tag:blogger.com,1999:blog-7366878066073177705.post8177064635574002546..comments2024-02-09T18:16:45.614+00:00Comments on The Psy-Fi Blog: The 160 Billion Dollar Bezzletimarrhttp://www.blogger.com/profile/06254802085744425067noreply@blogger.comBlogger11125tag:blogger.com,1999:blog-7366878066073177705.post-820710047066254532012-01-25T02:19:56.786+00:002012-01-25T02:19:56.786+00:00Hi again Timarr,
Shocked to hear you're now a...Hi again Timarr,<br /><br />Shocked to hear you're now almost entirely passive, assuming you're the same Timarr who used to write very entertainingly about shares on TMF as well (or before?) here?<br /><br />If it is you then congratulations on breaking the *habit*... ;)<br /><br />cheersMonevatorhttp://monevator.comnoreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-62067750752971488882012-01-14T23:25:37.219+00:002012-01-14T23:25:37.219+00:00The restaurant business is similar, over 80% fail,...The restaurant business is similar, over 80% fail, many only last a few years as well. Trading is no different. Thus to say trading is a bad choice is incorrect. Analysis of most business situations will show a very high failure rate.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-79954004044223751342012-01-14T18:49:36.028+00:002012-01-14T18:49:36.028+00:00>trading losses (27%), commissions (32%), trans...>trading losses (27%), commissions (32%), transaction taxes (34%), and market-timing losses (7%).”<br /><br />I don't understand this. How are trading losses different form market-timing losses? Also, why are commissions so high? And what taxes are we speaking of? The difference between long-term and short-term capital gains? Furthermore, there are only taxes on gains, and anyone getting big gains over the last 10 years is doing quite nicely, regardless of whether they had to pay the short-term or long-term rate. <br /><br />My own impression, from reading other studies, is that almost all of of the difference in performance between individuals and institutions has to do with bad market-timing. Stupid individuals tend to buy high and sell low. Smart institutions tend to do the opposite. Bad trading (buying at market or buying on the uptick rather than buying on the downtick) is just a special case of bad market timing.<br /><br />Furthermore, most institutions are not really that smart. The true smart money is quite concentrated and is mostly individual money, but a very special class of individuals. Warren Buffett alone picks up a huge share of the total alpha available for the world stock market as a whole. Wall Street proprietary trading and hedge funds pick up most of the remaining available alpha. However, those wall street winnings are then mostly paid out to the individuals working on Wall Street or running the hedge funds, rather than to the shareholders of Wall street investment banks or the hedge fund investors.frhttps://www.blogger.com/profile/14980384436598923074noreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-40806858014443861562012-01-14T15:46:33.442+00:002012-01-14T15:46:33.442+00:00Please we do not need any more Messiahs. The only ...Please we do not need any more Messiahs. The only salvation that is urgent is you been saved from your gross misconceptions about trading.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-29799868641784011922012-01-14T11:25:37.115+00:002012-01-14T11:25:37.115+00:00Hi Monevator
And yet you trade stocks Timmar, and...Hi Monevator<br /><br /><i>And yet you trade stocks Timmar, and so do I. And we even write blogs telling others not to do it! ;)</i><br /><br />Virtually passively, though, with occasional rebalancing and dividend reinvestment. I also favour those areas where the superior institutional information gathering machinery is less likely to make a difference ... <br /><br /><i>Maybe we should accept there's some other utility value in active trading that isn't captured in these studies.</i><br /><br />No question, however people also gain utility from drug use but that doesn't mean it's in their best interests, or that of society's. Even Malkeil admits that part of the attraction of stock trading is the fun of it, but getting hooked on the short term fix of a successful trade is a one-way ticket to penury. <br /><br /><i>The transaction tax impact would be higher in the UK, presumably, because of stamp duty, which I believe does not apply in the US? (Presumably there's is all capital gains tax -- if you're going to trade actively as a private investor, IMHO you certainly want to be doing it in a tax-shielded way, either in an ISA or SIPP or possibly via a spreadbet).</i><br /><br />Active trading raises costs, certainly, but the main point here is that private investors <i>trades</i> are loss making against institutions who have preferential access to the short-term trading information needed to outperform. It's generally the case that US research translates closely to UK results, so I'd certainly think it's reasonable to read across. Tax shelters can protect us from capital gains but not from behavioural foolishness.timarrhttps://www.blogger.com/profile/06254802085744425067noreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-14892972701907475802012-01-14T11:05:55.739+00:002012-01-14T11:05:55.739+00:00And yet you trade stocks Timmar, and so do I. And ...And yet you trade stocks Timmar, and so do I. And we even write blogs telling others not to do it! ;)<br /><br />Maybe we should accept there's some other utility value in active trading that isn't captured in these studies. <br /><br />The transaction tax impact would be higher in the UK, presumably, because of stamp duty, which I believe does not apply in the US? (Presumably there's is all capital gains tax -- if you're going to trade actively as a private investor, IMHO you certainly want to be doing it in a tax-shielded way, either in an ISA or SIPP or possibly via a spreadbet).Monevatorhttp://monevator.comnoreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-63946362098803203552012-01-13T22:02:10.135+00:002012-01-13T22:02:10.135+00:00The solution is easy: either passively invest in a...The solution is easy: either passively invest in an index fund, or scrupulously follow an algorithm. Or course our preference goes to the second solution...Valu Valuhttp://valuvalu.comnoreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-50910871670647001952012-01-13T17:34:04.890+00:002012-01-13T17:34:04.890+00:00I'm a tax preparer, mostly. From what I see, ...I'm a tax preparer, mostly. From what I see, the most successful portfolios are ones which are initiated by a parent and which the child becomes attached to, or feels too guilty to sell. I have clients sitting on small fortunes of JP Morgan, Exxon, Phillip Morris, etc.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-29683322695388526522012-01-12T15:03:48.091+00:002012-01-12T15:03:48.091+00:00These are the same kinds of studies that evaluate ...These are the same kinds of studies that evaluate mutual funds and newsletters and find on average they are worthless. I really think it's a mistake to just lump traders (we're talking traders, right, not investors) into one bucket and not do case studies on why 5% are successful and 95% are screw-ups. Rather than guessing what the problem is, why not just ask? The problem with losing traders is not overconfidence; it is getting an "F" in psychology.<br />RichAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-87028845345648360072012-01-11T16:48:12.164+00:002012-01-11T16:48:12.164+00:00So, when you say "we" need to stop it, w...So, when you say "we" need to stop it, who is "we"? And, how do you suggest it be stopped?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7366878066073177705.post-30441176027734924162012-01-10T08:49:53.512+00:002012-01-10T08:49:53.512+00:00There may be a parallell to this in Tetlock 2005 E...There may be a parallell to this in Tetlock 2005 Expert Political Judgement, where he in some tests found that those who were well informed about foreign affairs(reading one or two quality newspapers daily) were better predictors than the experts who spent all their time collecting facts. It may be that the real time feeling one gets from being online produce more confidence than it warrants with increased trading as a result.Anonymousnoreply@blogger.com