6 ms·

I work for a financial-services company and I still think investing in the stock market is crazy. There are people who spend their days figuring out how to sepa

by moron 14y ago

I work for a financial-services company and I still think investing in the stock market is crazy. There are people who spend their days figuring out how to separate "investors" (basically, gamblers) from their money either without getting caught or in a legal-but-underhanded manner. I know I'm stupid enough to have my money taken from me without understanding how, but I'm not stupid enough to actually subject myself to that.

tosseraccount 14y ago
"Investing in the stock market is crazy" ? http://www.mymoneyblog.com/impact-of-inflation-on-stocks-bonds-housing-and-gold-1900-2011.html http://www.mymoneyblog.com/impact-of-inflation-on-stocks-bon... Real Returns from various asset classes: Stocks: 6.9% Bonds: 2.3% Bills 1.0% Gold 2.4% Housing 1.5% Stocks crazy? Looks to me like the rational thing to invest in.
- muyuu 14y ago
  Every time I've made numbers equities have underperformed gold and housing long term, esp. when considering commissions and tax. One would normally look for 20-30 years max. returns, as 100+ year periods will include one-off historical events that will change the picture completely. Case in point, the hindsight bias is strong on this one, because it's fact that these countries were chosen because they are the "winners" in recent history. What about the "losers"? you don't know where your country will stand in 110 years time. I also work in the finance industry and I agree that Joe Doe outsider shouldn't gamble a significant chunk of his net worth in the stock market. Gambling being the key word here.
  - veyron 14y ago
    Speculation is a euphemism for gambling. Those people who push equities generally are brokers (and thus get a cut of your transactions) or shareholders (who need people to buy their stocks). Unfortunately the capital formation goals have fell by the wayside.
  - pcwalton 14y ago
    http://allfinancialmatters.com/2011/02/15/gold-vs-sp-500-index-1973-2010/ http://allfinancialmatters.com/2011/02/15/gold-vs-sp-500-ind... Shows the S&P 500 clearly outperforming gold from 1973 to 2010. Of course, there were massive fluctuations; what this says to me is to be diversified (and diversification includes stocks).
    - muyuu 14y ago
      Stocks pay tax and commission. This is never shown in these fancy charts, but any investor will see his bottom line affected by these costs. Also, companies can be ejected out of S&P and replaced by more successful companies. These events are also routinely hidden from graphs.
      - usaar333 14y ago
        Huh? Any investment is going to incur capital gains taxes when sold. Commissions are trivial for large stock purchases and certainly are very low compared to say gold or property. If a company is ejected from the S&P 500, tracking funds tend to eject it as well. Also these charts tend to not be dividend adjusted, further increasing the benefit of stocks. Check out SPY; it actually has out-performed the S&P 500 (I believe due to dividends and what not).
        muyuu 14y ago
        Physical gold purchases don't need to be declared in many places. Which means 0 tax, plus the fact that the government doesn't know you even have it, were they to introduce any kind of legislation. These charts usually include dividends. When they don't they are very crappy. In many international stocks dividend is too substantial to be possibly missed.
    - mattmanser 14y ago
      Unless I'm really stupid, this only works if you happened to buy in 1973. You see the big downward trends in the stocks in 1998 and 2007? Now pretend you invested in 1997 or 2006 instead of 1973. All of a sudden the graph would be transformed to show Gold as the clear winner. The guy's clearly an amateur, even as someone who has no interest in stocks whatsoever, never take advice from someone like this. If you invest at the wrong time you lose money. The problem with graphs like this demonstrating the 'long-term' is that people conveniently pick a year that works for their point. The other common one is that people always pick just after the great depression to demonstrate stock market growth over time.
  - mikejsiegel 14y ago
    I use to feel that way as well. Thing is - everything is a gamble. Holding your money in the US Dollar is a gamble in the dollar. How can you hold (and ideally grow) wealth without exposing it to risk?
  - usaar333 14y ago
    Could you cite some numbers? I'm dubious as everything I've seen shows equities winning over almost any 20-30 year period. And by equities I mean a minimal load index fund. It's well known housing pretty much follows inflation (http://www.ritholtz.com/blog/wp-content/uploads/2008/12/case-shiller-chart-updated.png http://www.ritholtz.com/blog/wp-content/uploads/2008/12/case...). On the surface, it would seem bizarre if housing could beat stocks long-term. I can't speak much for gold. 1. housing: People have to afford their houses. As long as land is not scarce, this is just going to follow (housing-part) inflation. The reasonable maximum (across the US) is median income growth. 2. Stocks: As a first (0th?) order approximation, some weighted average of US and world-wide nominal GDP growth. Should easily beat #1. 3. Gold: Pretty complicated to track. Demand will rise as world incomes go up. But suppliers respond and pump more gold out. In theory, this makes gold more expensive but advances in technology can make production cheaper. As a naive investor though, I see no reason to invest in gold as I know little about the supply-side.
    - ams6110 14y ago
      Gold is what it is. It's a commodity. It's pretty much moved with the CPI except in the last few years. You can make money if you can correctly speculate short term trends, long term it tends to be an inflation hedge at best.
      - muyuu 14y ago
        Exactly. It's something with objective value. Unlike your average stock, which depends on many variables. You can do better or worse, but if you have no idea about these variables it's perfectly wise to stay away.
        tosseraccount 14y ago
        Value is always subjective. I don't care for gold. I'd rather have water.
    - nandemo 14y ago
      > It's well known housing pretty much follows inflation I'm curious why you claim that while providing a reference that clearly contradicts you: a reference house cost $100k in 1890, went down to under 70k in the 1920s and then up to over 200k a few years ago. Note that this is already corrected for inflation.
  - JumpCrisscross 14y ago
    There's an excellent book Safe As Houses that basically shows that over the long term real estate fails to keep up with even GDP growth [1]. [1] http://www.cityam.com/news-and-analysis/allister-heath/why-buying-property-no-panacea http://www.cityam.com/news-and-analysis/allister-heath/why-b...
- wpietri 14y ago
  My guess is that he's talking about direct investments in particular stocks. I'm another person who worked for financial traders. I would never buy individual stocks. All my money is in low-load funds (e.g., index funds). I'll probably buy some income property soon. But I know exactly who is on the other side of stock market trades, and I know how hard it is to beat them.
rbanffy 14y ago
A friend of mine prefers the word "bet" or "gamble" to "invest" when it comes to stock markets. Sure, as much as in horse tracks, knowing more increases your odds of winning, but, overall, it's a sport better left for the professionals. That doesn't preclude you from playing, of course. I do and it's very entertaining. I just won't bet everything on stocks.
seanalltogether 14y ago
I still look back to the old old days when stocks actually meant you owned a part of the company and could expect to turn your stock back in for a payout from that company in the future. Those are stocks that make sense to me. Nowadays you're literally buying into the opinion of a company. Sure we use things like P/E and future growth to form that opinion, but in the end it's a lot like Bitcoin, it has value because people believe it has value, many of these stocks have no hard requirements that peg their value. You as a stock holder aren't entitled to any of Facebooks profits, and voting rights are worthless.
- eldude 14y ago
  I've been having a lot of conversations around intrinsic value of stocks that echoed this a bit: dividends or voting rights. If this were the case though, I don't think you would see the levels of investment that you're seeing. Facebook's stock's intrinsic value is derived from Mark Zuckerberg's value of it. In other words, even though you cannot exercise those rights to any effect, if everyone concluded they were worthless, you'd see Zuckerberg buying them up b/c he values them or he would address the reasons people consider them worthless thus adding value. The absurd part of this that this would imply FB stock is intrinsically worth less, which makes the current already over-valued trading price look that much more ridiculous!
- crag 14y ago
  Actually currency is the same thing. The dollar has value because we all agree it has value. It's not based on gold any longer (though one could argue it's based on oil). It's based on a host of indices that we, as a group set. And those indices are traded and have a set value. Decided by the buyer (us) and seller (us). I'm not complaining. I'm just pointing out that all of our economy is based on the same principe/model; as long as the vast majority of the group (us) believe the dollar is worth something, it will be. Anyone who invested in FB at any time (and that includes the big boys) believed that FB was a good investment. In other words, they believed the hype and didn't understand the business. Until someone who they trusted came along and told them to bail. And here we are. I actively trade. All the time. But FB I didn't touch. I asked myself, at ANY time have I ever clicked an ad on FB? The answer: "No". That meant FB is vapor. People are betting that people (all of us - including the people making the bets) might, sometime in the future click on ads. Or that FB might come up with something. Something. (And I bet it's gonna be selling out personal data - what we browse, like, etc, etc. It's the only real value FB has).
anon808 14y ago
I started out my working life as a financial analyst in an investment bank, and that experience led me to the same conclusion. I really believe the only people that should own equity in a company (public or private) are the people that actually know the business of that company (like top 10 customers, top expense line items, name of the major sales people etc.). The mindset of the casual investor is the same as the casual gambler (i'm saying this from personal experience). Financial services is a zero-sum, no value-added operation, it's a wealth redistribution exercise, nothing new gets created; the only way it can grow is by feeding it outside money/assets; there's a real incentive to find suckers.
- JumpCrisscross 14y ago
  My time on Wall Street has actually made me quite averse to the whole broad shareholding/democratised finance movement. The fact that 90% of finance related posts' comments on HackerNews, a top quartile intelligence population, make me cringe tells me we should restrict market access to institutions and accredited (read: very liquid) investors.
  - specialist 14y ago
    Yea! Because people are stoopid! Stoopid people shouldn't vote!
    - rozap 14y ago
      All these suckers invested in Facebook, prices fell, and now they're bitching about how there was inside information that they didn't know about, that would have prevented them from investing in the first place. Tough shit. That's life, and this sort of thing will happen. What's NOT ok is to sue (http://www.reuters.com/article/2012/05/23/us-nasdaq-facebook-lawsuit-idUSBRE84M02O20120523 http://www.reuters.com/article/2012/05/23/us-nasdaq-facebook...) over the loss of money, due to you investing in a business you don't know anything about. I just can't understand why this is okay. My brain hurts.
      - 14y ago
gouranga 14y ago
I write portfolio management software and decision support systems (about 25% of my time) and I have the same opinion. It's a fool's game betting on what is effectively a publicity ranking. If you want to do something crazy with a real return, invest in metals futures as they have real industrial uses (i.e. any catalysts/alkalis i.e. platinum, silver, lithium and copper as it's scarce). If it's not NEEDED, don't invest in it.
lsc 14y ago
>I still think investing in the stock market is crazy. this is a kinda extreme fringe position. I mean, I feel the same way, and all my money is invested in my own company, but I'm generally seen as way higher risk than just dumping your money in a index fund. Out of curiosity, where do you invest your money?

by moron 14y ago

tosseraccount 14y ago

"Investing in the stock market is crazy" ? http://www.mymoneyblog.com/impact-of-inflation-on-stocks-bonds-housing-and-gold-1900-2011.html http://www.mymoneyblog.com/impact-of-inflation-on-stocks-bon... Real Returns from various asset classes: Stocks: 6.9% Bonds: 2.3% Bills 1.0% Gold 2.4% Housing 1.5% Stocks crazy? Looks to me like the rational thing to invest in.

muyuu 14y ago
Every time I've made numbers equities have underperformed gold and housing long term, esp. when considering commissions and tax. One would normally look for 20-30 years max. returns, as 100+ year periods will include one-off historical events that will change the picture completely. Case in point, the hindsight bias is strong on this one, because it's fact that these countries were chosen because they are the "winners" in recent history. What about the "losers"? you don't know where your country will stand in 110 years time. I also work in the finance industry and I agree that Joe Doe outsider shouldn't gamble a significant chunk of his net worth in the stock market. Gambling being the key word here.
- veyron 14y ago
  Speculation is a euphemism for gambling. Those people who push equities generally are brokers (and thus get a cut of your transactions) or shareholders (who need people to buy their stocks). Unfortunately the capital formation goals have fell by the wayside.
- pcwalton 14y ago
  http://allfinancialmatters.com/2011/02/15/gold-vs-sp-500-index-1973-2010/ http://allfinancialmatters.com/2011/02/15/gold-vs-sp-500-ind... Shows the S&P 500 clearly outperforming gold from 1973 to 2010. Of course, there were massive fluctuations; what this says to me is to be diversified (and diversification includes stocks).
  - muyuu 14y ago
    Stocks pay tax and commission. This is never shown in these fancy charts, but any investor will see his bottom line affected by these costs. Also, companies can be ejected out of S&P and replaced by more successful companies. These events are also routinely hidden from graphs.
    - usaar333 14y ago
      Huh? Any investment is going to incur capital gains taxes when sold. Commissions are trivial for large stock purchases and certainly are very low compared to say gold or property. If a company is ejected from the S&P 500, tracking funds tend to eject it as well. Also these charts tend to not be dividend adjusted, further increasing the benefit of stocks. Check out SPY; it actually has out-performed the S&P 500 (I believe due to dividends and what not).
      - muyuu 14y ago
        Physical gold purchases don't need to be declared in many places. Which means 0 tax, plus the fact that the government doesn't know you even have it, were they to introduce any kind of legislation. These charts usually include dividends. When they don't they are very crappy. In many international stocks dividend is too substantial to be possibly missed.
  - mattmanser 14y ago
    Unless I'm really stupid, this only works if you happened to buy in 1973. You see the big downward trends in the stocks in 1998 and 2007? Now pretend you invested in 1997 or 2006 instead of 1973. All of a sudden the graph would be transformed to show Gold as the clear winner. The guy's clearly an amateur, even as someone who has no interest in stocks whatsoever, never take advice from someone like this. If you invest at the wrong time you lose money. The problem with graphs like this demonstrating the 'long-term' is that people conveniently pick a year that works for their point. The other common one is that people always pick just after the great depression to demonstrate stock market growth over time.
- mikejsiegel 14y ago
  I use to feel that way as well. Thing is - everything is a gamble. Holding your money in the US Dollar is a gamble in the dollar. How can you hold (and ideally grow) wealth without exposing it to risk?
- usaar333 14y ago
  Could you cite some numbers? I'm dubious as everything I've seen shows equities winning over almost any 20-30 year period. And by equities I mean a minimal load index fund. It's well known housing pretty much follows inflation (http://www.ritholtz.com/blog/wp-content/uploads/2008/12/case-shiller-chart-updated.png http://www.ritholtz.com/blog/wp-content/uploads/2008/12/case...). On the surface, it would seem bizarre if housing could beat stocks long-term. I can't speak much for gold. 1. housing: People have to afford their houses. As long as land is not scarce, this is just going to follow (housing-part) inflation. The reasonable maximum (across the US) is median income growth. 2. Stocks: As a first (0th?) order approximation, some weighted average of US and world-wide nominal GDP growth. Should easily beat #1. 3. Gold: Pretty complicated to track. Demand will rise as world incomes go up. But suppliers respond and pump more gold out. In theory, this makes gold more expensive but advances in technology can make production cheaper. As a naive investor though, I see no reason to invest in gold as I know little about the supply-side.
  - ams6110 14y ago
    Gold is what it is. It's a commodity. It's pretty much moved with the CPI except in the last few years. You can make money if you can correctly speculate short term trends, long term it tends to be an inflation hedge at best.
    - muyuu 14y ago
      Exactly. It's something with objective value. Unlike your average stock, which depends on many variables. You can do better or worse, but if you have no idea about these variables it's perfectly wise to stay away.
      - tosseraccount 14y ago
        Value is always subjective. I don't care for gold. I'd rather have water.
  - nandemo 14y ago
    > It's well known housing pretty much follows inflation I'm curious why you claim that while providing a reference that clearly contradicts you: a reference house cost $100k in 1890, went down to under 70k in the 1920s and then up to over 200k a few years ago. Note that this is already corrected for inflation.
- JumpCrisscross 14y ago
  There's an excellent book Safe As Houses that basically shows that over the long term real estate fails to keep up with even GDP growth [1]. [1] http://www.cityam.com/news-and-analysis/allister-heath/why-buying-property-no-panacea http://www.cityam.com/news-and-analysis/allister-heath/why-b...
wpietri 14y ago
My guess is that he's talking about direct investments in particular stocks. I'm another person who worked for financial traders. I would never buy individual stocks. All my money is in low-load funds (e.g., index funds). I'll probably buy some income property soon. But I know exactly who is on the other side of stock market trades, and I know how hard it is to beat them.

rbanffy 14y ago

A friend of mine prefers the word "bet" or "gamble" to "invest" when it comes to stock markets. Sure, as much as in horse tracks, knowing more increases your odds of winning, but, overall, it's a sport better left for the professionals. That doesn't preclude you from playing, of course. I do and it's very entertaining. I just won't bet everything on stocks.

seanalltogether 14y ago

I still look back to the old old days when stocks actually meant you owned a part of the company and could expect to turn your stock back in for a payout from that company in the future. Those are stocks that make sense to me. Nowadays you're literally buying into the opinion of a company. Sure we use things like P/E and future growth to form that opinion, but in the end it's a lot like Bitcoin, it has value because people believe it has value, many of these stocks have no hard requirements that peg their value. You as a stock holder aren't entitled to any of Facebooks profits, and voting rights are worthless.

eldude 14y ago
I've been having a lot of conversations around intrinsic value of stocks that echoed this a bit: dividends or voting rights. If this were the case though, I don't think you would see the levels of investment that you're seeing. Facebook's stock's intrinsic value is derived from Mark Zuckerberg's value of it. In other words, even though you cannot exercise those rights to any effect, if everyone concluded they were worthless, you'd see Zuckerberg buying them up b/c he values them or he would address the reasons people consider them worthless thus adding value. The absurd part of this that this would imply FB stock is intrinsically worth less, which makes the current already over-valued trading price look that much more ridiculous!
crag 14y ago
Actually currency is the same thing. The dollar has value because we all agree it has value. It's not based on gold any longer (though one could argue it's based on oil). It's based on a host of indices that we, as a group set. And those indices are traded and have a set value. Decided by the buyer (us) and seller (us). I'm not complaining. I'm just pointing out that all of our economy is based on the same principe/model; as long as the vast majority of the group (us) believe the dollar is worth something, it will be. Anyone who invested in FB at any time (and that includes the big boys) believed that FB was a good investment. In other words, they believed the hype and didn't understand the business. Until someone who they trusted came along and told them to bail. And here we are. I actively trade. All the time. But FB I didn't touch. I asked myself, at ANY time have I ever clicked an ad on FB? The answer: "No". That meant FB is vapor. People are betting that people (all of us - including the people making the bets) might, sometime in the future click on ads. Or that FB might come up with something. Something. (And I bet it's gonna be selling out personal data - what we browse, like, etc, etc. It's the only real value FB has).

anon808 14y ago

I started out my working life as a financial analyst in an investment bank, and that experience led me to the same conclusion. I really believe the only people that should own equity in a company (public or private) are the people that actually know the business of that company (like top 10 customers, top expense line items, name of the major sales people etc.). The mindset of the casual investor is the same as the casual gambler (i'm saying this from personal experience). Financial services is a zero-sum, no value-added operation, it's a wealth redistribution exercise, nothing new gets created; the only way it can grow is by feeding it outside money/assets; there's a real incentive to find suckers.

JumpCrisscross 14y ago
My time on Wall Street has actually made me quite averse to the whole broad shareholding/democratised finance movement. The fact that 90% of finance related posts' comments on HackerNews, a top quartile intelligence population, make me cringe tells me we should restrict market access to institutions and accredited (read: very liquid) investors.
- specialist 14y ago
  Yea! Because people are stoopid! Stoopid people shouldn't vote!
  - rozap 14y ago
    All these suckers invested in Facebook, prices fell, and now they're bitching about how there was inside information that they didn't know about, that would have prevented them from investing in the first place. Tough shit. That's life, and this sort of thing will happen. What's NOT ok is to sue (http://www.reuters.com/article/2012/05/23/us-nasdaq-facebook-lawsuit-idUSBRE84M02O20120523 http://www.reuters.com/article/2012/05/23/us-nasdaq-facebook...) over the loss of money, due to you investing in a business you don't know anything about. I just can't understand why this is okay. My brain hurts.
    - 14y ago

gouranga 14y ago

I write portfolio management software and decision support systems (about 25% of my time) and I have the same opinion. It's a fool's game betting on what is effectively a publicity ranking. If you want to do something crazy with a real return, invest in metals futures as they have real industrial uses (i.e. any catalysts/alkalis i.e. platinum, silver, lithium and copper as it's scarce). If it's not NEEDED, don't invest in it.

lsc 14y ago

>I still think investing in the stock market is crazy. this is a kinda extreme fringe position. I mean, I feel the same way, and all my money is invested in my own company, but I'm generally seen as way higher risk than just dumping your money in a index fund. Out of curiosity, where do you invest your money?