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> . A combination of low interest rates, a historic tech bull run, and the resulting torrent of fomo has tethered us to our monitors to watch candlestick charts

> . A combination of low interest rates, a historic tech bull run, and the resulting torrent of fomo has tethered us to our monitors to watch candlestick charts. He forgot one: the death of defined benefit retirement plans. Back when people knew that their pension + Social Security could allow them to retire with at least a decent lifestyle, nobody needed to care about the stock market. Only rich people needed to work with stock brokers. Take all that away and force people to fund their own retirement with 401(k)'s and IRAs, and now people are interested in what the market is doing. This is typically to their detriment, since people want to sell when the market drops, rather than buy and hold. Continuing to buy and hold quality index funds is certainly the easiest way to generate wealth over a time period of 15-20+ years, but it's not very comfortable psychologically in the short term. > Many “smart money” investors don’t rationalize investments by talking about the fundamentals of the business, or even conviction in its future. Instead, we’ve seen the emergence of chartism, which advocates for investing not based on where the business is today or where it’s headed, but its likeness to a “cup and handle” or “head and shoulders” pattern. This is the astrology of finance. I've said this before, except I typically call technical analysis "numerology for smart people who should know better." Its only real saving grace is that it tends to capture momentum, which is one of the known and fairly reliable ways to generate alpha.

TuringNYC 6y ago
I’d add another external factor: the loss of standard career-life tracks. In previous generations you could take a job at a company, buy a house and work to retirement. You were loyal to a company and the company was loyal to you. Now, cycles are fast, companies disappear. When they don’t, they have many rounds of layoffs (sometimes just to juice the stock) and employees have wised up — why slow and steady when there are no guarantees for loyalty? So you have lottery culture. Because “long term loyalty culture” largely isn’t available.
- Nasrudith 6y ago
  I have seen the meme of the "death of the defined benefits pension is responsible for <societal ill related to retirement/wages>" but it doesn't make any sense to me upon reflection. It isn't like defined benefits plans created stable returns via magical pixie dust. There would still be pressures and systemic consequences from the failures. The pension model essentially assumes either a far slower world or a protected relatively stagnant market. Even with "shift to government run pension" as a concept still has the same sorts of pressures no matter who the can is kicked down towards.
  - hakfoo 6y ago
    A defined benefit obligation throws a lot of money in the market that's optimizing for long-term yield and low volatility. I'd expect this would influence corporate behaviour.
internetslave 6y ago
I’ll be honest, I’m so tired of this attitude that the average joe shouldn’t be actively trading. Getting high returns with billions of dollars is hard. Doing it with hundreds of thousands is much easier. It’s brainwashing to say otherwise. You can’t compare the two, or listen to experts from the former. It’s a completely different discipline.
- pmiller2 6y ago
  Active trading is essentially market timing. Do you think you can time the market more profitably over a 15+ year time period than just buying and holding broad-based index funds?
  - internetslave 6y ago
    Enough of this nonsense. Plenty of people make money. Apply leverage to the SPY, your returns wildly outpace index returns
    - pmiller2 6y ago
      Three facts, then: * Most investors' returns are below index returns. * If everyone starts leveraging the index, that strategy becomes less effective. * Leverage subjects you to even bigger drawdowns than just buying the index. Do you think the average investor, who can't even manage drawdowns from the index can handle drawdowns bigger than drawdowns on the index? Besides, who said people don't make money? Also, notice how you switched from "active trading beats passive indexing" to "leverage the index." Are you saying you can't time the market? That you don't have the ability to make correct decisions about both when to get in and when to get out?
      - internetslave 6y ago
        Leverage the index is just a dumb strategy that works. If you bought TQQQ ten years ago, you made more than 70x your money. I bet you the next ten will also see wild returns. I used to work in finance. I’m sorry that you’ve been reading that index funds are the end all be all, but they’re really for people with no time or no brain cells. If you were leveraged in March and held through the draw down, you are massively up. NYC is full of prop shops with a few employees making 100% returns on a five million dollar portfolio. Just because you’ve never heard of those places doesn’t mean they don’t exist. Stop polluting the world with your middle class ideas of money management

TuringNYC 6y ago

I’d add another external factor: the loss of standard career-life tracks. In previous generations you could take a job at a company, buy a house and work to retirement. You were loyal to a company and the company was loyal to you. Now, cycles are fast, companies disappear. When they don’t, they have many rounds of layoffs (sometimes just to juice the stock) and employees have wised up — why slow and steady when there are no guarantees for loyalty? So you have lottery culture. Because “long term loyalty culture” largely isn’t available.

Nasrudith 6y ago
I have seen the meme of the "death of the defined benefits pension is responsible for <societal ill related to retirement/wages>" but it doesn't make any sense to me upon reflection. It isn't like defined benefits plans created stable returns via magical pixie dust. There would still be pressures and systemic consequences from the failures. The pension model essentially assumes either a far slower world or a protected relatively stagnant market. Even with "shift to government run pension" as a concept still has the same sorts of pressures no matter who the can is kicked down towards.
- hakfoo 6y ago
  A defined benefit obligation throws a lot of money in the market that's optimizing for long-term yield and low volatility. I'd expect this would influence corporate behaviour.

internetslave 6y ago

I’ll be honest, I’m so tired of this attitude that the average joe shouldn’t be actively trading. Getting high returns with billions of dollars is hard. Doing it with hundreds of thousands is much easier. It’s brainwashing to say otherwise. You can’t compare the two, or listen to experts from the former. It’s a completely different discipline.

pmiller2 6y ago
Active trading is essentially market timing. Do you think you can time the market more profitably over a 15+ year time period than just buying and holding broad-based index funds?
- internetslave 6y ago
  Enough of this nonsense. Plenty of people make money. Apply leverage to the SPY, your returns wildly outpace index returns
  - pmiller2 6y ago
    Three facts, then: * Most investors' returns are below index returns. * If everyone starts leveraging the index, that strategy becomes less effective. * Leverage subjects you to even bigger drawdowns than just buying the index. Do you think the average investor, who can't even manage drawdowns from the index can handle drawdowns bigger than drawdowns on the index? Besides, who said people don't make money? Also, notice how you switched from "active trading beats passive indexing" to "leverage the index." Are you saying you can't time the market? That you don't have the ability to make correct decisions about both when to get in and when to get out?
    - internetslave 6y ago
      Leverage the index is just a dumb strategy that works. If you bought TQQQ ten years ago, you made more than 70x your money. I bet you the next ten will also see wild returns. I used to work in finance. I’m sorry that you’ve been reading that index funds are the end all be all, but they’re really for people with no time or no brain cells. If you were leveraged in March and held through the draw down, you are massively up. NYC is full of prop shops with a few employees making 100% returns on a five million dollar portfolio. Just because you’ve never heard of those places doesn’t mean they don’t exist. Stop polluting the world with your middle class ideas of money management