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What to know about the stock market (2007)

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Re: What to know about the stock market (2007)

#111

Post by llampx »

3pt14159 wrote: post #99
cehrlich wrote: post #85

This is a great article that explains markets (not just the stock market really) in an easy to understand way. The one thing I believe people should know about the stock market is: There are people with more capital, time, and knowledge than you who will consistently beat you. Picking individual investments is mostly a sucker's game. Buying tech stocks and/or crypto in the last couple of years has been a consistent e…

People keep telling me this, but I keep beating the market. It's been 20 years or so of applying very basic reasoning and getting ahead. 1. Commodities are bad long term bets because technology gets better. I remember people talking my ear off about peak oil and then the US turned into a net-exporter. Short term inelasticity, yes can sky rocket prices; but long term prices go down. 2. Physics based thinking. I knew e…

When I was completely new to investing I put my money into AAPL, TSLA, AMD and TSM based on my experiences with them. That portfolio would have done extremely well had I stuck with it.

I think the dogmatic "nobody can beat the markets" is hurting people who then think they may as well give up, and patently not true when you look at traders who beat the market year in and year out, and minimize their losses when they do lose.

Re: What to know about the stock market (2007)

#112

Post by iso1631 »

0xcoffee wrote: post #97
pembrook wrote: post #96

Earlier quoted context omitted.

I believe this is also a side-effect of these poor pension schemes. European governments see the demographic timebomb coming, so they massively incentivize their citizens to invest in a primary residence, treating it as forced savings. This inflates local real estate values to ridiculous levels, especially while interest rates are low. However, incentivizing your citizens to take leveraged bets (big mortgages) on a s…

Is that so? Here in The Netherlands fixed rate is pretty common.

Fixed rate for lifetime?

Something I didn't realise until recently was in the US it's normal to have a 30 year mortgage with a fixed rate from the start, rather than a fixed rate for a few years and then either a variable rate or requiring a remortgage. My understanding is that most mortgages in the Netherlands tend to be 5-10 years fixed rather than lifetime.

In the UK I feel there's a lot of distrust of stock markets amongst normal people, partly because the FTSE doesn't grow (back in 2000 it was about 7,000, today it's about 7,500), and that's the one reported on the normal news. There's no widely reported "FTSE dividend reinvested" measure.

Add in the mortgage mess from annuity mortgages where people were sold the idea they could have their cake and eat it too, ended up without enough money to repay their mortgage at the end. Throw in the pension collapse of Equitable Life, the pension fraud from Maxwell, the stock "boom" in the 90s where normal people bought shares, driven by the selloff of nationalised industries, and then seeing those shares vanish in 2000 and never really recovering and you get a general distrust of private hands managing money, and a preference to trust the government.

This meant people put their money into houses starting in the late 90s, which combined with increasing household income as new families became dual-income led to increasing house prices and a snowball effect. Even 2008 didn't really impact, as it was mainly sold as a US problem which had an effect on the UK, but not a major one.

The UK government (any colour) will do anything to keep house prices growing as that's how you get votes.

Re: What to know about the stock market (2007)

#113

Post by andriesm »

ericmay wrote: post #102
cehrlich wrote: post #85

This is a great article that explains markets (not just the stock market really) in an easy to understand way. The one thing I believe people should know about the stock market is: There are people with more capital, time, and knowledge than you who will consistently beat you. Picking individual investments is mostly a sucker's game. Buying tech stocks and/or crypto in the last couple of years has been a consistent e…

> Picking individual investments is mostly a sucker's game. Kind of. What you have to remember is what game you’re playing. While financial firms can outspend and out-research you at an individual level, they can’t take the same risks you can or move as quickly as you can. If I decide I want to go all-in on some company I can just do that. Your friendly neighborhood hedge fund? Not so much. Most people should buy ind…

I agree - most people should buy low cost index funds but that is not enough - they have to space it out as monthly contributions over many years.

If you put all your money in at thr wrong moment, like say the Nasdaq in 99 then you waited 13 years just to break even.

But if you bought monthly you would have done very well because you averaged into the market.

The alternative is if you really understand valuations, diversification, risk and market psychology, like I do, then you can consistently beat the market. Most people cannot and most people you pay fees to do it on your behalf won't.

You could consider buying berkshire hathaway instead of a stock market index.... assuming the lead investors don't die too soon.

Re: What to know about the stock market (2007)

#114

Post by hhmc »

3pt14159 wrote: post #99
cehrlich wrote: post #85

This is a great article that explains markets (not just the stock market really) in an easy to understand way. The one thing I believe people should know about the stock market is: There are people with more capital, time, and knowledge than you who will consistently beat you. Picking individual investments is mostly a sucker's game. Buying tech stocks and/or crypto in the last couple of years has been a consistent e…

People keep telling me this, but I keep beating the market. It's been 20 years or so of applying very basic reasoning and getting ahead. 1. Commodities are bad long term bets because technology gets better. I remember people talking my ear off about peak oil and then the US turned into a net-exporter. Short term inelasticity, yes can sky rocket prices; but long term prices go down. 2. Physics based thinking. I knew e…

It's worth noting that the game is fundamentally _easier_ if you're not working with an institutionally sized portfolio.

1. You don't have concern yourself with market impact

2. There are niche opportunities that lack the capacity for funds to bother spending their time on.

Re: What to know about the stock market (2007)

#115

Post by gpderetta »

0xcoffee wrote: post #97
pembrook wrote: post #96

Earlier quoted context omitted.

I believe this is also a side-effect of these poor pension schemes. European governments see the demographic timebomb coming, so they massively incentivize their citizens to invest in a primary residence, treating it as forced savings. This inflates local real estate values to ridiculous levels, especially while interest rates are low. However, incentivizing your citizens to take leveraged bets (big mortgages) on a s…

Is that so? Here in The Netherlands fixed rate is pretty common.

So it is in Italy. In UK fixed rates usually last 2-5 years, then revert to variable rates (and inevitably you have to remortgage).

Re: What to know about the stock market (2007)

#116

Post by hhmc »

llampx wrote: post #111
3pt14159 wrote: post #99

Earlier quoted context omitted.

People keep telling me this, but I keep beating the market. It's been 20 years or so of applying very basic reasoning and getting ahead. 1. Commodities are bad long term bets because technology gets better. I remember people talking my ear off about peak oil and then the US turned into a net-exporter. Short term inelasticity, yes can sky rocket prices; but long term prices go down. 2. Physics based thinking. I knew e…

When I was completely new to investing I put my money into AAPL, TSLA, AMD and TSM based on my experiences with them. That portfolio would have done extremely well had I stuck with it. I think the dogmatic "nobody can beat the markets" is hurting people who then think they may as well give up, and patently not true when you look at traders who beat the market year in and year out, and minimize their losses when they…

It's a stochastic argument though. If, say, 60% of day traders lose money, then 40% necessarily make money -- but it's still EV negative unless you have a strong prior you belong in the 40%.

Re: What to know about the stock market (2007)

#117

Post by bradfa »

3pt14159 wrote: post #99
cehrlich wrote: post #85

This is a great article that explains markets (not just the stock market really) in an easy to understand way. The one thing I believe people should know about the stock market is: There are people with more capital, time, and knowledge than you who will consistently beat you. Picking individual investments is mostly a sucker's game. Buying tech stocks and/or crypto in the last couple of years has been a consistent e…

People keep telling me this, but I keep beating the market. It's been 20 years or so of applying very basic reasoning and getting ahead. 1. Commodities are bad long term bets because technology gets better. I remember people talking my ear off about peak oil and then the US turned into a net-exporter. Short term inelasticity, yes can sky rocket prices; but long term prices go down. 2. Physics based thinking. I knew e…

I've invested in GM and avoided investing in Tesla. Mostly just because I understand GM, their business and financials and stock price history makes sense to me. I do not understand the valuations on Tesla, and hadn't even long before COVID and the most recent run-up in value. Clearly I've missed out on massive earnings if I had invested in Tesla instead of GM (although GM's done decently lately).

To me looking at the stock pricing, Tesla looks like a software company where tremendous growth has been occurring and is expected to continue for some time. To some extent they are a software company, but that software so far has seemed to me to require quite an expensive set of hardware to be sold with it in order to get the software and continuing monthly/yearly/feature revenues sales. This has worked for Apple, so it's not unprecedented, but it'll be interesting to watch how long it can last.

SpaceX makes more sense to me with having high valuations relative to revenues, it's a services company. The service is getting things to space and now also providing internet access. Tesla doesn't look like a software or services company to me, at least not yet. But maybe I'm looking at it wrong?

Re: What to know about the stock market (2007)

#118

Post by djbebs »

pasabagi wrote: post #98
sokoloff wrote: post #88

Earlier quoted context omitted.

I think the act of buying a house to live in should be considered more an act of consumption than of investment . It’s not 100% consumption, but it’s almost surely we’ll over 50% consumption and yet people get confused by the fact that a slice of it is forced savings and a sliver of it is an investment and they focus on these latter two more than is appropriate and in so doing are prone to less rational decisions tha…

I wish it was just consumption! If houses always depreciated in value, then they would cost about as much as it costs to build them. Unfortunately, because a bunch of political factors, they endlessly balloon in price.

The houses do. The land they're on don't

Re: What to know about the stock market (2007)

#119

Post by sokoloff »

pasabagi wrote: post #98
sokoloff wrote: post #88

Earlier quoted context omitted.

I think the act of buying a house to live in should be considered more an act of consumption than of investment . It’s not 100% consumption, but it’s almost surely we’ll over 50% consumption and yet people get confused by the fact that a slice of it is forced savings and a sliver of it is an investment and they focus on these latter two more than is appropriate and in so doing are prone to less rational decisions tha…

I wish it was just consumption! If houses always depreciated in value, then they would cost about as much as it costs to build them. Unfortunately, because a bunch of political factors, they endlessly balloon in price.

I think houses mostly do depreciate in value. The land underneath them does not and this can often mask the former.

I live in a nice part of my city. My house is 100 years old, has terrible insulation, very old retrofit wiring, and needs constant maintenance to stave off decline. The house, with all the upgrades over the years, is likely worth about what it was when built. The land underneath it is a lot more valuable than it was 100, or even 25, years ago.

Re: What to know about the stock market (2007)

#120

Post by cj »

andriesm wrote: post #106
cj wrote: post #103

Earlier quoted context omitted.

> Either way, sell early and buy the crash. Trying to time the market is akin to individual stock picking. When it works, it’s usually just luck.

No it can be skill. Was Warren Buffet and Charlie munger just lucky, year after year? Was Michael Burry of the Big Short just lucky to short the mortgage backed securities market, no he also side stepped the dot com crash and bought value stocks, recently he had very nice shorts on Kathy Woods ARKK... clearly he isn't just lucky, he has skill. I used to think I have skill yet my results were random for about a decade…

Quoting the original commenter:

> There are people with more capital, time, and knowledge than you who will consistently beat you.

Maybe you are one of those people, but the point is not everyone is good at it (the majority of people are bad at it)

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