Stock Market Returns Are Anything but Average • Hacker News Board

Re: Stock Market Returns Are Anything but Average

#421

Post by dcow » Sat, May 01, 2021, 9:19 PM UTC

hattmall wrote: post #319

dcow wrote: post #237

Earlier quoted context omitted.

The problem is options/derivatives trading. That is straight up gambling. There’s a meta market where you bet on the behavior of the market...

It is ALL gambling, options are just another instrument, they can make your gamble more risky or less risky depending on how you use them. Except in very rare cases stocks are entirely based on what investors think someone else is willing to pay in the future.

When I buy TSLA stock I’m not gambling on the future of Tesla. I’m investing in electric vehicles. So it’s “value investing” insofar as that’s my motive for investing. Sure I could gamble with plain stocks in the market, but thats not my motive or goal. Others, sure.

Of course stocks are based on what investors think they’re worth. Thats the whole point. It’s not gambling. Tesla is worth a lot of money because people think it is. If you’re susceptible to fomo hype trains and looking for a quick buck, you’re looking at the market as a slot machine, no doubt.

Stocks pay owners other than their value in the market, too. Capitalists look to make money off the market. It doesn't mean it’s all gambling. That’s a little reductive.

Re: Stock Market Returns Are Anything but Average

#422

Post by egman_ekki » Sun, May 02, 2021, 7:53 AM UTC

akomtu wrote: post #272

ericmay wrote: post #170

Earlier quoted context omitted.

> What is the point of such trivia? That most of the profit or loss happens during the days of high volatility? Simply that you shouldn't try and time the market, but continue to "buy and hold". The likelihood of picking these exact 10 or 20 days is near 0, so it's an irrational thing to do.

I'd politely disagree. The massive fall and recovery around March 2020 was easy to predict, so I did and made a handsome amount of money. I mean, if a small asteroid fell on an important trade route or if another serious pandemic began, would you seriously suggest to just hold the stocks?

Curious to learn more, if you don't mind sharing. I wrongly assumed things would get quite a bit worse than they were at the point when sp500 turned back up. How did you know that was the bottom? Fundamental analysis? Or were you buying continuously on the way down?

Re: Stock Market Returns Are Anything but Average

#423

Post by rorykoehler » Sun, May 02, 2021, 8:32 AM UTC

ChrisLomont wrote: post #340

rorykoehler wrote: post #164

Earlier quoted context omitted.

Cash is being decimated by asset inflation before our very eyes.

>Cash is being decimated by asset inflation before our very eyes. Not really - 10% change in 5 years is expected. https://fred.stlouisfed.org/series/CPILFESL

I'm not sure what relevance that has to my assertion? If a/the market goes up 50% you'd be poorly advised to hold cash rather than put it in the market.

Re: Stock Market Returns Are Anything but Average

#424

Post by skystarman » Sun, May 02, 2021, 4:36 PM UTC

kaydub wrote: post #367

skystarman wrote: post #205

Earlier quoted context omitted.

The thing is there's a FRACTION of a percentage of people who are "good at picking stocks". Most PROFESSIONAL stock pickers don't beat the market. And those that do, a tiny fraction can do it consistently over a 5-10 year time frame. This is backed up by decades of data. But we still have millions of people who apparently think they are smarter than the thousands of professional stock-pickers who have MAs, PhDs and y…

It has nothing to do with me thinking I'm smarter than all those guys. The market is irrational. I'm counting on being luckier than those guys more than anything.

That's a certainly more rational position than believing your are smarter than the thousands of people with PhDs in finance or CS who pick stocks full time.

Any yes, what people on WallStreetBets are doing is gambling. Which is perfectly fine, I just wish more would acknowledge it.

Re: Stock Market Returns Are Anything but Average

#425

Post by mordymoop » Mon, May 03, 2021, 3:11 PM UTC

arisAlexis wrote: post #111

Taleb in his Black Swan book makes exactly the counter-point for this type of article that uses statistics and curves to predict and explain something that doesn't fit laws of averages and bell curves. Interesting read. The statistics of the article are just observational without any kind of predictive power or meaning.

I think the way to phrase it is something like: We don't know what the heck is happening, actually. We call this "randomness." But it is not randomness in the sense of truly, fundamentally unpredictable, nonsensical things happening. It is randomness only in the sense that almost everybody fail to see important things coming. But usually you could, in principle, see important things coming. And often a handful of people do, but nobody listens to them.

You use bell curves when you radically doubt your ability to see important things coming, and just assume that a sort of vaguely similar distribution of types of things will keep happening.

Taleb argues, correctly, that this is actually a pretty stupid assumption because new, weird, statistically unpredictable important things happen all the time.

I like Taleb's critique but I'm not satisfied with his answer. Radical skepticism in your ability to see important things coming ... probably shouldn't stop you from trying anyway, using whatever tools you decide, using your reason, are the most useful. You can't predict black swans but you have to try. One of the tools here would be leveraging statistical regularities in past performance. Another would be having some kind of thesis about how solar power, or crypto, is gonna be big, for Reasons, which violates past statistical behavior.

It definitely seems suggestive that hedge funds don't seem to outperform index funds, over almost any timescale you care to choose. Everybody is doing the best they can; Taleb points out that this still isn't very good; he's right, but what else are you gonna do?

Re: Stock Market Returns Are Anything but Average

#426

Post by thehappypm » Mon, May 03, 2021, 3:24 PM UTC

pradn wrote: post #245

thehappypm wrote: post #198

Earlier quoted context omitted.

Cryptocurrencies are basically stocks in nothing.

Proof-of-work crypto prices are based on 1) mind-share 2) sentiment/momentum 3) institutional backing (hedge funds and companies legitimizing them) 4) price of electricity 5) cost per hash 6) hardware supply 7) legality/illegality/regulation. Proof-of-stake currencies only lack #5, cost per hash. What I'm trying to say is that there's components to the price that can drive purchase/sell decisions.

No, proof-of-work crypto prices are based on supply and demand. Simple as that.

Re: Stock Market Returns Are Anything but Average

#427

Post by ChrisLomont » Mon, May 03, 2021, 11:28 PM UTC

rorykoehler wrote: post #423

ChrisLomont wrote: post #340

Earlier quoted context omitted.

>Cash is being decimated by asset inflation before our very eyes. Not really - 10% change in 5 years is expected. https://fred.stlouisfed.org/series/CPILFESL

I'm not sure what relevance that has to my assertion? If a/the market goes up 50% you'd be poorly advised to hold cash rather than put it in the market.

No one should ever hold cash long term as an investment, but the graph shows pretty clearly there is nothing at the moment that has not been the trend for literally 50+ years.

Calling that "Cash is being decimated by asset inflation before our very eyes" seems to be undue hysteria.

Re: Stock Market Returns Are Anything but Average

#428

Post by pradn » Tue, May 04, 2021, 4:40 PM UTC

thehappypm wrote: post #426

pradn wrote: post #245

Earlier quoted context omitted.

Proof-of-work crypto prices are based on 1) mind-share 2) sentiment/momentum 3) institutional backing (hedge funds and companies legitimizing them) 4) price of electricity 5) cost per hash 6) hardware supply 7) legality/illegality/regulation. Proof-of-stake currencies only lack #5, cost per hash. What I'm trying to say is that there's components to the price that can drive purchase/sell decisions.

No, proof-of-work crypto prices are based on supply and demand. Simple as that.

Yes, but supply and demand can be further broken down into these and other factors.

Re: Stock Market Returns Are Anything but Average

#429

Post by TheHypnotist » Tue, May 04, 2021, 6:32 PM UTC

sojournerc wrote: post #377

jonfw wrote: post #261

Earlier quoted context omitted.

Supply is mostly limited because demand is up among millennials and material shortages have increased costs and delayed construction.

I'll agree there is natural price pressure upward, but the recent acceleration is concerning, both in equities and real estate values. Millennials were buying houses before all this too (I am and have) without this level of inflated prices (depending on where you are and how "free" the market is).

Well that's exactly it. In my area, inventory is scarce because of an influx of people who are used to paying an arm and a leg to live. In certain counties, prices are up 20-30% simply due to demand. Speaking with my own realtor, competition bidding is very common now. Rarely do you see a house go for asking or below asking.

Re: Stock Market Returns Are Anything but Average

#430

Post by ericmay » Thu, May 06, 2021, 2:01 PM UTC

egman_ekki wrote: post #422

akomtu wrote: post #272

Earlier quoted context omitted.

I'd politely disagree. The massive fall and recovery around March 2020 was easy to predict, so I did and made a handsome amount of money. I mean, if a small asteroid fell on an important trade route or if another serious pandemic began, would you seriously suggest to just hold the stocks?

Curious to learn more, if you don't mind sharing. I wrongly assumed things would get quite a bit worse than they were at the point when sp500 turned back up. How did you know that was the bottom? Fundamental analysis? Or were you buying continuously on the way down?

Well, I can't speak for the person you are replying to, but think about a company like this (in general) - has something changed such that the new price (usually a drop) makes sense?

Take Amazon - down 15% or something. The virus is there yet, but is Amazon really worth 15% less? Won't people shop online? There's no way Amazon is going bankrupt, and there's no way that the U.S. would let companies like this fail over the virus, so is it really worth 15% less?

You don't have to time the exact moment of the bottom, you just find it once you see double digit loses in extremely good and valuable companies who are pulled down with the market. Airlines? Yea probably wouldn't have been an ideal buy, though if you waited long enough you've rebounded on them. But it seemed pretty safe to buy the big tech companies, Berkshire, etc. when they were experiencing double-digit percentage market losses over a likely temporary phenomenon.

Now, was it possible that things would have gotten much, much worse? Yea. So OP and myself could have been wrong, but instances like this are a bit of informed gambling, if you will.