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What I Learned from Losing $200M (2015)

nautil.us

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Re: What I Learned from Losing $200M (2015)

#81

Post by user5994461 »

ChuckMcM wrote: post #19
nathan_f77 wrote: post #16

Earlier quoted context omitted.

You can retire comfortably almost anywhere with $2M. 3% is an extremely safe "withdrawal rate" if you invest the money in index funds, and that gives you an annual income of $60k. That's a solid middle-class income anywhere in the US, and luxury in South-East Asia.

Apropos of nothing, health care before age 65 in the US (prior to the ACA, and possibly again) peaked at about $36K/year (age 64). That leaves you with $24K of your $60K to live on. Not saying it isn't doable, but it isn't as much as it once was. All I'm saying is that retirement planning is a bit weird because if you do it when you're 20 you might miss some expenses that older people have that you are not yet aware…

>>> That leaves you with $24K of your $60K to live on. Not saying it isn't doable, but it isn't as much as it once was.

Depends if you have to pay a rent or not.

Re: What I Learned from Losing $200M (2015)

#82

Post by kinkrtyavimoodh »

yters wrote: post #29
ryandrake wrote: post #13

Earlier quoted context omitted.

> Systematic profits are feasible year over year... But only to the select few who are in the right product or looking at the market in the right way. You seem to be falling for the same myth: That "certain wizards" can get +EV. Every casino on Earth makes money from this myth. I believe that there are no wizards in the stock market (or in business in general), and everyone's gains and losses vs the total market are…

If that student flipped 200 heads in a row it isn't survivorship bias. That student has a two headed coin.

Even if the class had 200 students the winner didn't need to flip 200 in a row. On average, half the students of the class would get Heads in each iteration, which means that this experiment would go on only for lg(200) iterations, which is only 7. Flipping 7 Heads in a row is not all that difficult to imagine.

Re: What I Learned from Losing $200M (2015)

#83

Post by ChuckMcM »

user5994461 wrote: post #81
ChuckMcM wrote: post #19

Earlier quoted context omitted.

Apropos of nothing, health care before age 65 in the US (prior to the ACA, and possibly again) peaked at about $36K/year (age 64). That leaves you with $24K of your $60K to live on. Not saying it isn't doable, but it isn't as much as it once was. All I'm saying is that retirement planning is a bit weird because if you do it when you're 20 you might miss some expenses that older people have that you are not yet aware…

>>> That leaves you with $24K of your $60K to live on. Not saying it isn't doable, but it isn't as much as it once was. Depends if you have to pay a rent or not.

True enough, but could say more about what a housing situation without cost would look like?

Re: What I Learned from Losing $200M (2015)

#84

Post by user5994461 »

ChuckMcM wrote: post #83
user5994461 wrote: post #81

Earlier quoted context omitted.

>>> That leaves you with $24K of your $60K to live on. Not saying it isn't doable, but it isn't as much as it once was. Depends if you have to pay a rent or not.

True enough, but could say more about what a housing situation without cost would look like?

A trader who made millions of dollars would diversify his assets, especially if he lived during the last 2 decades and thus had access to cheap properties.

Re: What I Learned from Losing $200M (2015)

#85

Post by yters »

the_cat_kittles wrote: post #73
yters wrote: post #63

Earlier quoted context omitted.

Probabilities can be so small they are only possible in a mathematical sense, but impossible practically speaking. When faced with such small probabilities we can use Bayes theorem to infer a better explanation than chance, such as a two headed coin.

lol @ u spouting nonsense. i think your trying to say you can use bayes to adjust for small sample sizes, like with beta-binomial models, or comparing posterior distributions for different models and params.

Two sequences of coin flips:

HHHHHHHHHHHHHHHHHHHHHHHHHHHHHH

THTHTHHTHTHHHHHHHTTTHTHHHTHHTT

Which was generated by fair coin, which by 2 headed? How did you decide?

Re: What I Learned from Losing $200M (2015)

#86

Post by mrchicity »

hidenotslide wrote: post #48
ryandrake wrote: post #34

Earlier quoted context omitted.

Those would be the few on the right-most side of the distribution who flipped heads 10 times in a row. As soon as they inevitably flip tails, we'll post facto find others who have gotten consistent returns and declare them to be the ones with the secret sauce.

Virtu trades 3 million shares a day, they are way out on the bell curve in terms of statistical significance. There are of course many risks to their business model, e.g. high fixed costs, competition, regulatory risk, technical malfunctions, etc. They are "lucky" to be in a position to capitalize on the opportunity, but investment luck does not play a role on a day to day basis.

Virtu trades far more than 3 million shares a day. They may even make 3 million trades a day.

If you've seen a system like this in action, it's a beautiful thing to behold and cannot be mere luck. Transactions stream in constantly. It's not just one big, lucky bet, but thousands of tiny bets with a slight edge. A plot of profit & loss with respect to time looks like an almost perfectly smooth upward line. And if you're good, you can do this every single day for years and years.

Still, I wouldn't say guys like that have beaten the market in a real way. I've certainly never felt like I did. This style of trading doesn't need outside capital and can't scale. If I gave you $100 and armed you with a scalping bot, I bet you could easily turn it into $200 buying hot tickets on Ticketmaster and reselling them. But would anyone call you a genius trader? Could you do it with a million? A billion?

As a business net of all costs like employee compensation and technology, returns to owners are pretty lousy. Compare owning Virtu stock to an index fund since their IPO. Ouch.

Re: What I Learned from Losing $200M (2015)

#88

Post by inthewoods »

Danihan wrote: post #36
brianpgordon wrote: post #33

Earlier quoted context omitted.

That kind of stock picking is dangerous. First, it's easy to look around your little bubble and see that people are lining up at your local Chipotle or that people use Google for solving tech support problems, and conclude that Chipotle and Google are taking off. They may be not be doing as well in other locales/sectors. And second, how do you know that these signs of promise aren't already priced in? If you can see…

I'm sure you're correct, all stock picking is dangerous though. I'd assert that my style is the least dangerous. > look around your little bubble I didn't (and don't) have a bubble. In fact, I frankly despise the Bay Area and SV because it constantly tries to put you in a liberal / wealthy bubble. >If you can see signs that Chipotle is doing well, so can everyone else. Apparently not, though. They doubled on IPO but…

>I'm sure you're correct, all stock picking is dangerous though. I'd assert that my style is the least dangerous.

Why? Seems to me that all stock picking has the exact same level of risk.

Re: What I Learned from Losing $200M (2015)

#89

Post by 0x00000000 »

ChuckMcM wrote: post #19
nathan_f77 wrote: post #16

Earlier quoted context omitted.

You can retire comfortably almost anywhere with $2M. 3% is an extremely safe "withdrawal rate" if you invest the money in index funds, and that gives you an annual income of $60k. That's a solid middle-class income anywhere in the US, and luxury in South-East Asia.

Apropos of nothing, health care before age 65 in the US (prior to the ACA, and possibly again) peaked at about $36K/year (age 64). That leaves you with $24K of your $60K to live on. Not saying it isn't doable, but it isn't as much as it once was. All I'm saying is that retirement planning is a bit weird because if you do it when you're 20 you might miss some expenses that older people have that you are not yet aware…

It's morbid, but why even have insurance at that age? Any major accident or stroke or whatever could be close to the end for you anyway and you still have the 2M if you absolutely need to pay
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