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Does Market Timing Work?

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Re: Does Market Timing Work?

#91

Post by pokler »

olalonde wrote: post #88
bluGill wrote: post #86

Earlier quoted context omitted.

A few people have consistently beat the market over many years. I call that skill. I don't know if they really know thier how they do it though

If there are really just a few, it could be explained by chance. Warren Buffet is often cited in that group and yet, a blindfolded monkey would have done better than him in the past 20 years[0]. [0] https://www.linkedin.com/pulse/warren-buffett-has-underperfo...

And what about Renaissance Technologies? Is that just chance or luck?

Re: Does Market Timing Work?

#92

Post by StanislavPetrov »

bluGill wrote: post #86
vik0 wrote: post #68

Ever since I read The Black Swan by Nassim Nicholas Taleb and Thinking, Fast and Slow by Daniel Kahneman, I can't take anything related to the stock market seriously (among other things as well, but this post is related to the stock market, so that's why I'm focusing on it.) There's very little skill involved, which isn't to say there is no skill involved whatsoever - but at the end of the day it really is just luck…

A few people have consistently beat the market over many years. I call that skill. I don't know if they really know thier how they do it though

I call it (almost always) being a member of Congress or someone else with inside information!

Re: Does Market Timing Work?

#93

Post by codethief »

achrono wrote: post #80
vik0 wrote: post #68

Ever since I read The Black Swan by Nassim Nicholas Taleb and Thinking, Fast and Slow by Daniel Kahneman, I can't take anything related to the stock market seriously (among other things as well, but this post is related to the stock market, so that's why I'm focusing on it.) There's very little skill involved, which isn't to say there is no skill involved whatsoever - but at the end of the day it really is just luck…

FWIW ever since Kahneman, Ariely and similar company have had some of their theories get discredited (Ariely's taint is worse because it's to do with fabricating research!) I have gone back to simply resorting to common sense and quotidian skepticism.

> ever since Kahneman […] have had some of their theories get discredited

Could you elaborate?

Re: Does Market Timing Work?

#94

Post by olalonde »

pokler wrote: post #91
olalonde wrote: post #88

Earlier quoted context omitted.

If there are really just a few, it could be explained by chance. Warren Buffet is often cited in that group and yet, a blindfolded monkey would have done better than him in the past 20 years[0]. [0] https://www.linkedin.com/pulse/warren-buffett-has-underperfo...

And what about Renaissance Technologies? Is that just chance or luck?

I could be wrong but I don't believe Renaissance Technologies makes their money picking individual stocks. My understanding is that they mostly make money with (statistical) arbitrage, market making, etc.

Re: Does Market Timing Work?

#95

Post by auxym »

bluGill wrote: post #86
vik0 wrote: post #68

Ever since I read The Black Swan by Nassim Nicholas Taleb and Thinking, Fast and Slow by Daniel Kahneman, I can't take anything related to the stock market seriously (among other things as well, but this post is related to the stock market, so that's why I'm focusing on it.) There's very little skill involved, which isn't to say there is no skill involved whatsoever - but at the end of the day it really is just luck…

A few people have consistently beat the market over many years. I call that skill. I don't know if they really know thier how they do it though

Sorry for shilling this podcast that I mentioned in another comment in this thread, but they do have very relevant information on this too:

https://rationalreminder.ca/podcast/220

This is an interview with two academic researchers into active fund managers who can indeed beat the market consistently sometimes. One factor why they exist is that they have access to better information than the average individual investor. However, (1) excess returns tend to mostly get absorbed by higher fees and (2) it's very difficult to scale it up, funds who beat the market tend to lose this edge when more funds go into them. Thus, market-beating funds, if they want to maintain their edge, have to severely limit who can invest in the fund and how much they can put into it.

The episode also goes into the effect of security selection (which stocks are picked) vs market timing, which is relevant to TFA.

Re: Does Market Timing Work?

#96

Post by auxym »

TacticalCoder wrote: post #79
zer0tonin wrote: post #54

Earlier quoted context omitted.

The dogma that it's impossible to beat the market is frankly weird at this point. If the markets were truly efficient, randomly picking stocks would beat SPX ~50% of the time. Since markets are not super efficient, basic exposure to performance factors (small cap, value, momentum...) puts you at a fairly high likelyhood of beating SPX.

> The dogma that it's impossible to beat the market is frankly weird at this point. I agree. Meta was literally priced below $90 not even a year ago (I entered at about $100 FWIW, which was my nice and round number). Now at $315. Anybody who believes the market is efficient is on some serious drugs. The market correctly valued Meta a $380 or so before the crash (because "TINA" I'm supposed to believe), then correctly…

The EMH is a model, and like all models: none are correct, but some are useful (to understand some phenomena).

Re: Does Market Timing Work?

#97

Post by creakingstairs »

One of my family members is absolutely convinced that they can time the market and it kinda drives me up the wall every time it comes up. They will use all these “techniques” to draw arbitrary lines on the chart to establish a trend in the market while watching the news like a hawk everyday.

Meanwhile I just get on with my day with index funds and get better returns.

Re: Does Market Timing Work?

#98

Post by corey_moncure »

vikingerik wrote: post #18
shrimpx wrote: post #8

Although when the s&p dropped 20% in a few days in March 2020 — that was clearly a buy signal. And when tech stocks dropped by 70-90% in Nov 2022. Those stocks are now up 2x/3x from bottom. Sure, long term it probably doesn’t work out to time the market but sometimes it’s pretty obvious what’s happening.

The March 2020 drop was from the pandemic lockdowns. In that moment, nobody knew that was a buy signal. Nobody knew then when economic activity would recover, if the pandemic would pass in two weeks or several months or many years.

For every sell, there is a buy

Re: Does Market Timing Work?

#99

Post by anonu »

TacticalCoder wrote: post #82
anonu wrote: post #65

Earlier quoted context omitted.

Schwab would rather you have cash in your account than be invested in securities. This is how their cash sweep works. The article is educational and generally stands up to the research on the topic. It is designed to build trust with clients so they invest in Schwab.

> Schwab would rather you have cash in your account than be invested in securities Compared to IBKR which gives "benchmark - 0.5%" on your NAV in USD, what does Schwab give for your USD sitting idle?

Cash sweep in Schwab is like 0.5%, it's nothing. But this is how they make their money, turning around and lending at 8%.

But you can just as easily buy a short duration Treasury ETF yielding 5%+ or a CD.

Re: Does Market Timing Work?

#100

Post by tylergetsay »

TacticalCoder wrote: post #82
anonu wrote: post #65

Earlier quoted context omitted.

Schwab would rather you have cash in your account than be invested in securities. This is how their cash sweep works. The article is educational and generally stands up to the research on the topic. It is designed to build trust with clients so they invest in Schwab.

> Schwab would rather you have cash in your account than be invested in securities Compared to IBKR which gives "benchmark - 0.5%" on your NAV in USD, what does Schwab give for your USD sitting idle?

Schwab gives a similar return, they don't offer any high yield savings
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