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I’m Still Going Long and Hoping the Markets Go Down

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Re: I’m Still Going Long and Hoping the Markets Go Down

#11

Post by rtf »

josefresco wrote: post #9
davidw wrote: post #5

http://economix.blogs.nytimes.com/2008/10/10/how-long-before... > Some may also wonder how long it will take the market to “recover.” It depends exactly what is meant by “recover,” of course, but one measure might be when the market returns to its pre-crash peak. The historical data is somewhat more distressing in this context. > After the Great Depression, it took 29 years — until 1958 — for the market to reach its…

The 'going back up' part is where all the money is made.

Exactly.

If you invested in the index, you break even over that period.

But if you invest in big winners(taking Apple and Microsoft for known examples in tech) you come out way ahead.

Re: I’m Still Going Long and Hoping the Markets Go Down

#12

Post by davidw »

DanielBMarkham wrote: post #8
Prrometheus wrote: post #6

Earlier quoted context omitted.

I remember seeing this graph not too long ago that showed the P/E ratio of the stock market took off in the '90s and it never came back to its historical average range. The graph predicted that the "real" value of the Dow was in the 7,000 - 8,000 range. The people passing around these graphs would have looked like cranky perma-bears a few years ago. Now they look down-right reasonable. It's not a crash, it's a readju…

Usually during a re-adjustment the market swings too far the other way by a few points. So I'd be looking for value stocks that have a P/E ratio that's overly low. Find some stock that's getting beaten up beyond the normal recovery by panicked sellers.

Here's a question for the quant-minded:

> So I'd be looking for value stocks that have a P/E ratio that's overly low

The thing that makes me nervous about that kind of thing is that there are people who have written code that knows a lot more than my sum total knowledge of the stock market to look for those sorts of factors. Given actors like that, is there any reason to invest in anything but broad index funds?

Re: I’m Still Going Long and Hoping the Markets Go Down

#13

Post by DanielBMarkham »

davidw wrote: post #12
DanielBMarkham wrote: post #8

Earlier quoted context omitted.

Usually during a re-adjustment the market swings too far the other way by a few points. So I'd be looking for value stocks that have a P/E ratio that's overly low. Find some stock that's getting beaten up beyond the normal recovery by panicked sellers.

Here's a question for the quant-minded: > So I'd be looking for value stocks that have a P/E ratio that's overly low The thing that makes me nervous about that kind of thing is that there are people who have written code that knows a lot more than my sum total knowledge of the stock market to look for those sorts of factors. Given actors like that, is there any reason to invest in anything but broad index funds?

I believe there is. The criteria I mentioned would just be the start of the search -- you should easily come up with scads of stocks that meet that criteria. There are a lot of steps after that.

Going to an index is usually a safe bet. I think it still is. But that's long term. You could end up waiting ten years just to double your money. I'm just talking about a quick hit. Now you could combine the approach and go with an sector index. But the more you spread it out the more of a slow response you're going to get, in my opinion.

Re: I’m Still Going Long and Hoping the Markets Go Down

#14

Post by mixmax »

davidw wrote: post #12
DanielBMarkham wrote: post #8

Earlier quoted context omitted.

Usually during a re-adjustment the market swings too far the other way by a few points. So I'd be looking for value stocks that have a P/E ratio that's overly low. Find some stock that's getting beaten up beyond the normal recovery by panicked sellers.

Here's a question for the quant-minded: > So I'd be looking for value stocks that have a P/E ratio that's overly low The thing that makes me nervous about that kind of thing is that there are people who have written code that knows a lot more than my sum total knowledge of the stock market to look for those sorts of factors. Given actors like that, is there any reason to invest in anything but broad index funds?

A friend of mine works for a small company that develops the models that many automated tradings are based on. It's so secret that he won't even tell me which companies use the software, only that it's some of the major global players. He does tell me about the software in broad terms though, and it is obvious there is a market for a new player in there. Basically almost everyone is using the same models and algorithms, just with different tweaks. And it's based on 20 year old principles. Start writing code that looks for different patterns (weather, psychological factors, etc.) and you might be able to beat them.

Re: I’m Still Going Long and Hoping the Markets Go Down

#15

Post by davidw »

mixmax wrote: post #14
davidw wrote: post #12

Earlier quoted context omitted.

Here's a question for the quant-minded: > So I'd be looking for value stocks that have a P/E ratio that's overly low The thing that makes me nervous about that kind of thing is that there are people who have written code that knows a lot more than my sum total knowledge of the stock market to look for those sorts of factors. Given actors like that, is there any reason to invest in anything but broad index funds?

A friend of mine works for a small company that develops the models that many automated tradings are based on. It's so secret that he won't even tell me which companies use the software, only that it's some of the major global players. He does tell me about the software in broad terms though, and it is obvious there is a market for a new player in there. Basically almost everyone is using the same models and algorith…

> The effect of the sun seems to have been quite big. For shares traded in New York, for instance, annualised returns on perfectly sunny days averaged 24.8%, compared with 8.7% on perfectly cloudy days. Moreover, unlike some stockmarket “anomalies” discovered by economists, investing by the sun would have been more profitable than simply investing in the market index, even after subtracting trading costs. Alas, this does not guarantee profitable trading in the future. Even assuming the effect really exists, investors, now they have been alerted to it, will probably arbitrage away any excess returns to be had by exploiting it.

http://www.economist.com/finance/displaystory.cfm?story_id=E...

So... it seems as if people really do think of everything - why wouldn't they, with millions or billions on the line. What hope does an individual have?

Re: I’m Still Going Long and Hoping the Markets Go Down

#16

Post by mixmax »

davidw wrote: post #15
mixmax wrote: post #14

Earlier quoted context omitted.

A friend of mine works for a small company that develops the models that many automated tradings are based on. It's so secret that he won't even tell me which companies use the software, only that it's some of the major global players. He does tell me about the software in broad terms though, and it is obvious there is a market for a new player in there. Basically almost everyone is using the same models and algorith…

> The effect of the sun seems to have been quite big. For shares traded in New York, for instance, annualised returns on perfectly sunny days averaged 24.8%, compared with 8.7% on perfectly cloudy days. Moreover, unlike some stockmarket “anomalies” discovered by economists, investing by the sun would have been more profitable than simply investing in the market index, even after subtracting trading costs. Alas, this…

What hope does an individual have?

More than you think. Especially if you change your attitude towards the problem a bit ;-)

Re: I’m Still Going Long and Hoping the Markets Go Down

#17

Post by steveplace »

timcederman wrote: post #10
steveplace wrote: post #3

Earlier quoted context omitted.

If you didn't have a risk management plan in place, for shame. Anyways, here's some stuff that will take the fear out of you. http://bigpicture.typepad.com/comments/2008/10/10-bullish-si...

I have risk management in place, of course. I'm not concerned about my losses, just wish I had the balls to capitalize on the falling market. Good link, thanks. So perhaps time to start buying soon...

It's been tough. I've been trading in this market and I've caught a couple pretty good moves.

Re: I’m Still Going Long and Hoping the Markets Go Down

#18

Post by fallentimes »

Prrometheus wrote: post #6
DanielBMarkham wrote: post #4

It's a great time to buy. I haven't been in the market for a couple years, but I'm salivating over this downturn. Sorry for all those losing money, but in my opinion this is a buying opportunity like there never was before.

I remember seeing this graph not too long ago that showed the P/E ratio of the stock market took off in the '90s and it never came back to its historical average range. The graph predicted that the "real" value of the Dow was in the 7,000 - 8,000 range. The people passing around these graphs would have looked like cranky perma-bears a few years ago. Now they look down-right reasonable. It's not a crash, it's a readju…

Do you happen to recall the historical P/E averages?

Re: I’m Still Going Long and Hoping the Markets Go Down

#19

Post by davidw »

mixmax wrote: post #16
davidw wrote: post #15

Earlier quoted context omitted.

> The effect of the sun seems to have been quite big. For shares traded in New York, for instance, annualised returns on perfectly sunny days averaged 24.8%, compared with 8.7% on perfectly cloudy days. Moreover, unlike some stockmarket “anomalies” discovered by economists, investing by the sun would have been more profitable than simply investing in the market index, even after subtracting trading costs. Alas, this…

What hope does an individual have? More than you think. Especially if you change your attitude towards the problem a bit ;-)

My attitude is that it's pretty clear how I can take on (or rather, simply run around) even big players as a small startup. It's less clear how I can come out ahead stock picking as an individual. So it's better to not dick around with stock picking, put my money in cash (like it has been for a while), or an index fund, and just concentrate on the startup stuff.

Re: I’m Still Going Long and Hoping the Markets Go Down

#20

Post by kingkongrevenge »

davidw wrote: post #15
mixmax wrote: post #14

Earlier quoted context omitted.

A friend of mine works for a small company that develops the models that many automated tradings are based on. It's so secret that he won't even tell me which companies use the software, only that it's some of the major global players. He does tell me about the software in broad terms though, and it is obvious there is a market for a new player in there. Basically almost everyone is using the same models and algorith…

> The effect of the sun seems to have been quite big. For shares traded in New York, for instance, annualised returns on perfectly sunny days averaged 24.8%, compared with 8.7% on perfectly cloudy days. Moreover, unlike some stockmarket “anomalies” discovered by economists, investing by the sun would have been more profitable than simply investing in the market index, even after subtracting trading costs. Alas, this…

> What hope does an individual have?

A whole lot of people support themselves by trading successfully. The thing is, making decent money by trading is a full time job, not an after-hours hobby.

You CAN make money designing trading strategies. People do it. The question is simply whether the EV returns on your time will be higher than working on an actual job or businesses. Someone smart enough to make a winning trading system is also smart enough to get paid a lot in other endeavors. So more often than not it's a wash. Except traders get to work in their underwear...

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