Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

blogmaverick.com

Post reply on HN
Print view View original

61–69 of 69 posts

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

#61

Post by furiouslol »

swombat wrote: post #56
furiouslol wrote: post #47

Earlier quoted context omitted.

An almost risk-free way to money in the stock market is to put most of your money in fixed income while apportioning a small % in long dated options. Eg. you think Morgan Stanley is dirt cheap at current levels ($10) and you are willing to invest $100,000 in them. Action 1: You bought $100,000 worth of MS shares at $10 each Action 2: You bought $90,000 in bonds that yields 11%. You bought $10,000 worth of Jan 2010 MS…

Scenario 3: The bond issuer defaults because of the sub-prime crisis, and MS is nationalised. Woopsie daisies.

Haha. Yeah. That's why i inserted the word 'almost' before 'risk-free'

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

#62

Post by davidw »

mixmax wrote: post #21
davidw wrote: post #19

Earlier quoted context omitted.

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.

Couldn't agree more - sorry if I sounded a bit harsh or judging in the OP. I didn't mean it that way. And good luck with the startup :-)

Well, I wouldn't mind being proved wrong if someone has good advice that's not "make it a full time job".

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

#63

Post by SwellJoe »

furiouslol wrote: post #48
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.

There's a reason why those trailing P/E are lows. The E will decrease drastically in the future. You have to make really good guesstimate on what the E will be in the future before you can determine whether it is cheap. There's a lot of danger in picking stocks based on P/E. You have to look at their debt ratios and short term financing requirements. You should avoid highly profitable firms that use crazy leverages i…

Cash (cashflow and cash on hand) is king in times like these.

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

#64

Post by TheWama »

mattmaroon wrote: post #53
TheWama wrote: post #52

Earlier quoted context omitted.

The fallacy is that you don't know, can't know, what our economy would have been after that period, absent WWII. What if we were on the cusp of recovery anyway and we had spent 5 years building railroad and machinery rather than tanks and bombs? The end result would have been a more efficient application of industry over time, resulting in a more abundant society, right? But I can't say that was the case, would have…

It's not a fallacy because I specifically pointed that out. You can, however, point to all of the various technologies and cultural shifts that impacted our economy, and the 50+ year period of unrivaled prosperity that occurred afterward and say it most likely was for the best. Very few nations ever achieve a period like America did from that point to probably about 9/11/01. If we had to make the decision again from…

You did state rather unequivocally that WWII fixed the economy:

> It didn't suffer through it at all, it got fixed by it.

And now, you're attempting to declare post hoc, ergo propter hoc? The whole point of what I'm saying is that there are thousands or millions of changes in policy, technology, demographics, sentiment, which had an impact on the economy, we don't know which did what.

I could just as easily explain the post-war years by saying that it's natural that any country which does not get bombed to smithereens will experience relative prosperity, whether or not it participated in bombing other countries, as we did in WWII. Perhaps it was only that advantage which overwhelmed the tax of war spending.

Again, I can't say for sure, but neither can you. I'm inclined to think you're wrong though, from the simple perspective the the allocation of resources over time.

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

#65

Post by netcan »

furiouslol wrote: post #60
netcan wrote: post #55

Earlier quoted context omitted.

Assuming both scenarios are equally likely: Option 1 Average ROI = 50% Option 1 Average ROI = 12.5% High risk premium. A good time to take risks?.. if you can afford it.

Not for MS. The probability of MS getting nationalized or going bankrupt is 90%. So it's 0.9 * 0 + 0.1 * 3 = 0.3 = -70%. Whoops.

Probably not 0 is it?

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

#66

Post by kirse »

fauigerzigerk wrote: post #59
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...

The problem is that the credit fueled series of booms and busts that started in the 1980s might end here. At the end of the day growth of credit and money supply must be backed by productivity growth. I don't have the numbers right now, but be assured that credit and money supply growth hugely outpaced productivity growth since the 80s. So basically that means we've been financing bubbles. In my view, it's up for deb…

The problem is that the credit fueled series of booms and busts that started in the 1980s might end here...credit and money supply growth hugely outpaced productivity growth since the 80s.

Bingo. This is more than just another downswing in the economy. We've reached our limit for credit and leverage-fueled growth and it will NOT be the same level of growth as experienced the past 20-30 years. The U.S. is in debt up to its eyeballs and the bills are starting to come due.

Just looking at this basic chart here: http://en.wikipedia.org/wiki/Image:US_Federal_Debt(gross).JPG

Shows that since 1980 most of our growth has been on the back of an insane amount of growing debt, which is now to the tune of $32k per PERSON! The bills are coming due, this is a fundamental correction in the economy and it's not going to be a quick little recovery back to growth of the 90s.

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

#67

Post by fauigerzigerk »

kirse wrote: post #66
fauigerzigerk wrote: post #59

Earlier quoted context omitted.

The problem is that the credit fueled series of booms and busts that started in the 1980s might end here. At the end of the day growth of credit and money supply must be backed by productivity growth. I don't have the numbers right now, but be assured that credit and money supply growth hugely outpaced productivity growth since the 80s. So basically that means we've been financing bubbles. In my view, it's up for deb…

The problem is that the credit fueled series of booms and busts that started in the 1980s might end here...credit and money supply growth hugely outpaced productivity growth since the 80s. Bingo. This is more than just another downswing in the economy. We've reached our limit for credit and leverage-fueled growth and it will NOT be the same level of growth as experienced the past 20-30 years. The U.S. is in debt up t…

That's right, and the chart doesn't even show the whole problem because it shows just the federal dept. Consumer dept and dept of financial institutions is where the biggest growth has been: http://www.ft.com/cms/s/0/a09b317e-898d-11dd-8371-0000779fd1... (scroll down for the charts)

Another interesting question is of course who owns this dept and how much of it is owed to foreigners, because that points to possible ways of silent default ;-)

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

#68

Post by steveplace »

mattmaroon wrote: post #42
timcederman wrote: post #10

Earlier quoted context omitted.

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...

Trying to accurately time the market isn't ballsy, it's stupid. It's the modern day alchemy.

Well I've been stupidly printing money in this market.

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

#69

Post by mleonhard »

Eliezer wrote: post #57

You are all missing the key point of Mark's whole reasoning. DON'T BUY STOCKS BECAUSE SOMEONE ELSE WILL BUY THEM. BUY STOCKS YOU WANT TO OWN, forever if need be. Why? Because they pay dividends! Mark doesn't care if the Dow goes to zero or infinity, he's got an acceptable yield on his stocks and that's all that matters.

There are some stocks that don't pay any dividends. :(
Post reply on HN