about maximizing profit and beating the market is kind of moot anyway. > Or take any compensation in the form of equity in one company, even at a large one. Public stocks are liquid enough that you can sell them as soon as possible and immediately "cash out", so any equity-based compensation at a public company can reasonably be treated as cash. The same applies to a private VC-backed company with an upcoming IPO, though obviously there is a little bit more risk involved there.
      - RussianCow 7y ago
        > but is this "gambling"? I don't think so. Of course it is, because you can't predict the future. You could have just as easily lost money investing in individual stocks, even ones that seemed like no-brainers at the time. Why do you think you're better than most other investors at making those investment choices?
        mikestew 7y ago
        Why do you think you're better than most other investors at making those investment choices? Not OP, but the simple answer is: “because my returns over the years prove that I can.” I’ve heard this question enough times over the years that I usually just ignore such silly questions and go back to buying deep-in-the-money AAPL calls. Conversely, if it makes one feel better, continue to tell yourself individuals can’t beat the market (which is mostly true).
        doliveira 7y ago
        It's like you copied the definition of a fallacy in your comment.
        RussianCow 7y ago
        > Not OP, but the simple answer is: “because my returns over the years prove that I can.” But I could make the same argument as to why my "strategy" playing slots or roulette is good, but in reality it just means I've gotten really lucky, and I might wipe out all my earnings in the span of an hour if that luck suddenly turns. That's not to say there aren't legitimately profitable trading strategies—"you can't beat the market" is, strictly speaking, demonstrably false—but "buy stocks of companies I like" is not one of those, and is entirely equivalent to gambling.
        mikestew 7y ago
        Lucky is making a few trades that went well. When one can do it consistently for twenty years, is it still luck? Yeah, maybe it’s luck that deep-in-the-money AAPL calls (as one example) consistently make money. Maybe my occasional “disaster” strategy (buys calls for UAL, Equifax, et. al., after bad press that’ll blow over) is luck. But, man, both examples consistently work. /shrug Anyway, I have little desire to repeat the same old arguments, nor convince anyone else. However, one might consider the differences between a slot machine (which tells you up front that you will lose money in the long term, and has no stop orders) and trading equities. Or don’t, matters little to me because I have no argument to win.
- bluGill 7y ago
  Sure I can compete. I don't have so much money under my control that my act of buying/selling changes the market. Thus I can afford to make trades that are worth a lot of money on my scale, but not worth it for the big guys because compared to the total amount they must work with means they don't have the time. Note I said can. Reading the 10k and 8q and other such forms to find those opportunities is boring. I get paid very well to write software instead and just let an index fund grow my money. I can't live off my investments yet, but when they grow enough I'll be able to [substitute any of a number of hobbies I might get interested in], and it won't be a full time job moving money around.
  - davidw 7y ago
    "not worth it for the big guys" Sounds like a legit strategy, but it also sounds like part of it is actively not competing with them.
    - tomrod 7y ago
      Differentiated market.
    - nothrabannosir 7y ago
      If that's how you define it, then it was never the question to begin with. Someone just asked how to move on this info, which, we now all agree, is possible. Nobody said anything about competing until it was brought up as a glib dismissal of the original question. Which, we now agree, wasn't warranted.
      - davidw 7y ago
        From the OP "Buy TSN, SAFM, HRL...but it's probably too late at this point. We were placing bets on this 18 months ago." Emphasis mine.
        deleted 7y ago
        [deleted]
        7y ago
- toohotatopic 7y ago
  Aren't we already in an index fund bubble? How can the stock market stomach all of that liquidity? Don't the share prices go up beyond the value of the companies?
  - pm90 7y ago
    There is a large amount of wealth invested in index funds but that doesn’t mean it’s a bubble. By its definition index funds are amortizing their investments to mitigate risk, this is opposite of a bubble.
    - toohotatopic 7y ago
      I don't understand what you mean with 'amortize'. Doesn't it mean writing off the value of something? Why would you write off the value of an index fund investment? And how does that mitigate risk? I guess you mean that they spread their investment among all companies that belong to an index. But that doesn't solve the problem of too much liquidity.
    - ethbro 7y ago
      Depends on the index fund. Weighting seems surprisingly important, yet almost never mentioned by index proponents. Especially as their total cap comes to represent a broader proportion of the total market.
- ves 7y ago
  You absolutely can, because you have much less capital to deploy and no strings attached. The sorts of opportunities you’re looking for and they’re looking for can be totally disjoint. Some friends and I made a bit of easy money in college on very good derivatives trades that only existed at tiny volumes (low thousands). There’s lots of good reasons to invest passively but being unable to compete with big funds isn’t necessarily one of them.
  - davidw 7y ago
    "Quarter of the world's supply..." doesn't sound like the world of "tiny volumes", but something that moves pretty big markets, which is hardly an under-the-radar trade.
shadow-banned 7y ago
2x
xwowsersx 7y ago
Buy TSN, SAFM, HRL...but it's probably too late at this point. We were placing bets on this 18 months ago.
- dman 7y ago
  Fair enough - thanks for the pointers.
  - thedudeabides5 7y ago
    HOGS Wisdomtree ETF which tries to track US hog futures prices (with some drag)
    - xwowsersx 7y ago
      Not to be confused with HOG which is Harley-Davidson haha
- skidd0 7y ago
  I have a few questions about the kind of work you do. Mostly just about how you got started and what sort of activities you perform. If you have the time, could you please contact me at skidd0 [at] skidd0 [dot] com?
  - xwowsersx 7y ago
    Sure thing, will do later. FYI I transitioned back to software engineering so I'm no longer doing this professionally, but happy to answer any questions I can. Talk soon.
bluejay2 7y ago
One way would be to buy protein producers (e.g. Tyson) . The hard part is figuring out how much of the expected benefit is already factored into current stock prices though. As another user mentioned, this is not exactly breaking news to the investment community. Tyson for example was up 72% in 2019 (vs 32% for the SP500 and 27% for an index of consumer staples companies, of which Tyson is one)
- xwowsersx 7y ago
  That's exactly right.
- mikorym 7y ago
  The irony is that an increase in stock price is supposed to reflect future value (of dividends). In this case, the 72% does not accurately reflect the increase in value, unless they almost double their dividend for quite a few years after the whole Chinese pork fiasco. Market effect are exaggerated by investors and speculators. (Read: amplified, not fabricated [usually].)
  - nradov 7y ago
    Why should we believe that you're right and the rest of the market is wrong?
    - mikorym 7y ago
      The rest of the market knows this and uses it to make money. I am not sure what you mean in terms of someone being right and someone being wrong. Edit: The point about future value of dividends is a common approach. My personal addition was that 72% is probably an exaggerated effect, but these kind of swings are to be expected, with later corrections. The point about irony is that when people buy shares, they follow the price of sale of one share, they don't usually try to calculate the future value of dividends. A case in point would be Amazon. However, with Amazon, people expect dividends at some unspecified point in the future.
      - 7y ago
ww520 7y ago
I've bought and maintained holding on LW, which is in the worldwide market of potato products (french fries, etc). Reason being people would be looking for fat substitute when meat price goes up. Restaurants will increase their fries portion to account for the decreasing meat portion. The trend toward plant based food also helps.
- xwowsersx 7y ago
  Interesting thesis! We looked at the name, but never had that thesis. Maybe same could be said for CVGW (the avocado guys)?
  - ww520 7y ago
    When you look at the components of a fast food burger meal, you got: burger, bun, drink, and fries. Meat and drink stocks have been well analyzed and well brought. Bun has high substitutability and too diverse sourcing. That leaves fries. There're just a few players supplying the potato products. LW is the biggest one. Not sure about CVGW. Might be too small a market.
mc3 7y ago
Probably too hard to analyze. How do you know what the demand for meat is like? Will people just switch to other foods if it becomes too expensive? If pork is costing me $50/kg, maybe I start eating potatoes and nuts? Maybe other factors force the price down anyway. I don't know - I wouldn't. Just buy shares that are good for the long term.
elfexec 7y ago
I wouldn't take investment advice from strangers on the internet. Especially one so uninformed to claim "Funny to see this finally making mainstream news" or someone so shady that he'd lie on HN to get people interested in his scheme. The ASF and china's pig issue has been known for since 2018. Unless the economist, bloomberg, washingtonpost, etc are not mainstream. https://www.economist.com/china/2018/09/06/african-swine-flu-is-causing-alarm-in-china-and-beyond https://www.economist.com/china/2018/09/06/african-swine-flu... https://www.bloomberg.com/graphics/2019-eliminating-african-swine-fever/ https://www.bloomberg.com/graphics/2019-eliminating-african-... https://www.washingtonpost.com/world/china-races-to-corral-a-deadly-outbreak-of-african-swine-fever-before-it-spreads/2018/08/29/defbf39a-aad9-11e8-b1da-ff7faa680710_story.html https://www.washingtonpost.com/world/china-races-to-corral-a... https://www.vox.com/2019/6/6/18655460/china-african-swine-fever-pig-ebola https://www.vox.com/2019/6/6/18655460/china-african-swine-fe...

Any examples of how a retail investor would play this?

by dman 7y ago

Any examples of how a retail investor would play this?

Buy an index fund. Do you think you can compete with that big investment outfit that has people working on this stuff full time?

tempsy 7y ago
everyone says this but so long as you aren't day trading this is mostly untrue buying individual stocks is not akin to gambling.
- et2o 7y ago
  A substantial amount of evidence disagrees with you. Active traders (day traders or not) almost always underperform the market in the long run.
  - tempsy 7y ago
    ok. underperforming does not mean "gambling". i buy what i personally like and use and have made substantially more than the market on Apple, Amazon, Starbucks, PayPal, etc. am I a professional equity analyst? no. but is this "gambling"? I don't think so.
    - et2o 7y ago
      Tech has done very well the past few years. In the long run, who knows. Gambling is taking on excess risk for excess profit, especially when the odds are against you (expected value is negative). This could be poker or active trading. It's gambling.
      - tempsy 7y ago
        Buy and hold long term is not active trading. You’re conflating two completely different things. It’s odd when I find HN to be so risk adverse when working in tech is all about risk. Fortunes are made with risk. Then as an industry we’re apparently all just degenerate gamblers if buying and holding Apple stock is akin to playing roulette.
        et2o 7y ago
        Yes, that is the definition of active trading. I suggest you do more research. Active trading is contrasted to passive trading (index funds). It’s akin to roulette in that it’s statistically non-optimal, not that the level of risk is the same. HN readers tend to be focused upon evidence and mathematically inclined.
        tempsy 7y ago
        If that were true literally no HN reader would work at a startup, but we know that isn't the case. Or take any compensation in the form of equity in one company, even at a large one.
        pm90 7y ago
        That would be true iff compensation were the only reason for joining startups.
        RussianCow 7y ago
        First of all, financially and statistically speaking, working at a startup almost never makes sense compared to working at a FAANG or similarly high-paying company. (There have been countless articles and discussions about this on HN, so I won't rehash the arguments.) Second, there are other reasons for working at a startup that have little or nothing to do with money (it's more fun/rewarding, you learn more, work/life balance, etc). The latter doesn't really have a parallel in investing unless you only invest in sustainable/ethical companies or something like that, but then the conversation about maximizing profit and beating the market is kind of moot anyway. > Or take any compensation in the form of equity in one company, even at a large one. Public stocks are liquid enough that you can sell them as soon as possible and immediately "cash out", so any equity-based compensation at a public company can reasonably be treated as cash. The same applies to a private VC-backed company with an upcoming IPO, though obviously there is a little bit more risk involved there.
    - RussianCow 7y ago
      > but is this "gambling"? I don't think so. Of course it is, because you can't predict the future. You could have just as easily lost money investing in individual stocks, even ones that seemed like no-brainers at the time. Why do you think you're better than most other investors at making those investment choices?
      - mikestew 7y ago
        Why do you think you're better than most other investors at making those investment choices? Not OP, but the simple answer is: “because my returns over the years prove that I can.” I’ve heard this question enough times over the years that I usually just ignore such silly questions and go back to buying deep-in-the-money AAPL calls. Conversely, if it makes one feel better, continue to tell yourself individuals can’t beat the market (which is mostly true).
        doliveira 7y ago
        It's like you copied the definition of a fallacy in your comment.
        RussianCow 7y ago
        > Not OP, but the simple answer is: “because my returns over the years prove that I can.” But I could make the same argument as to why my "strategy" playing slots or roulette is good, but in reality it just means I've gotten really lucky, and I might wipe out all my earnings in the span of an hour if that luck suddenly turns. That's not to say there aren't legitimately profitable trading strategies—"you can't beat the market" is, strictly speaking, demonstrably false—but "buy stocks of companies I like" is not one of those, and is entirely equivalent to gambling.
        mikestew 7y ago
        Lucky is making a few trades that went well. When one can do it consistently for twenty years, is it still luck? Yeah, maybe it’s luck that deep-in-the-money AAPL calls (as one example) consistently make money. Maybe my occasional “disaster” strategy (buys calls for UAL, Equifax, et. al., after bad press that’ll blow over) is luck. But, man, both examples consistently work. /shrug Anyway, I have little desire to repeat the same old arguments, nor convince anyone else. However, one might consider the differences between a slot machine (which tells you up front that you will lose money in the long term, and has no stop orders) and trading equities. Or don’t, matters little to me because I have no argument to win.
bluGill 7y ago
Sure I can compete. I don't have so much money under my control that my act of buying/selling changes the market. Thus I can afford to make trades that are worth a lot of money on my scale, but not worth it for the big guys because compared to the total amount they must work with means they don't have the time. Note I said can. Reading the 10k and 8q and other such forms to find those opportunities is boring. I get paid very well to write software instead and just let an index fund grow my money. I can't live off my investments yet, but when they grow enough I'll be able to [substitute any of a number of hobbies I might get interested in], and it won't be a full time job moving money around.
- davidw 7y ago
  "not worth it for the big guys" Sounds like a legit strategy, but it also sounds like part of it is actively not competing with them.
  - tomrod 7y ago
    Differentiated market.
  - nothrabannosir 7y ago
    If that's how you define it, then it was never the question to begin with. Someone just asked how to move on this info, which, we now all agree, is possible. Nobody said anything about competing until it was brought up as a glib dismissal of the original question. Which, we now agree, wasn't warranted.
    - davidw 7y ago
      From the OP "Buy TSN, SAFM, HRL...but it's probably too late at this point. We were placing bets on this 18 months ago." Emphasis mine.
      - deleted 7y ago
        [deleted]
      - 7y ago
toohotatopic 7y ago
Aren't we already in an index fund bubble? How can the stock market stomach all of that liquidity? Don't the share prices go up beyond the value of the companies?
- pm90 7y ago
  There is a large amount of wealth invested in index funds but that doesn’t mean it’s a bubble. By its definition index funds are amortizing their investments to mitigate risk, this is opposite of a bubble.
  - toohotatopic 7y ago
    I don't understand what you mean with 'amortize'. Doesn't it mean writing off the value of something? Why would you write off the value of an index fund investment? And how does that mitigate risk? I guess you mean that they spread their investment among all companies that belong to an index. But that doesn't solve the problem of too much liquidity.
  - ethbro 7y ago
    Depends on the index fund. Weighting seems surprisingly important, yet almost never mentioned by index proponents. Especially as their total cap comes to represent a broader proportion of the total market.
ves 7y ago
You absolutely can, because you have much less capital to deploy and no strings attached. The sorts of opportunities you’re looking for and they’re looking for can be totally disjoint. Some friends and I made a bit of easy money in college on very good derivatives trades that only existed at tiny volumes (low thousands). There’s lots of good reasons to invest passively but being unable to compete with big funds isn’t necessarily one of them.
- davidw 7y ago
  "Quarter of the world's supply..." doesn't sound like the world of "tiny volumes", but something that moves pretty big markets, which is hardly an under-the-radar trade.

shadow-banned 7y ago

xwowsersx 7y ago

Buy TSN, SAFM, HRL...but it's probably too late at this point. We were placing bets on this 18 months ago.

dman 7y ago
Fair enough - thanks for the pointers.
- thedudeabides5 7y ago
  HOGS Wisdomtree ETF which tries to track US hog futures prices (with some drag)
  - xwowsersx 7y ago
    Not to be confused with HOG which is Harley-Davidson haha
skidd0 7y ago
I have a few questions about the kind of work you do. Mostly just about how you got started and what sort of activities you perform. If you have the time, could you please contact me at skidd0 [at] skidd0 [dot] com?
- xwowsersx 7y ago
  Sure thing, will do later. FYI I transitioned back to software engineering so I'm no longer doing this professionally, but happy to answer any questions I can. Talk soon.

bluejay2 7y ago

One way would be to buy protein producers (e.g. Tyson) . The hard part is figuring out how much of the expected benefit is already factored into current stock prices though. As another user mentioned, this is not exactly breaking news to the investment community. Tyson for example was up 72% in 2019 (vs 32% for the SP500 and 27% for an index of consumer staples companies, of which Tyson is one)

xwowsersx 7y ago
That's exactly right.
mikorym 7y ago
The irony is that an increase in stock price is supposed to reflect future value (of dividends). In this case, the 72% does not accurately reflect the increase in value, unless they almost double their dividend for quite a few years after the whole Chinese pork fiasco. Market effect are exaggerated by investors and speculators. (Read: amplified, not fabricated [usually].)
- nradov 7y ago
  Why should we believe that you're right and the rest of the market is wrong?
  - mikorym 7y ago
    The rest of the market knows this and uses it to make money. I am not sure what you mean in terms of someone being right and someone being wrong. Edit: The point about future value of dividends is a common approach. My personal addition was that 72% is probably an exaggerated effect, but these kind of swings are to be expected, with later corrections. The point about irony is that when people buy shares, they follow the price of sale of one share, they don't usually try to calculate the future value of dividends. A case in point would be Amazon. However, with Amazon, people expect dividends at some unspecified point in the future.
    - 7y ago

ww520 7y ago

I've bought and maintained holding on LW, which is in the worldwide market of potato products (french fries, etc). Reason being people would be looking for fat substitute when meat price goes up. Restaurants will increase their fries portion to account for the decreasing meat portion. The trend toward plant based food also helps.

xwowsersx 7y ago
Interesting thesis! We looked at the name, but never had that thesis. Maybe same could be said for CVGW (the avocado guys)?
- ww520 7y ago
  When you look at the components of a fast food burger meal, you got: burger, bun, drink, and fries. Meat and drink stocks have been well analyzed and well brought. Bun has high substitutability and too diverse sourcing. That leaves fries. There're just a few players supplying the potato products. LW is the biggest one. Not sure about CVGW. Might be too small a market.

mc3 7y ago

Probably too hard to analyze. How do you know what the demand for meat is like? Will people just switch to other foods if it becomes too expensive? If pork is costing me $50/kg, maybe I start eating potatoes and nuts? Maybe other factors force the price down anyway. I don't know - I wouldn't. Just buy shares that are good for the long term.

elfexec 7y ago

I wouldn't take investment advice from strangers on the internet. Especially one so uninformed to claim "Funny to see this finally making mainstream news" or someone so shady that he'd lie on HN to get people interested in his scheme. The ASF and china's pig issue has been known for since 2018. Unless the economist, bloomberg, washingtonpost, etc are not mainstream. https://www.economist.com/china/2018/09/06/african-swine-flu-is-causing-alarm-in-china-and-beyond https://www.economist.com/china/2018/09/06/african-swine-flu... https://www.bloomberg.com/graphics/2019-eliminating-african-swine-fever/ https://www.bloomberg.com/graphics/2019-eliminating-african-... https://www.washingtonpost.com/world/china-races-to-corral-a-deadly-outbreak-of-african-swine-fever-before-it-spreads/2018/08/29/defbf39a-aad9-11e8-b1da-ff7faa680710_story.html https://www.washingtonpost.com/world/china-races-to-corral-a... https://www.vox.com/2019/6/6/18655460/china-african-swine-fever-pig-ebola https://www.vox.com/2019/6/6/18655460/china-african-swine-fe...