I am on a roll. This article plays this out like poor investor lost his money in a market downturn. My view is this; they are trading derivatives. This is known to be very risky. It just goes to show how a shiny education was hired, when in reality nothing was known / gained here other than a market bump. Sad waste of an education IMO.
What I Learned from Losing $200M (2015)
111–120 of 136 posts
Re: What I Learned from Losing $200M (2015)
#112Earlier 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…
The stock market is not random though. If you have a person who previously worked at the fda specializing in kidneys for example, having that person analyze which kidney drugs/devices they think will get approved is not luck. People can have an informational advantage and use it to make intelligent trades.
You would be right if the stock prices actually 1:1 tracked business success. The reality is that they do not. The are an approximation of future growth, and that adds a great deal of uncertainty, sometimes enough to even make your anecdote moot.
Re: What I Learned from Losing $200M (2015)
#113Earlier quoted context omitted.
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?
You were a bit ranting in your previous response, but let me try to answer this. It is actually impossible to tell, given your sample, because we do not know the sample size. Given infinite samples, it is guaranteed that both of these runs are going to happen for a fair coin. On the other hand, if both are representative of full sample size, the later is clearly the fair coin because it more closely approximates 50/50.
Re: What I Learned from Losing $200M (2015)
#114Earlier quoted context omitted.
peaked at about $36K/year So leave USA for a while or forever, if you need to pay $3000 a MONTH for insurance. WTF? Unless you have a very, very specific disease everything will be solved in many other countries, at a lot less. By paying cash if needed.
Having to pay $3k per month for health reasons sounds like the very disaster buying health insurance was supposed to guard against. If that $3k were paying a mortgage debt, it would be servicing more than $600,000!
If that $3k were paying a mortgage debt, it would be servicing more than $600,000!
Sadly, $600K is nothing in healthcare costs, at least retail price. A snake bite can cost $153K https://www.cnbc.com/2015/07/21/hospital-appears-to-charge-1... https://www.cbsnews.com/news/rattlesnake-selfie-results-in-a...
Re: What I Learned from Losing $200M (2015)
#115Earlier quoted context omitted.
>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.
If the stock market were truly random, then yes, all stock picking would be equally risky. But the stock market is a voting machine voting on the future of companies, and is definitely not random. So you could look at two stock picking strategies: 1) throw darts at the Wall Street Journal and buy whatever it hits, 2) buy new companies that are being used by lots of people in your area (the parent's strategy). #1 shou…
But #2 historically does not give better returns. Since the information is already public it has already been included in the price of the stock. The vast majority of investors are not smarter than Wall Street.
As someone who has done some gambling in the stock market using this kind of thinking it has not been a good strategy compared to just buying and holding index funds. Sometimes I get lucky and sometimes I get unlucky buying individual stocks but my most best returns have been buying broad index funds and holding them.
Re: What I Learned from Losing $200M (2015)
#116Earlier quoted context omitted.
Solomonoff induction and universal probability.
P(all heads|double headed coin) = 1 P(all heads|fair coin) = 2^{-L} Applying Bayes gets P(double headed coin|all heads) >> P(fair coin|all heads) for a long enough sequence.
thats what i suggested originally, essentially
Re: What I Learned from Losing $200M (2015)
#117As a junior trader navigating the markets during that time I noticed that nobody has a clue about anything. Pundits, researchers, analysts, Junior guys, Senior guys... They all pretend to know. I'm not suggesting the markets are truly random. 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. I suppose it's those guys th…
> 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…
You got a nice story out there. Random, bla bla bla...
How instead you come up with real numbers? Like you pick a stock or say an index like the Nasdaq and analyse if its movements are truly random or not?
Also you are aware that true random might mean perfect distribution? You don't know whether the tick is up or down but you know you'll have a distribution that is 50/50 up or down. So you can market make based on it (buy and sell on the same time).
There are more to trading than day trading: Collecting premium on futures or options, arbitrage, collecting interest on bonds, etc...
Re: What I Learned from Losing $200M (2015)
#118I was working in the crude oil / nat gas options pit at the NYMEX during the summer of 2008 when these trades went down (where much of Mexico's hedge was traded but not necessarily the author's portion.) A highly ironic part of this story is that the traders in the pit selling to Mexico thought they were getting an incredible deal. Both because the price of crude was so high at the time but also because they were abl…
Thank you for sharing this! One outsider/laymen question: > When one of these brokers came into the pit and yelled out "what's the market on DEC '9 crude" traders guessed he was hedging for mexico and quoted a price a full dollar above where the market was at > The brokers had no choice but to accept this higher price. I don't understand this. They didn't say they want to buy or sell anything. Why were they obligated…
I think they meant it's because traders knew that these brokers wanted to buy (to hedge), so the price was only going to go up further.
Re: What I Learned from Losing $200M (2015)
#119Earlier quoted context omitted.
And yet, you have rentec medallion, virtu, buffet, gross and quite a few others who have quite consistently beat the market. Each has their own secret sauce, and you won’t get their returns just by sitting at home and picking stocks. But they do prove that the market is far from random.
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 and others (that aren’t as public, some of which i’ve Worked for) flip coins in the order of 1,000,000 times a day, and have had less than 30 days of losses in 15 years; if you believe that this is pure luck then I suspect we cannot reach any agreement.
Re: What I Learned from Losing $200M (2015)
#120Earlier quoted context omitted.
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?
Both sequences are equally improbable, but they're two outcomes among 2^30 others. What you want to be comparing is the sequence consisting entirely of heads to all the other potential outcomes. If it is a fair coin toss, the chance of getting all heads in a sequence of 30 is 1/1073741824. So is the chance of getting any one other sequence, but not any other sequence.