7 ms·

Nobody knows what the fuck they are talking about and everybody ranging from Warren Buffett to Jimmy Buffett are just winging it. Finance is essentially psycho

by GDC7 5y ago

Nobody knows what the fuck they are talking about and everybody ranging from Warren Buffett to Jimmy Buffett are just winging it. Finance is essentially psychology with 6 months weather forecasting slapped on top of it. It's way easier to predict the fate of the Universe trillions of years from now than it is to predict where Microsoft stock will sit 4 months from now.

quickthrower2 5y ago
What about Matt Levine? There is a lot of value in analysis of what just happened. Also, unless you are betting, you don’t need to know what MS stock will be in 4 months. Just whether it is value for money to invest now.
- blitzar 5y ago
  There is basically zero value in analysis of what just happened. "and today on wall street ..." is backward looking and as relevant to the future as checking the last 10 results on the roulette table. But it is a lot easier to sound like you know what you are talking about when you talk about what happened yesterday than talking about what will happen tomorrow.
  - quickthrower2 5y ago
    It seems to me you are talking purely from a hedge fund kind of viewpoint. Of course they’ll be using primary sources of data with real time predictive value. But for the layman outside of the industry or even someone trying to learn the ropes it’s useful? Also to get a conceptual understanding. Like … history books are useful.
    - blitzar 5y ago
      Is it useful to have a grounding in history of any subject, absolutely. It is no different from any other subject. Some are more helpful than not. Reading The art of War or reviewing wartime procurement and supply chain management from the vietnam war are likely to help in times of war. Deep expertese based on the WW1 comprehensive guide to digging parallel trenches will probably be of no use when launching drones against the enemy. The british army, based on all their experience, send troops off to the desert in iraq (iraq 1) with all the equipment they needed for what they saw yesterday - cool to cold northern european climates. Plenty of warm clothes and heavy black boots with soles that litterally melted on hot roads or sand. Times change, some lessons are persitent, many are not. Some periods of history the lesson is "buy train stocks", more recent "buy tech stocks" and those from the turn of the century "do not under any circumstances buy tech stocks no matter how many people say it will keep going up forever".
xchaotic 5y ago
I still find it enjoyable to at least try to predict trends. But I agree some things like technical analysis are 100% BS. for my feed of economy related tidbits try Financial Time Alphaville, it's free if you register: https://www.ft.com/alphaville https://www.ft.com/alphaville I also listen to Bloomberg Odd Lots podcast - great episodes on nuances of supply chains recently
- mikeodds 5y ago
  TA bullshit * * unless critical mass number of market participants who all also believe in voodoo.
  - GDC7 5y ago
    that's right, it can work in a reflexive manner but you never know the reason or rhyme of it so it's still a game of chance.
willbw 5y ago
Just because no one is right 100% of the time (clearly not possible) doesn't mean that no one knows what they are talking about. There's also a lot more to finance than stock picking.
- GDC7 5y ago
  > There's also a lot more to finance than stock picking. People aren't interested in finance because of the wonders of the Fed Repo plumbing mechanisms which Zoltan of Credit Suisse explain to all of us with his reports on a weekly basis. Saying there's more to finance than stock picking is like saying there's more to poker than the actual game. Sure somebody has to build the poker table and deliver it to the casino but that's not where the money is at. People look at finance as a way to escape their mediocre lives, so stock picking it is, if it's not stock picking still it's some form of concentration bet.
  - willbw 5y ago
    Theres a lot more to a casino than the roulette table is how I might phrase it using your analogy.
melling 5y ago
Hasn’t Jim Simons gone on the record as saying the algorithms make all the trading decisions in Renaissance, his hedge fund? If it can be coded,…
- nojito 5y ago
  So? Outliers exist for any dataset.
- GDC7 5y ago
  Rentech doesn't try to predict where MSFT stock will be according to fundamentals, they simply looks at every other data of interest which is not MSFT stock price and they speculate: "MSFT stock is too high/low considering that such and such has just moved and according to historical trends when such and such moves, then MSFT stock moves too" Of course i'm simplifying. But nobody really knows what they are doing, they are excellent at sales, Soros has achieved the same results listening to his body aches, and Buffett of course not the same results on a YoY % basis but he is working with a much larger pool of money. At the end of the day it's like people trying to extrapolate the secrets of longevity from diet and habits. That old french lady lived to 123 smoking a pack a day till she was 100. There is no reason or rhyme to extrme outliers. The more simple and likely explanaition is that in a large enough dataset somebody has to be a positive outlier and it just happened to be those particular people with that particular personal/professional history, and people who are blinded by the $$ are trying to replicate their success by maniacally looking at their personal/professional history and copying it. Unfortunately copying their personal/professional history won't also include copying the luck of the statistical outlier.
  - protoax 5y ago
    I think I understand your point and agree with the hype aspect, but statistically how can they be statistical outliers? On a broad annual basis they’ve beat everyone 10+ times in a row or whatever the number is. That’s far more than statistically significant. How can 1 fund beat 10,000s 10 times in a row and be just an “outlier” with no rhyme or reason to their performance? Please correct me if I’m misunderstanding.
landa 5y ago
This is very obviously wrong, but it is the conventional wisdom. Every time someone says something like this and mentions Jimmy Buffet you know they're just quoting some movie like Wolf of Wall Street. Trading is a real job and the market is very inefficient. If you're too lazy to study it, you say things like what the GDC7 posted. It's pretty easy to predict Microsoft stock four months from now (it will probably be higher, but there's a small chance it will be lower), certainly easier than "the fate of the Universe trillions of years from now." At the end of the day, trading is learning how to manage risk. What is Microsoft doing, how much is it likely to make, and will the macro environment support or suppress their strategy. Then you put on a trade to take advantage of this view. You may sometimes be wrong, but the idea is that over all of your decisions, you'll mostly be right and make more money than you lose.
- speedgoose 5y ago
  How do you feel about research papers showing that trading randomly is as good on the long term ? https://www.researchgate.net/publication/235937406_Are_Random_Trading_Strategies_More_Successful_than_Technical_Ones https://www.researchgate.net/publication/235937406_Are_Rando...
- massinstall 5y ago
  With all due respect, you have no idea what you’re talking about. Your imagination of how this industry works is skewed. It is amazing how many self-professed experts there are, without any professional or meaningful experience. And the confidence they have… Source: have been working professionally in trading for almost 24 years. Go unleash your attack dogs against me now. :) P.S.: Since it’s “pretty easy” to predict MSFT for you, let me congratulate you in advance to your exorbitant returns of the near future. Soon, the world will know of you, the next Elon Musk.
  - 1ibsq 5y ago
    I don't want to defend the comment you replied to, but there is obviously some nuance to the topic. Your comment makes it look like you're jumping right on the opposite side and have been rolling dice for 24 years. There is obviously some sort of substance in trading. To what degree, is the question here.
boublepop 5y ago
There’s a story about two stock brokers walking down wall street, one of them spots something on the ground and goes: “Look, a hundred dollar bill on the ground!”, the other responds: “That’s impossible, if there was a hundred dollar bill on the ground, someone would have picked it up” While it’s not possible to predict exact movements of stocks, that doesn’t mean that finance isn’t filled with situations where someone drops money on the ground. It never stays there for long because someone picks it up, but you’ll certainly never be the one picking up anything if you don’t look.
- quickthrower2 5y ago
  Its not even zero sum! You can have mostly winners! (Well putting environmental impact to one side)

by GDC7 5y ago

quickthrower2 5y ago

What about Matt Levine? There is a lot of value in analysis of what just happened. Also, unless you are betting, you don’t need to know what MS stock will be in 4 months. Just whether it is value for money to invest now.

blitzar 5y ago
There is basically zero value in analysis of what just happened. "and today on wall street ..." is backward looking and as relevant to the future as checking the last 10 results on the roulette table. But it is a lot easier to sound like you know what you are talking about when you talk about what happened yesterday than talking about what will happen tomorrow.
- quickthrower2 5y ago
  It seems to me you are talking purely from a hedge fund kind of viewpoint. Of course they’ll be using primary sources of data with real time predictive value. But for the layman outside of the industry or even someone trying to learn the ropes it’s useful? Also to get a conceptual understanding. Like … history books are useful.
  - blitzar 5y ago
    Is it useful to have a grounding in history of any subject, absolutely. It is no different from any other subject. Some are more helpful than not. Reading The art of War or reviewing wartime procurement and supply chain management from the vietnam war are likely to help in times of war. Deep expertese based on the WW1 comprehensive guide to digging parallel trenches will probably be of no use when launching drones against the enemy. The british army, based on all their experience, send troops off to the desert in iraq (iraq 1) with all the equipment they needed for what they saw yesterday - cool to cold northern european climates. Plenty of warm clothes and heavy black boots with soles that litterally melted on hot roads or sand. Times change, some lessons are persitent, many are not. Some periods of history the lesson is "buy train stocks", more recent "buy tech stocks" and those from the turn of the century "do not under any circumstances buy tech stocks no matter how many people say it will keep going up forever".

xchaotic 5y ago

I still find it enjoyable to at least try to predict trends. But I agree some things like technical analysis are 100% BS. for my feed of economy related tidbits try Financial Time Alphaville, it's free if you register: https://www.ft.com/alphaville https://www.ft.com/alphaville I also listen to Bloomberg Odd Lots podcast - great episodes on nuances of supply chains recently

mikeodds 5y ago
TA bullshit * * unless critical mass number of market participants who all also believe in voodoo.
- GDC7 5y ago
  that's right, it can work in a reflexive manner but you never know the reason or rhyme of it so it's still a game of chance.

willbw 5y ago

Just because no one is right 100% of the time (clearly not possible) doesn't mean that no one knows what they are talking about. There's also a lot more to finance than stock picking.

GDC7 5y ago
> There's also a lot more to finance than stock picking. People aren't interested in finance because of the wonders of the Fed Repo plumbing mechanisms which Zoltan of Credit Suisse explain to all of us with his reports on a weekly basis. Saying there's more to finance than stock picking is like saying there's more to poker than the actual game. Sure somebody has to build the poker table and deliver it to the casino but that's not where the money is at. People look at finance as a way to escape their mediocre lives, so stock picking it is, if it's not stock picking still it's some form of concentration bet.
- willbw 5y ago
  Theres a lot more to a casino than the roulette table is how I might phrase it using your analogy.

melling 5y ago

Hasn’t Jim Simons gone on the record as saying the algorithms make all the trading decisions in Renaissance, his hedge fund? If it can be coded,…

nojito 5y ago
So? Outliers exist for any dataset.
GDC7 5y ago
Rentech doesn't try to predict where MSFT stock will be according to fundamentals, they simply looks at every other data of interest which is not MSFT stock price and they speculate: "MSFT stock is too high/low considering that such and such has just moved and according to historical trends when such and such moves, then MSFT stock moves too" Of course i'm simplifying. But nobody really knows what they are doing, they are excellent at sales, Soros has achieved the same results listening to his body aches, and Buffett of course not the same results on a YoY % basis but he is working with a much larger pool of money. At the end of the day it's like people trying to extrapolate the secrets of longevity from diet and habits. That old french lady lived to 123 smoking a pack a day till she was 100. There is no reason or rhyme to extrme outliers. The more simple and likely explanaition is that in a large enough dataset somebody has to be a positive outlier and it just happened to be those particular people with that particular personal/professional history, and people who are blinded by the $$ are trying to replicate their success by maniacally looking at their personal/professional history and copying it. Unfortunately copying their personal/professional history won't also include copying the luck of the statistical outlier.
- protoax 5y ago
  I think I understand your point and agree with the hype aspect, but statistically how can they be statistical outliers? On a broad annual basis they’ve beat everyone 10+ times in a row or whatever the number is. That’s far more than statistically significant. How can 1 fund beat 10,000s 10 times in a row and be just an “outlier” with no rhyme or reason to their performance? Please correct me if I’m misunderstanding.

landa 5y ago

This is very obviously wrong, but it is the conventional wisdom. Every time someone says something like this and mentions Jimmy Buffet you know they're just quoting some movie like Wolf of Wall Street. Trading is a real job and the market is very inefficient. If you're too lazy to study it, you say things like what the GDC7 posted. It's pretty easy to predict Microsoft stock four months from now (it will probably be higher, but there's a small chance it will be lower), certainly easier than "the fate of the Universe trillions of years from now." At the end of the day, trading is learning how to manage risk. What is Microsoft doing, how much is it likely to make, and will the macro environment support or suppress their strategy. Then you put on a trade to take advantage of this view. You may sometimes be wrong, but the idea is that over all of your decisions, you'll mostly be right and make more money than you lose.

speedgoose 5y ago
How do you feel about research papers showing that trading randomly is as good on the long term ? https://www.researchgate.net/publication/235937406_Are_Random_Trading_Strategies_More_Successful_than_Technical_Ones https://www.researchgate.net/publication/235937406_Are_Rando...
massinstall 5y ago
With all due respect, you have no idea what you’re talking about. Your imagination of how this industry works is skewed. It is amazing how many self-professed experts there are, without any professional or meaningful experience. And the confidence they have… Source: have been working professionally in trading for almost 24 years. Go unleash your attack dogs against me now. :) P.S.: Since it’s “pretty easy” to predict MSFT for you, let me congratulate you in advance to your exorbitant returns of the near future. Soon, the world will know of you, the next Elon Musk.
- 1ibsq 5y ago
  I don't want to defend the comment you replied to, but there is obviously some nuance to the topic. Your comment makes it look like you're jumping right on the opposite side and have been rolling dice for 24 years. There is obviously some sort of substance in trading. To what degree, is the question here.

boublepop 5y ago

There’s a story about two stock brokers walking down wall street, one of them spots something on the ground and goes: “Look, a hundred dollar bill on the ground!”, the other responds: “That’s impossible, if there was a hundred dollar bill on the ground, someone would have picked it up” While it’s not possible to predict exact movements of stocks, that doesn’t mean that finance isn’t filled with situations where someone drops money on the ground. It never stays there for long because someone picks it up, but you’ll certainly never be the one picking up anything if you don’t look.

quickthrower2 5y ago
Its not even zero sum! You can have mostly winners! (Well putting environmental impact to one side)