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Well you dropped buffets name first. I only shared Shiller's article because I was too lazy to type out the conditional probability. Off the 10% of the people,

Well you dropped buffets name first. I only shared Shiller's article because I was too lazy to type out the conditional probability. Off the 10% of the people, who beat market handily? If they all happen to be deep value investors. Will you still conclude blackswan? Or would you start thinking Conditional probability

lutusp 12y ago
> Well you dropped buffets name first. Yes, but not as an authority. Your references all had college degrees or prizes listed, as though that added weight to their opinions. My Buffet example was limited to saying how he dealt with popular equities mythology, i.e. by rejecting it out of hand. > Off the 10% of the people, who beat market handily? Do you understand anything about probability? For a sufficiently large population of investors, even in a market that doesn't gradually increase in value over time, some of those investors will become fabulously wealthy by chance alone. As shown here: http://arachnoid.com/equities_myths/index.html#Market_Model http://arachnoid.com/equities_myths/index.html#Market_Model Quote: "In this random market, with no investment strategy, the most successful of the 100 managed-portfolio investors increases his original investment by 2,330%, solely because of chance." Now imagine the results for an investor pool of a million investors instead of 100. > Will you still conclude blackswan? Or would you start thinking Conditional probability 1. If an investor makes a killing, why would he care if it's a black swan or the outcome of conditional probability -- and has it occurred to you that both terms mean the same thing? 2. Learn about science and probability. Stop making assertions about a system you clearly don't understand.
- arbitragedude 12y ago
  So if 10% of the people outperform the market and they all happen to be value investors", is that a random event?
  - lutusp 12y ago
    > So if 10% of the people outperform the market and they all happen to be value investors", is that a random event? Yes, of course -- that's the default assumption until there's reliable evidence pointing to another conclusion. But if you were a deep thinker, you would realize the problem in your alternative hypothesis -- assuming certain individuals are able to read the market and reliably choose winners, then: 1. They would stop talking to ordinary investors and directly invest their own rapidly increasing funds. 2. Following obvious principles, they would drain the market of its capital. 3. Not being stupid and seeing a game they cannot win, businesses would react by refusing to raise capital using equities. But that hasn't happened, ever, even once. The conclusion a scientist makes is that this stands as evidence against the idea that there is a reliable, consistent winning strategy for playing the market. And to think, you could have come to this self-evident conclusion on your own.
    - arbitragedude 12y ago
      So your take "Yes of course, value investor is a chance event". Alternative hypothesis does exist:-) They also have names like Berkshire, Soros, DE Shaw, Renaissance, Virtu, Tiger cubs, Ed Thorpe, Bridgewater, AQR, Tepper .. why do they exist?? markets are efficient. Are they not as "deep" thinkers as you are? Is that why they have wasted their 30-40yrs amassing wealth in the market? They must not be very smart wasting all that time thinking markets are inefficient. Indeed, very large hedge funds and super successful/secretive investors do exist (they are the same y/y after). The successful one get larger every year. If markets are efficient, why would hedge funds particularly the successful ones? Some of them aren't reported in the media as they are private family offices. So the alternative hypothesis Why would these guys be wasting their time? And more recently high frequency trading hedgefunds show Sharpe Ratios of more than 7, outperforming the market by more than 15x. The reason why they can't become large as the market is because they can't get enough leverage and/or find large enough balance sheet. But you can bet, they are actively seeking more money to expand. Case in point, Bridgewater, which exploits really a longshot bias, via their risk-parity fund is now a $160bn fund (grew from less than $1mn in 1970s). This is in practice, you just can't get the world's balance sheet as Capital is tied up in other economic processes. Also large swings in the stock market also indicate that the markets are not efficient. What justifies 50% drop in S&P in less than a year, if everything was fairly priced. In my opinion, super successful investors also reach their utility function for capital. Case in point is guys like Ed Thorpe, who ran successful hedgefunds for 20yrs with same 20% return every year. There's a finite capital utility for every man. I agree that someone who is not skilled in the market day to day, should just invest in S&P.

lutusp 12y ago

> Well you dropped buffets name first. Yes, but not as an authority. Your references all had college degrees or prizes listed, as though that added weight to their opinions. My Buffet example was limited to saying how he dealt with popular equities mythology, i.e. by rejecting it out of hand. > Off the 10% of the people, who beat market handily? Do you understand anything about probability? For a sufficiently large population of investors, even in a market that doesn't gradually increase in value over time, some of those investors will become fabulously wealthy by chance alone. As shown here: http://arachnoid.com/equities_myths/index.html#Market_Model http://arachnoid.com/equities_myths/index.html#Market_Model Quote: "In this random market, with no investment strategy, the most successful of the 100 managed-portfolio investors increases his original investment by 2,330%, solely because of chance." Now imagine the results for an investor pool of a million investors instead of 100. > Will you still conclude blackswan? Or would you start thinking Conditional probability 1. If an investor makes a killing, why would he care if it's a black swan or the outcome of conditional probability -- and has it occurred to you that both terms mean the same thing? 2. Learn about science and probability. Stop making assertions about a system you clearly don't understand.

arbitragedude 12y ago
So if 10% of the people outperform the market and they all happen to be value investors", is that a random event?
- lutusp 12y ago
  > So if 10% of the people outperform the market and they all happen to be value investors", is that a random event? Yes, of course -- that's the default assumption until there's reliable evidence pointing to another conclusion. But if you were a deep thinker, you would realize the problem in your alternative hypothesis -- assuming certain individuals are able to read the market and reliably choose winners, then: 1. They would stop talking to ordinary investors and directly invest their own rapidly increasing funds. 2. Following obvious principles, they would drain the market of its capital. 3. Not being stupid and seeing a game they cannot win, businesses would react by refusing to raise capital using equities. But that hasn't happened, ever, even once. The conclusion a scientist makes is that this stands as evidence against the idea that there is a reliable, consistent winning strategy for playing the market. And to think, you could have come to this self-evident conclusion on your own.
  - arbitragedude 12y ago
    So your take "Yes of course, value investor is a chance event". Alternative hypothesis does exist:-) They also have names like Berkshire, Soros, DE Shaw, Renaissance, Virtu, Tiger cubs, Ed Thorpe, Bridgewater, AQR, Tepper .. why do they exist?? markets are efficient. Are they not as "deep" thinkers as you are? Is that why they have wasted their 30-40yrs amassing wealth in the market? They must not be very smart wasting all that time thinking markets are inefficient. Indeed, very large hedge funds and super successful/secretive investors do exist (they are the same y/y after). The successful one get larger every year. If markets are efficient, why would hedge funds particularly the successful ones? Some of them aren't reported in the media as they are private family offices. So the alternative hypothesis Why would these guys be wasting their time? And more recently high frequency trading hedgefunds show Sharpe Ratios of more than 7, outperforming the market by more than 15x. The reason why they can't become large as the market is because they can't get enough leverage and/or find large enough balance sheet. But you can bet, they are actively seeking more money to expand. Case in point, Bridgewater, which exploits really a longshot bias, via their risk-parity fund is now a $160bn fund (grew from less than $1mn in 1970s). This is in practice, you just can't get the world's balance sheet as Capital is tied up in other economic processes. Also large swings in the stock market also indicate that the markets are not efficient. What justifies 50% drop in S&P in less than a year, if everything was fairly priced. In my opinion, super successful investors also reach their utility function for capital. Case in point is guys like Ed Thorpe, who ran successful hedgefunds for 20yrs with same 20% return every year. There's a finite capital utility for every man. I agree that someone who is not skilled in the market day to day, should just invest in S&P.