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> I own 100 shares of Apple… Tim Cook goes on CNBC and says he’s all in on printers. So I want to sell my Apple shares and buy Microsoft. I’m being a smart inve

> I own 100 shares of Apple… Tim Cook goes on CNBC and says he’s all in on printers. So I want to sell my Apple shares and buy Microsoft. I’m being a smart investor. No, you’re being a schmuck. The market moved on that information well before you saw it on the news, loaded up your web browser, and executed the transaction. Time and time and time again it has been demonstrated that actively trading is negatively correlated with performance. The more frequent you trade, the statistically worse you do. Besides being empirically true, it makes intuitive sense. Every time you trade you’re engaging with a counter party on the other side of the transaction. With overwhelming likelihood, that counterparty has disproportionately greater (and timelier) access to information and market analysis than you. So every time you trade, you do so at a steep disadvantage. Invest in the market. Buy and hold. Sell to finance your retirement. Save the gambling for your Vegas fund, not your life savings.

twoodfin 3y ago
Sorry a colorful example seems to have gone over your head: A financial transaction tax dulls the market response to new information. The primary purpose of markets is to translate information into prices. Markets that are less efficient in that task hurt long-term retirement investors and day-traders alike.
- avs733 3y ago
  I would caution you against assuming disagreement is misunderstanding, A spring only suspension system responds quickly to a bump in the road. If that’s your only metric, it’s good. But a car without a damper is going to be hella uncomfortable. The shock makes it respond slower - it doesn’t mean it doesn’t respond.
  - MoreSEMI 3y ago
    Uuuu, While the analogy is nice, I doubt that taxes are decided upon like an engineer deciding on damping coefficients. An engineer has a specification and tries to hit that spec. I have a hard time believing that’s how taxes are set. I would like carbon taxs/credits to be decided upon that way. But if you look at the real systems it’s obvious they weren’t designed that way. Finally, you are correct that you need to be careful in choosing the metric. I think I would also question the desirability of dampinh, which it seems like the other poster was trying to say. The market being dumber is a slower response in your analogy. They want a sports car, not a rolls.
    - avs733 3y ago
      I wanted a sports car as a teenagers and my parents gave me a minivan. It wasn’t what I wanted but it’s likely the reason I’m alive today. The point of governance to some extent is dealing with the tension between what competing groups of people say they want and actually need
- stouset 3y ago
  > Markets that are less efficient in that task hurt long-term retirement investors and day-traders alike. On some level this is true, but the insane quantities being siphoned out of the economy through the financial system is wildly disproportionate to the increasingly-infinitesimal gains in “price efficiency”. As a long-term investor in the market as a whole, whether Apple’s true per-share value today is 175.01 and not 175.07 is almost completely irrelevant. Even less so the difference between 175.008913 and 175.008916. We have long since passed a point where there is sufficient liquidity and sufficient price discovery for the purpose of buy-and-hold investment, and every extra dollar that goes to financial services in the name of more accurately determining prices is just a transfer of money from people who provide value to the economy to a class of leeches who provide nearly nothing.
  - RandomLensman 3y ago
    The money is not siphoned out of the economy (unless it all leaves the US/World). The money made in finance is just as any other money, i.e., it is used to consume, invest, save etc. Btw., no-one is forced to trade incessantly, either.
    - stouset 3y ago
      The money technically being “in the economy” is cold comfort to the workers whose COL has steadily increased while wages have remained flat.
      - twoodfin 3y ago
        https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N
inetknght 3y ago
> The market moved on that information well before you saw it on the news, loaded up your web browser, and executed the transaction. Sounds like insider trading to me.
- stouset 3y ago
  So for starters, insider trading exists and while it would be great to live in a world where it doesn’t, we live in this world where it certainly does. Second, even in a magical world where this doesn’t happen, institutional investors have literal teams of analysts working for them. They have bots responding to news reports and public filings, and the lowest latency possible connections to trading platforms. You have none of this.

twoodfin 3y ago

Sorry a colorful example seems to have gone over your head: A financial transaction tax dulls the market response to new information. The primary purpose of markets is to translate information into prices. Markets that are less efficient in that task hurt long-term retirement investors and day-traders alike.

avs733 3y ago
I would caution you against assuming disagreement is misunderstanding, A spring only suspension system responds quickly to a bump in the road. If that’s your only metric, it’s good. But a car without a damper is going to be hella uncomfortable. The shock makes it respond slower - it doesn’t mean it doesn’t respond.
- MoreSEMI 3y ago
  Uuuu, While the analogy is nice, I doubt that taxes are decided upon like an engineer deciding on damping coefficients. An engineer has a specification and tries to hit that spec. I have a hard time believing that’s how taxes are set. I would like carbon taxs/credits to be decided upon that way. But if you look at the real systems it’s obvious they weren’t designed that way. Finally, you are correct that you need to be careful in choosing the metric. I think I would also question the desirability of dampinh, which it seems like the other poster was trying to say. The market being dumber is a slower response in your analogy. They want a sports car, not a rolls.
  - avs733 3y ago
    I wanted a sports car as a teenagers and my parents gave me a minivan. It wasn’t what I wanted but it’s likely the reason I’m alive today. The point of governance to some extent is dealing with the tension between what competing groups of people say they want and actually need
stouset 3y ago
> Markets that are less efficient in that task hurt long-term retirement investors and day-traders alike. On some level this is true, but the insane quantities being siphoned out of the economy through the financial system is wildly disproportionate to the increasingly-infinitesimal gains in “price efficiency”. As a long-term investor in the market as a whole, whether Apple’s true per-share value today is 175.01 and not 175.07 is almost completely irrelevant. Even less so the difference between 175.008913 and 175.008916. We have long since passed a point where there is sufficient liquidity and sufficient price discovery for the purpose of buy-and-hold investment, and every extra dollar that goes to financial services in the name of more accurately determining prices is just a transfer of money from people who provide value to the economy to a class of leeches who provide nearly nothing.
- RandomLensman 3y ago
  The money is not siphoned out of the economy (unless it all leaves the US/World). The money made in finance is just as any other money, i.e., it is used to consume, invest, save etc. Btw., no-one is forced to trade incessantly, either.
  - stouset 3y ago
    The money technically being “in the economy” is cold comfort to the workers whose COL has steadily increased while wages have remained flat.
    - twoodfin 3y ago
      https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N

inetknght 3y ago

> The market moved on that information well before you saw it on the news, loaded up your web browser, and executed the transaction. Sounds like insider trading to me.

stouset 3y ago
So for starters, insider trading exists and while it would be great to live in a world where it doesn’t, we live in this world where it certainly does. Second, even in a magical world where this doesn’t happen, institutional investors have literal teams of analysts working for them. They have bots responding to news reports and public filings, and the lowest latency possible connections to trading platforms. You have none of this.