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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)

#151

Post by waffle_maniac »

christophilus wrote: post #136
lotsofpulp wrote: post #132

Earlier quoted context omitted.

Buffet’s last good move was the deal he got for Goldman Sachs in 2007. Then he said he was not going to invest in tech companies because he did not invest in businesses he did not understand, then he dumped a bunch of money in IBM which obviously did terrible, then he relented and finally bought a ton of Apple in 2014 or 2015, which has single-handedly saved Berkshire and kept it relevant. I also would like to see ob…

Apple, in absolute terms, has been his best investment (iirc). But yeah. The law of large numbers has gotten him. When you have to invest hundreds of billions, it’s impossible to keep compounding at high rates. I’d put a lot of money on Buffett beating the market if he was managing $50M.

Better than Coke?

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

#152

Post by nly »

lordnacho wrote: post #46

Well, that is how a basic orderbook works. But US markets have some special Reg-NMS rules that glue together things across exchanges. Being from Europe I'm not so familiar with it, but I understand it causes some interesting games to be played. If you want to actually understand how the market works, there's a fair bit more reading to do.

Not to mention the trend is more and more liquidity going dark.

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

#153

Post by 3pt14159 »

hhmc wrote: post #114
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…

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.

Cuts both ways, in my opinion.

Institutional portfolios have access to more opportunities and talent than retail investors.

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

#154

Post by mosermint »

bidirectional wrote: post #67
agumonkey wrote: post #56

Earlier quoted context omitted.

"market makers" ?

Why are they a bad thing?

Many market makers profit off speed and information advantages while providing liquidity. There are alternative market structures like frequent batch auctions that would allow better trading, lower spreads and negate the HFT speed arms race. This paper is a good overview:

https://www.aeaweb.org/articles?id=10.1257/aer.104.5.418

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

#155

Post by nly »

bidirectional wrote: post #21
DoingIsLearning wrote: post #15

Earlier quoted context omitted.

> Many people dedicate their lives to learning the stock market and what to do. It's unlikely someone can beat them with doing the bare minimum research. This hints at some sort of deserved meritocracy that just doesn't exist. Funding is king nowadays when a large fraction of trades happen via HFT. Implying that all you need is knowledge in order to reach wealth is misleading at best.

HFT is irrelevant, those firms basically compete with themselves and there's really not all that much money in it anyway. They're just providing liquidity and can basically be ignored 99% of the time.

You realise there are proprietary trading firms with algorithms making billions of $ every year just trading stocks at high frequency, right?

If anything they actively avoid trading against themselves and seek out opportunities in markets where retail investment is still at high participation.

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

#156

Post by nly »

erwincoumans wrote: post #49
kqr wrote: post #38

Earlier quoted context omitted.

I'm not sure what you're saying, but the spread between buying price and selling price is exactly how the temporary middle man gets paid for the risk they take in matching up buyers and sellers. The size of the spread depends on how large the perception of that risk is.

Example to clarify: Buyer tells the trader to buy for (up to) 140. Seller wants to sell for (at least) 120. Trader gives 120 to seller, gets 140 from buyer, gets to keep 20 for himself.

Best execution kicks in on most exchanges. The second order never hits the order book (nobody observing the book will even see it) and the trade executes at the price of whoever put on their bid/offer first.

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

#157

Post by shoto_io »

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…

My stock advice for any rookie has always been the same:

- Buy S&P ETFs, most preferably by Vanguard, because they are a non-profit and thus have very low fees

- If you have a large sum of cash, go all-in immediately, don't wait for the perfect time

- Now, just wait, ideally 10+ years, before looking into your account again

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

#158

Post by runarberg »

notahacker wrote: post #63
runarberg wrote: post #55

Earlier quoted context omitted.

Personally I have a philosophical (read marxist) reason to avoid it. Fundamentally I see the stock market as an exploitation tool which the rich use to siphon money away from workers and into their own pockets without contributing. Every dollar you get but didn’t work for was a dollar that somebody else worked for but didn’t get. The stock market is full of transactions which yields profits for the rich while leaving…

Isn't being offered stock in your own company broadly consistent with Marxist principles: workers own a share of the wealth they create? Maybe not as much of a share as they'd like, but I wouldn't have thought that was reason to avoid taking any.

hnbad answered this much more thoroughly than I’m able. I would just like to add that in my experience stock options and grants has been an excellent way of pretending to pay me more then they actually pay. It feels like they are giving me a lot extra until you actually look at the numbers. And I bet a lot of workers get fooled by this. For me it feels like an exercise in cognitive dissonance, that is my employer is trying manufacture a cognitive dissonance in my brain which favors them.

Of course owning these stocks gives me nothing over their monitory value, so having them benefits me nothing over having an interest account with equal interest rate. So I just look at them as a bonus pay with additional headaches (moving money out of the stock market is harder then to cash in a normal check). And as while the power imbalance exists between workers and bosses, I would rather just get paid in regular salaries without the extra complexities.

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

#159

Post by hhmc »

3pt14159 wrote: post #153
hhmc wrote: post #114

Earlier quoted context omitted.

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.

Cuts both ways, in my opinion. Institutional portfolios have access to more opportunities and talent than retail investors.

The market impact point doesn't cut both ways though, and it's crucial.

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

#160

Post by onlyrealcuzzo »

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…

> Software scales. People like to make money. Combine the two and its a real winner.

There were plenty of tech losers. You still had to pick the winners.

> Physics based thinking. I knew electric cars were going to work because the math checked out.

Electric cars were obvious, but Tesla was not an obvious play. In hindsight, it might seem so, but in the beginning it was far from clear that Tesla would dominate the space. Additionally, time will tell if Tesla's stock stays 8x higher than its pre-pandemic price.

> Sell when forward price to earnings after cash starts to look wonky. Which was 2007 and I think 2019.

This happened many more times than the two massive crashes. If you actually followed this advice, you'd probably be worse off than investing in the s&p - even if you did pick good stocks.

--

As others have mentioned, beating the market with $1M invested is much easier than beating the market with $10B invested. Especially when your appetite for potentially losing money is much higher.

Let's naively assume that you actually can pick stocks. At $10Bn - you need to pick more stocks - otherwise you would drive up the price too much in buying that much of the stock - unless you only picked Apple and Google and MSFT and Amazon.

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