The problem IMO is that stocks outperform bonds in the first place because of the debt-based economy. I suspect it is part of why Glass-Steagell was repealed in the first place.
Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
181–190 of 323 posts
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#182Earlier quoted context omitted.
> Are you able to tell more about what types of data this was? I mined data in the real estate, QSR, automotive and airline sectors (and a few peripherally related ones). We would identify a source of data that was a demonstrably strong proxy for a specific company's revenue (that is to say, if we broke out a naive timeseries of the data it would map nearly 1:1 to earnings results each quarter). Then we would collect…
Would you be able to describe how your data was normally priced? I'm sure it is very context dependent, but I'm very interested. For example, let's say you have information that allows you to forecast the earnings of a publicly traded company to within 1% MoE; for how much could you sell this information (either one time, or periodically) to a financial company? I once briefly chatted with a man who ran a company tha…
> I'm sure it is very context dependent, but I'm very interested. For example, let's say you have information that allows you to forecast the earnings of a publicly traded company to within 1% MoE; for how much could you sell this information (either one time, or periodically) to a financial company?
It is context dependent, but I can give a basic idea. In the example you've given, high four figures per customer per quarter, assuming you just give them a deliverable report once a month and the data is turnkey enough that many customers (30 - 40) can "subscribe" to it. For a fund that wants something more boutique, like exclusivity or a specific company, five figures becomes the floor.
The nature of the business is significant upfront work (setup of data collection and analysis model) followed by infrequent tweaks going forward. Lucrative data on a single hot company could be sold for mid - high six figures per year with very high profit margin for as long as the data is available and the analysis model is both functional and interesting (i.e. delivers an insight not already priced into the market).
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#183Index funds will almost always outperform actively managed funds. They are the best choice for the layman investor. An excellent book on this topic is The Little Book of Common Sense Investing by John Bogle. https://www.amazon.com/Little-Book-Common-Sense-Investing/dp...
"Rest Estate always goes up!" "Index funds will almost always outperform actively managed funds." Convenient investment vehicles should not stop you thinking. Index ETF were a great idea. But now everybody is pouring tons of money into them. Not sure this is a good idea, at least not on the scale how it is currently done. A stock is priced by supply and demand. There are stocks where there is basically very little re…
Index funds have to outperform active funds and traders in aggregate by definition. It's not a claim or debate, it's simple math. After savings on taxes and expenses, indexes represent the average + a fair bit more than other options. There is no feedback effect, except that more people indexing will lead to more trading arbitrage opportunities, which people will take and which doesn't hurt indexers, who will continue to take the market average return plus what they save in expenses and taxes. As an aside: the last place to get financial advice is Zero Hedge. Try this instead:
http://www.etf.com/sections/index-investor-corner/swedroe-wh...
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#184Question for financial types: For a few years I've owned a small selection of shares in FTSE companies (15 of them at the moment). I don't really do this scientifically, I just look for large, well-established companies where their shares look cheaper than long run, and buy those. (Partly I do this so I can see everyday companies that I own a tiny bit of). Is this practically equivalent to owning index-linked funds?…
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Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#185This does not surprise me. My personal experience with hedge fund managers is that they are good salesmen that peddle their financial expertise to clients, convincing them of their financial rock-star status (usually gained through a lucky investment or two). Paulson is a classic example. Wealthy individuals buy into it, especially those that are less educated (e.g. those that have inherited money), and happily alloc…
Nothing works forever but there are funds like Renaissance Technologies' Medallion which may just be getting heads for a long time but rather seem to have some secret sauce that works for a long time. Usually though they're not very large and don't seek out investments.
There are several options that have noting to do with competence that allow for such returns. The most obvious is feeding the fund using another fund. Luck is another as the best returns from the largest outlier taking high risks looks great especially if you ignore large initial losses.
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#186Okay so any leveraged real estate fund would have outperformed the S&P500, without the possibility of a sudden margin call Any leveraged bond fund should have been able to as well, a carry trade from 2012 in European government bonds should have made many hundreds of percent A futures fund should have been able to A commodity options should have made monumental gains over the 85% that the S&P500 gave in 10 years, hon…
Quibble... Buffet doesnt buy bad companies. He buys solid companies that have excellent management and for some reason are inexpensive at the time of purchase.
Not anymore. Before he became the baby boomer conservating investor guru he made his millions borrowing in leveraged investments to buy the "cigar butts" of the equities market. Companies which had poor management.
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#187Question for financial types: For a few years I've owned a small selection of shares in FTSE companies (15 of them at the moment). I don't really do this scientifically, I just look for large, well-established companies where their shares look cheaper than long run, and buy those. (Partly I do this so I can see everyday companies that I own a tiny bit of). Is this practically equivalent to owning index-linked funds?…
There's two parts to this answer. First, the numbers thrown around are that once you own 15 diversified stocks you have reduced your portfolio risk by 70 percent. That's not bad. At this point your volatility may not be that different than a market index. Of course it's different for every set of stocks, but I think this is a safe-ish guideline. So in that sense you are not missing out a whole lot. Second, and more i…
I wrote out a whole response (then deleted it) with that link in mind - perfect example with the other commenter's number (15). Didn't even know Bernstein's old site was still on anyone else's radar!
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#188Okay so any leveraged real estate fund would have outperformed the S&P500, without the possibility of a sudden margin call Any leveraged bond fund should have been able to as well, a carry trade from 2012 in European government bonds should have made many hundreds of percent A futures fund should have been able to A commodity options should have made monumental gains over the 85% that the S&P500 gave in 10 years, hon…
So do you mind telling us which funds have a 100% certainty of >S&P500 performance over the next few decades please?
sure, pretty much any options selling fund, pretty much any carry trade fund, pretty much any leveraged bond fund
you can sell options on the S&P index to amplify returns of passive S&P500 investing
if you blow up, you didn't manage risk right. rinse and repeat. the returns should be higher, especially over a decade.
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#189The problem IMO is that stocks outperform bonds in the first place because of the debt-based economy. I suspect it is part of why Glass-Steagell was repealed in the first place.
Stocks should outperform bonds because they are riskier than bonds. Why would you expect or want it to be otherwise?
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#190So clearly, for the individual, the optimal strategy is to simply invest in index funds and just wait. But a new question that is being raised is: "what happens if everyone only invests in index funds?"
This has been answered a thousand times. Everyone will never invest in index funds. What will happen is more and more people will invest in index funds until there are so little people actively investing in the stock market that the ones that do are able to beat it. However, them beating it will only net (after their fees) the same returns as index funds thus striking a balance where index funds match the performance…
True with a caveat: they will never balance completely because of taxes and fees - active traders and funds will always underperform in aggregate.