Bottom just fell out of Nikkei • Hacker News Board

Re: Bottom just fell out of Nikkei

#101

Post by geekman » Tue, Mar 15, 2011, 9:39 AM UTC

seanalltogether wrote: post #87

blhack wrote: post #41

It seems like everybody in this thread is saying "No duh, invest in Japan right now!" The assumption is that the market will turn around, and anybody who buys into Japanese companies stands to make a lot of money. If this is the case, then why are the prices going down at all? Are other investors really that ignorant?

Learn the lesson of what happened to BP after they bottomed out. http://www.google.com//finance?chdnp=1&chdd=1&chds=1...

> Learn the lesson of what happened to BP after they bottomed out.

By buying the panic, in effect you are selling out "of the money put options" to the rest of the market. In effect you are selling insurance policies saying things are not worse than they look. The performance characteristic of selling OOTM options is that most of the time you make money. But...

Once in a while you lose your shirt. Ask Victor Niederhoffer. What is there is a catastrophic meltdown and Tokyo has to be evacuated? What will the Nikkei be worth then? What about all the people who bought dot.com stocks after they fell 50% because they were "cheap".

When considering the merits of investment, it is worth asking:

1. Am I selling insurance to someone without realizing it?

2. Does my strategy amount to nothing more than leverage? Leverage works well in rising markets and works very badly in falling markets.

3. Are there hidden risks I am not aware of but someone else is? Or as Buffett puts it, have you been playing poker for an hour and still haven't worked out who the patsy is? (It's probably you).

4. Are you taking uncompensated risks like putting 1/3 of your net worth into one company when you could be diversified for no cost?

Re: Bottom just fell out of Nikkei

#102

Post by [deleted] » Tue, Mar 15, 2011, 10:06 AM UTC

blhack wrote: post #41

It seems like everybody in this thread is saying "No duh, invest in Japan right now!" The assumption is that the market will turn around, and anybody who buys into Japanese companies stands to make a lot of money. If this is the case, then why are the prices going down at all? Are other investors really that ignorant?

[deleted]

Re: Bottom just fell out of Nikkei

#103

Post by artsrc » Tue, Mar 15, 2011, 10:10 AM UTC

geekman wrote: post #101

seanalltogether wrote: post #87

Earlier quoted context omitted.

Learn the lesson of what happened to BP after they bottomed out. http://www.google.com//finance?chdnp=1&chdd=1&chds=1...

> Learn the lesson of what happened to BP after they bottomed out. By buying the panic, in effect you are selling out "of the money put options" to the rest of the market. In effect you are selling insurance policies saying things are not worse than they look. The performance characteristic of selling OOTM options is that most of the time you make money. But... Once in a while you lose your shirt. Ask Victor Niederho…

I completely agree with the diversification part, putting much of your portfolio in correlated risks does not need to be rewarded by an efficient market.

On the other hand out of the money put options have a limited upside.

Japan has had a crap economy for a generation, and this disaster may result on them being on a whole new course with massive upside.

Re: Bottom just fell out of Nikkei

#104

Post by tnorthcutt » Tue, Mar 15, 2011, 10:11 AM UTC

mixmax wrote: post #14

The Nikkei is now at a ten year low

To be fair, it was almost at a 10 year low before the earthquake, and is barely lower now than it was in August.

Re: Bottom just fell out of Nikkei

#105

Post by netcan » Tue, Mar 15, 2011, 10:24 AM UTC

wheaties wrote: post #2

Time to start buying. Bet Buffet is taking a look at all those wonderful Japanese companies who moats are wide, have good fundamentals, and produce reasonable free-cash flow. Hope his "itchy trigger finger" found a few targets. My IRA could use a boost after the last few years.

I remember buffet saying in some interview that Japan makes great products and has a great economy but they don't make great companies, from the investor's perspective.

Re: Bottom just fell out of Nikkei

#106

Post by secretasiandan » Tue, Mar 15, 2011, 11:46 AM UTC

wheaties wrote: post #2

Time to start buying. Bet Buffet is taking a look at all those wonderful Japanese companies who moats are wide, have good fundamentals, and produce reasonable free-cash flow. Hope his "itchy trigger finger" found a few targets. My IRA could use a boost after the last few years.

You must think markets are pretty inefficient.

Can you explain why this is time to start buying?

If you can explain why people are selling so much so fast right now, that might help your argument.

Re: Bottom just fell out of Nikkei

#107

Post by Duff » Tue, Mar 15, 2011, 11:51 AM UTC

blhack wrote: post #41

It seems like everybody in this thread is saying "No duh, invest in Japan right now!" The assumption is that the market will turn around, and anybody who buys into Japanese companies stands to make a lot of money. If this is the case, then why are the prices going down at all? Are other investors really that ignorant?

People behave irrationally during panics. Through a little bit of cleverness on my part and alot of luck I found myself sitting on cash when Lehman collapsed.

So faced with the prospect of fiscal apocalypse or (I had friends pulling money out of banks) the buying opportunity of the century, I bought a bunch of equities that were punished by the collapse, and made a bunch of money.

Re: Bottom just fell out of Nikkei

#108

Post by wheaties » Tue, Mar 15, 2011, 11:55 AM UTC

secretasiandan wrote: post #106

wheaties wrote: post #2

Time to start buying. Bet Buffet is taking a look at all those wonderful Japanese companies who moats are wide, have good fundamentals, and produce reasonable free-cash flow. Hope his "itchy trigger finger" found a few targets. My IRA could use a boost after the last few years.

You must think markets are pretty inefficient. Can you explain why this is time to start buying? If you can explain why people are selling so much so fast right now, that might help your argument.

Yes and no. What I see is all of Japans equities moving in lock step regardless of where their manufacturing or distribution centers are actually geographically located. Much like Toyota or one of our own blue chips some of these companies are headquartered in Japan but exist all over the world. Those are the companies whose fundamentals do not reflect an equities plunge like we are seeing.

Re: Bottom just fell out of Nikkei

#109

Post by steveplace » Tue, Mar 15, 2011, 12:22 PM UTC

REMEMBER: This is probably not the best place to get investment advice. Everyone's got an opinion but it's different when you've got actual cash on the line.

Re: Bottom just fell out of Nikkei

#110

Post by Yrlec » Tue, Mar 15, 2011, 12:40 PM UTC

pero wrote: post #85

carsongross wrote: post #84

Earlier quoted context omitted.

Only an economist can consider a theory like that for more than a few seconds and not laugh hysterically. As Tom Woods has said, following this logic, the best thing we could do for our economy is build a huge armada of amazing battle ships, have Japan do likewise, then float them to the middle of the pacific and, after evacuating them (surely, the loss of human life is not a necessary component in this economic mode…

Empiricism is not on your side. The richest country in the world spends more than its fair share on 'a huge armada of amazing battle ships', actually, as much as everyone else on the planet put together, and also actively seeks out remote spots of the planet to blow stuff up in. Rinse, repeat, very rich.

Correlation != causation