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Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds

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Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds

#271

Post by fallingfrog »

mrep wrote: post #36
baron816 wrote: post #32

So 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…

OR, since index funds are constantly getting 401(k) money dumped into them and therefore establish a reputation for a type of asset that has guaranteed returns with no risk, will develop into a massive asset bubble that will eventually go kablammo and take the retirement savings of half of the world down with them.

You have way too much faith in people making well informed decisions.

Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds

#272

Post by wyldfire »

wpietri wrote: post #67

And I'm just going to self-promote a bit and say that the bet was registered via a project I worked on, the Long Now Foundation's project Long Bets: http://longbets.org/ We've been going since 2002: https://www.wired.com/2002/05/longbets/ We are happy to host bets of long-term significance, and the minimum bet is only $200/side. I am glad to personally help shepherd people who are serious about bets to make sure you…

Crazy question: how can/does longbets interact with people's estates? Meaning -- what happens when one of the bettors is dead when the bet is settled?

Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds

#273

Post by lootsauce »

valuearb wrote: post #217
sytelus wrote: post #173

Earlier quoted context omitted.

You cannot perform above average without an information asymmetry. This asymmetry may be either because you found "bug" in financial system or insider information or custom data collection. The test for "good" funds is essentially what information asymmetry they have. If their answer is "good fund managers", "years of experience", "past performance" etc then it's not concrete asymmetry and most likely won't work over…

Buffett clearly disproves this theory. The reason is it's ignoring the overwhelming impact of bias and mal-incentives. Hundreds of thousands of investors have professional training in valuation techniques Buffett uses. But 99% don't make the same use of that skill as Buffett does, for reasons that include 1) they can't buy in to using valuation as their sole investment criteria. They want to be "smarter", thinking th…

Or perhaps Buffet has an information asymmetry. Don't you think when he is interested in buying a company that may not even be in the public market that the meetings, tours of facilities and financial due diligence represents a significant information asymmetry. This information is probably available to any who seek it but not practically to most.

Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds

#274

Post by mercutio2 »

d4l3k wrote: post #55
RandomInteger4 wrote: post #54

Earlier quoted context omitted.

I don't drive, but as a passenger, it is my understanding that the left lane is the fast lane and the right lane is to remain empty or mostly empty so cars can enter and exit the highway? Please correct me if I'm wrong. Regardless, if I ever get my license, I'm pretty much always going to avoid the highway as my anxiety cannot handle those speeds.

It's the law to keep to the right in most states. For instance, Washington state: http://app.leg.wa.gov/rcw/default.aspx?cite=46.61.100

I’m curious where you and other posters got the idea it’s the law in most states?

The only states west of the Mississippi for which this is true are Washington, Kansas, Oklahoma, and Louisiana. 10 if you look at the entire USA. Not nearly half by population or geographic area.

Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds

#275

Post by saalweachter »

blfr wrote: post #58
osrec wrote: post #30

This 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.

The trick is that any non-illegal investing strategy has finite potential, because it is exploiting some sort of mispricing by the market. Eventually either your buying and selling will correct the mispricing, or other investors will catch on and start doing the same thing, spreading the profits thinner among a larger crowd.

This means that if you want to continually beat the market, using any strategy beyond an impressive gut, you need to be continually developing new tricks and strategies, finding new market mispricings to exploit as your old ones dry up. It's like juggling: someone who is skilled or lucky can keep the balls in the air for quite a bit of time, but eventually you're going to run out of tricks, and the best you can hope for when that happens is returning to average returns.

Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds

#276

Post by bfuller »

duggan wrote: post #249
bfuller wrote: post #169

Earlier quoted context omitted.

you can exceed the speed limit by a certain amount while passing. at least here.

I'd like to see where that's written into a statute book; doesn't sound correct.

It's in the book you have to study when you get your license here in Texas :) you can exceed the limit by 5mph. Have a nice day!

Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds

#277

Post by wpietri »

wyldfire wrote: post #272
wpietri wrote: post #67

And I'm just going to self-promote a bit and say that the bet was registered via a project I worked on, the Long Now Foundation's project Long Bets: http://longbets.org/ We've been going since 2002: https://www.wired.com/2002/05/longbets/ We are happy to host bets of long-term significance, and the minimum bet is only $200/side. I am glad to personally help shepherd people who are serious about bets to make sure you…

Crazy question: how can/does longbets interact with people's estates? Meaning -- what happens when one of the bettors is dead when the bet is settled?

No, it's a great question.

We take the money up front and deposit it in a long-term investment account. Each bettor picks a charity, and the initial bet plus half the gains go to the winner's selected charity. (The charity thing is to get around US gambling laws.) If if that charity doesn't exist anymore (which is plausible given our longest current bet settles in 2150) then we pick a charity that's close in spirit.

Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds

#278

Post by wpietri »

0xJRS wrote: post #258
timb07 wrote: post #213

Earlier quoted context omitted.

If longbets.org was really serious about long-term bets, it wouldn't be restricting years to only 5 digits. Haven't they heard of the Y100K problem?

What is the Y100K problem. More importantly, who would they pay out at that point when both parties are dead

I'm pretty sure that's a joking reference to the Y2K problem: https://en.wikipedia.org/wiki/Year_2000_problem

Payout are to the bettor's selected charity. Or, if that's gone, the closest one we can find.

Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds

#279

Post by knodi123 »

wpietri wrote: post #277
wyldfire wrote: post #272

Earlier quoted context omitted.

Crazy question: how can/does longbets interact with people's estates? Meaning -- what happens when one of the bettors is dead when the bet is settled?

No, it's a great question. We take the money up front and deposit it in a long-term investment account. Each bettor picks a charity, and the initial bet plus half the gains go to the winner's selected charity. (The charity thing is to get around US gambling laws.) If if that charity doesn't exist anymore (which is plausible given our longest current bet settles in 2150) then we pick a charity that's close in spirit.

> We take the money up front and deposit it in a long-term investment account

A minimal-fee S&P 500 index fund, I hope. I think Buffett just proved that anything else would be fiscally irresponsible.

Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds

#280

Post by knodi123 »

timb07 wrote: post #213
wpietri wrote: post #67

And I'm just going to self-promote a bit and say that the bet was registered via a project I worked on, the Long Now Foundation's project Long Bets: http://longbets.org/ We've been going since 2002: https://www.wired.com/2002/05/longbets/ We are happy to host bets of long-term significance, and the minimum bet is only $200/side. I am glad to personally help shepherd people who are serious about bets to make sure you…

If longbets.org was really serious about long-term bets, it wouldn't be restricting years to only 5 digits. Haven't they heard of the Y100K problem?

If they had only used 4 digits, then in eight thousand years or so, longbets.org would have felt really stupid about having to hire a historical programming re-enactor to show us how our ancestors used to adjust the width of a database column.

But luckily they used 5 digits. 5 digits should be enough for anyone.

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