4 ms·

That's a lot of "this won't work" without very much "here's what does work" leading me to conclude this is bluster and ego. I always hear these finance people

That's a lot of "this won't work" without very much "here's what does work" leading me to conclude this is bluster and ego. I always hear these finance people dick waving about how crap everyone else's methodologies are without examples of their own. This leads me to conclude it's all snake oil anyway. So I'm asking, speaking as a former M&A financial advisor... What _does_ work?

immibis 2y ago
nothing. There is no way to predict the stock market. Even the way you're probably thinking of. Even the ones in the replies to this comment. Even the really basic ones and the really advanced ones.
- altdataseller 2y ago
  This. If something "worked", then nobody would share it, or it's so popular that everyone has everyone applied it, and it doesn't work anymore.
- jdhwosnhw 2y ago
  The existence and success of the Millenium fund is a (probabilistic, to be fair) disproof of your assertion.
  - FridgeSeal 2y ago
    Tbf, I’ve had friends in finance describe the Millennium fund (now Medallion fund I think?) as operating in a very, very specific niche of the market. Probably helps that it’s limited to a very select group. Its extraordinary impressive for sure, but I don’t think it is widely applicable or comparable.
  - immibis 2y ago
    Outlying returns can be produced by pure chance, or also by cheating.
yifanl 2y ago
What makes you confident a methodology that consistently beats the market exists?
- kevin_thibedeau 2y ago
  There are a number of wealthy investors who don't tell other people about their methodology. They're either very lucky, criminals, or have beaten the market.
  - yifanl 2y ago
    There's wealthy, and there's Wealthy. As the market itself tends to trend upwards, you can absolutely ride that into wealthy, no crime or extreme luck required.
- dom96 2y ago
  If such methodology doesn't exist then how are quantitative trading firms in business? Genuinely wondering. Is this because they have so much money to play with that they can move markets in their favour?
  - yifanl 2y ago
    The one consistent method I know of would be high-frequency trading to front-run orders, which involves maintaining a moving target of state of the art infrastructure (both hardware and software), including a relationship at the markets so you can get an ultra high-speed connection (I'm certain there are rules with this to make it fairer, but I would assume not everyone will be provided a connection simply due to physical limits). But I also assume that's not the type of thing parent comment is asking about - Any rational actor with an opportunity to do this would already be doing this after all.
  - airstrike 2y ago
    How many quantitative trading firms have gone out of business?
  - Maxatar 2y ago
airstrike 2y ago
To be clear, I'm talking about fundamental (relative and intrinsic) valuation, not quant trading. I recently answered a similar question so if you don't mind I'll just link you to it: https://news.ycombinator.com/item?id=41862295 https://news.ycombinator.com/item?id=41862295
FridgeSeal 2y ago
You think the people with the stuff that even “sort of works” are likely to be giving up that edge?
tim333 2y ago
I'm not a former M&A guy but observing people in the market, figuring out the fundamentals better than the other guys and investing to maximise your returns can work and people like Buffett, Watsa, Soros and the late Simmons could do well enough to give billions away to charity. A few gotchas - It can be a bit of a zero sum game and the Buffett's and Soros make outsized returns because joe public makes lower ones. - Investing like that is hard - Buffett would basically spend all waking hours studying the stuff when younger. Just reading a How to Invest Like Buffett article doesn't cut it. - Most "investment professionals" make money on fees from clients and so will recommend what sells to clients - typically the hot thing of the day - rather than what's the best investment which is often cheap because most people think it's dull / doomed / unrespectable.

immibis 2y ago

nothing. There is no way to predict the stock market. Even the way you're probably thinking of. Even the ones in the replies to this comment. Even the really basic ones and the really advanced ones.

altdataseller 2y ago
This. If something "worked", then nobody would share it, or it's so popular that everyone has everyone applied it, and it doesn't work anymore.
jdhwosnhw 2y ago
The existence and success of the Millenium fund is a (probabilistic, to be fair) disproof of your assertion.
- FridgeSeal 2y ago
  Tbf, I’ve had friends in finance describe the Millennium fund (now Medallion fund I think?) as operating in a very, very specific niche of the market. Probably helps that it’s limited to a very select group. Its extraordinary impressive for sure, but I don’t think it is widely applicable or comparable.
- immibis 2y ago
  Outlying returns can be produced by pure chance, or also by cheating.

yifanl 2y ago

What makes you confident a methodology that consistently beats the market exists?

kevin_thibedeau 2y ago
There are a number of wealthy investors who don't tell other people about their methodology. They're either very lucky, criminals, or have beaten the market.
- yifanl 2y ago
  There's wealthy, and there's Wealthy. As the market itself tends to trend upwards, you can absolutely ride that into wealthy, no crime or extreme luck required.
dom96 2y ago
If such methodology doesn't exist then how are quantitative trading firms in business? Genuinely wondering. Is this because they have so much money to play with that they can move markets in their favour?
- yifanl 2y ago
  The one consistent method I know of would be high-frequency trading to front-run orders, which involves maintaining a moving target of state of the art infrastructure (both hardware and software), including a relationship at the markets so you can get an ultra high-speed connection (I'm certain there are rules with this to make it fairer, but I would assume not everyone will be provided a connection simply due to physical limits). But I also assume that's not the type of thing parent comment is asking about - Any rational actor with an opportunity to do this would already be doing this after all.
- airstrike 2y ago
  How many quantitative trading firms have gone out of business?
- Maxatar 2y ago

airstrike 2y ago

To be clear, I'm talking about fundamental (relative and intrinsic) valuation, not quant trading. I recently answered a similar question so if you don't mind I'll just link you to it: https://news.ycombinator.com/item?id=41862295 https://news.ycombinator.com/item?id=41862295

FridgeSeal 2y ago

You think the people with the stuff that even “sort of works” are likely to be giving up that edge?

tim333 2y ago

I'm not a former M&A guy but observing people in the market, figuring out the fundamentals better than the other guys and investing to maximise your returns can work and people like Buffett, Watsa, Soros and the late Simmons could do well enough to give billions away to charity. A few gotchas - It can be a bit of a zero sum game and the Buffett's and Soros make outsized returns because joe public makes lower ones. - Investing like that is hard - Buffett would basically spend all waking hours studying the stuff when younger. Just reading a How to Invest Like Buffett article doesn't cut it. - Most "investment professionals" make money on fees from clients and so will recommend what sells to clients - typically the hot thing of the day - rather than what's the best investment which is often cheap because most people think it's dull / doomed / unrespectable.