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Trading halted as U.S. stocks plummet

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Re: Trading halted as U.S. stocks plummet

#901

Post by _7fvc »

aeternum wrote: post #874
_7fvc wrote: post #782

Earlier quoted context omitted.

I think the dynamic of the US equity market has changed. In the old days, you can balance your portfolio between stock and bond. This is portfolio advice from Benjamin Graham's The Intelligent Investor. We can no longer do this because interest rates are heading to 0. Bond investors don't make money from interest rates. Bond traders benefit from rate drop. Bond was an investment. It's now destroyed. We end up with ca…

The counter-argument to this is that even with the money being pumped into the market by the central banks, we are not seeing significant inflation in consumer goods. This implies that the money is being put to work efficiently and resulting in productivity and QoL improvements for society as a whole.

We have not seen inflation. But we're seeing slow growth and negative interest rate. These are signs of diminishing returns. The market has lost its check-and-balance. Bond and lending were supposed to carry risk and skin in the game. Right now, overall growth is delivered through the Fed pumping money. There is no check-and-balance.

With this crisis, governments will likely pump more money. That'll distort the market further.

Re: Trading halted as U.S. stocks plummet

#902

Post by manigandham »

FabHK wrote: post #752
manigandham wrote: post #731

Earlier quoted context omitted.

Note that report is Vanguard marketing material and most managed funds have specific mandates (like maintaining a certain volatility or investing in certain securities) other than maximizing gains. This is why hedge funds underperform indexes in bull markets but beat them in turbulent times.

> This is why hedge funds underperform indexes in bull markets but beat them in turbulent times. Agreed on the first part; I’d want to see hard statistics (after fees) on the second part (and, no, citing the 3 or so famous exceptions that are closed to outside investors and might have used illegally obtained insider information doesn’t invalidate the larger point).

Hedge funds trade gains for consistency. They don't publicly report numbers though and aren't meant to be public funds (that's what ETFs are for) so it's hard to get full stats, but it's common knowledge in finance.

Re: Trading halted as U.S. stocks plummet

#903

Post by darkerside »

anm89 wrote: post #872
ttul wrote: post #625

I notice that there are many commenters here offering opinions on the future price of equities. Note that nobody has any idea where equity prices will be in one day, never mind one year or ten years' time. As a retail investor (i.e. not extremely rich), you can't gain any advantage over the market that overcomes your transaction costs. So relax. There's nothing to do here. If you're contributing to a retirement fund,…

>Note that nobody has any idea where equity prices will be in one day, never mind one year or ten years' time This is more or less true. > As a retail investor (i.e. not extremely rich), you can't gain any advantage over the market that overcomes your transaction costs. This is patently absurd. It's an easily falsifiable statement which is a rare feat in economics. On average, the the average retail investor will not…

Half of people do better than average...

Re: Trading halted as U.S. stocks plummet

#904

Post by manigandham »

nl wrote: post #800
manigandham wrote: post #731

Earlier quoted context omitted.

Note that report is Vanguard marketing material and most managed funds have specific mandates (like maintaining a certain volatility or investing in certain securities) other than maximizing gains. This is why hedge funds underperform indexes in bull markets but beat them in turbulent times.

This is why hedge funds underperform indexes in bull markets but beat them in turbulent times. Hedge funds have only outperformed the market twice since 2008. Once was during the financial crisis of 2008 (-19% vs -37%) and once was 2018 (-4.07 vs -4.38). It's unclear what benefits you are getting here.

That aligns with what I said, although there are plenty of private hedge funds that don't report their returns. The benefit varies for each client.

An example would be a real-estate company that has holdings in a fund. Preservation and low volatility is far more important than raw gains and can be used as collateral to offset losses in physical property valuations.

Re: Trading halted as U.S. stocks plummet

#905

Post by senordevnyc »

kortilla wrote: post #799
senordevnyc wrote: post #570

Earlier quoted context omitted.

One of us is thinking about implied volatility wrong. My understanding is that it's not a measure of actual volatility, of either the underlying security or the option itself. Rather, it's a measure of how much the price reflects expected volatility in the underlying security. So in a security with ultra-low expected volatility (IV), options that are far out of the money will have much lower premiums than those where…

It’s still not optimism because it doesn’t imply direction. A low implied volatility just means lower expectation of big moves in either direction . A stock that has gone up like a rocket ship will have a high implied volatility despite no crashes or expectations of declines.

It’s not optimism that stocks will only go up, but it’s optimism that they won’t suddenly go up or down by too much, which is generally to be avoided unless you’re a trader.

Re: Trading halted as U.S. stocks plummet

#906

Post by ltbarcly3 »

santoriv wrote: post #704
totalZero wrote: post #667

Earlier quoted context omitted.

> As a retail investor (i.e. not extremely rich), you can't gain any advantage over the market that overcomes your transaction costs. Sure you can. You develop a system, learn how to find information, and make good predictions of future human behavior. You should learn the ins and outs of the product you're trading.

Very few active fund managers can consistently beat their indexes. Why do you believe you would be better over a long period of time? Vanguard Study of Actively Managed Funds vs Index Performance: https://personal.vanguard.com/pdf/ISGIDX.pdf

You are assuming fund managers want to maximize returns for investors. That is not the game they are playing at all.

Fund managers have pathological incentives. People won't hand them money if they say 'I'm going to just hold this money as cash for the next 1-5 years until the market goes completely irrational in a way that I can make you 5x returns, but in the meantime I'm going to charge you 2% per year on the balance'.

They have to put that money in to something or they won't be given money in the first place.

Secondly, funds play games with the money, because investors are not sophisticated and there is a ton of dumb money in retirement accounts. People look at the past returns and choose funds that have a high past rate of return. Fund managers know this, so they set up 15 funds with different strategies. One of them has a high rate of return, by luck, while 14 do much worse. Then they expand that fund 10x by quoting that high rate of return.

Fund managers can make more money by not optimizing how much money they make for you, if you measure them by how much money they get paid to manage other people's money you'll see they are playing that game very well.

Re: Trading halted as U.S. stocks plummet

#907

Post by ltbarcly3 »

IAmEveryone wrote: post #673
totalZero wrote: post #667

Earlier quoted context omitted.

> As a retail investor (i.e. not extremely rich), you can't gain any advantage over the market that overcomes your transaction costs. Sure you can. You develop a system, learn how to find information, and make good predictions of future human behavior. You should learn the ins and outs of the product you're trading.

The efficient market hypothesis would like a word with you.

The efficient market hypothesis says you will never find money on the ground, because someone will always find it before you.

Re: Trading halted as U.S. stocks plummet

#908

Post by nimblegorilla »

ttul wrote: post #625

I notice that there are many commenters here offering opinions on the future price of equities. Note that nobody has any idea where equity prices will be in one day, never mind one year or ten years' time. As a retail investor (i.e. not extremely rich), you can't gain any advantage over the market that overcomes your transaction costs. So relax. There's nothing to do here. If you're contributing to a retirement fund,…

> If you need to retire in the next five years, you should already have started moving out of equities. It's too late to change that now.

This is still a great time to reallocate your money. The SPDR fund that I invest in is still about where it was 1 year ago.

Re: Trading halted as U.S. stocks plummet

#909

Post by coolspot »

hoten wrote: post #893
anm89 wrote: post #872

Earlier quoted context omitted.

>Note that nobody has any idea where equity prices will be in one day, never mind one year or ten years' time This is more or less true. > As a retail investor (i.e. not extremely rich), you can't gain any advantage over the market that overcomes your transaction costs. This is patently absurd. It's an easily falsifiable statement which is a rare feat in economics. On average, the the average retail investor will not…

What does it mean for a market to have inefficiencies?

Seriousness of wuhan virus was known since end of January, but stock market ignored it completely, raging into all-time highs till February 20th.

Regular person could absolutely see it and be prepared. Even today market still doesn’t price in Italy-style or China-style lockdowns.

Re: Trading halted as U.S. stocks plummet

#910

Post by RhodesianHunter »

scottlegrand2 wrote: post #840
AgentOrange1234 wrote: post #832

Earlier quoted context omitted.

Well, so far...

And if it doesn't hopefully you stocked up on toilet paper and purell to trade in the new hellscape economy...

The market not bouncing back doesn't necessarily imply Armageddon. Just look at the Nikkei.
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