After five years of studying the quant investing phenmena, I arrived to the conclusion that it is based on a mistake. The stock exchange generates immense quantities of numbers which can be graphed and processed, and one can calculate averages, B&S and all kind of correlations and indices. This property of the stock market that it is amenable to mathermatical manipulation generates the wrong impression that the market is ruled by mathematical laws. And that using math and statistics, we can "control" or predict what will happen. This is a mistake.
The problem is that the market is full of people who knows to use mathematics and is using it all the time. Math is fundamental to calculate compound interests, amortization, present value of a cash stream and so on. The numbers obtained ib this type of math are 100% true and reliable. But these highly numerate people tend to fall into the mental trap of thinking that the mass of financial data that the markets are vomiting out by the second is of the same nature and quality, that applying the Black and Scholes equation produces numbers of the same worth as applying the compound interest formula. But these are two completely different class of numbers.
If I am at it, lets notice that the newspaper headline method of investing is even less valuable. Today there is uncertainty if Greece will be able to pay debts due and the market value of some unrelated entity, say Teva Pharm, sinks 5%. Tomorrow there is a rumor that Greece will pay this month's coupons, so Teva rises. Some investors dont believe that there is any linkage, but they do believe in "sentiment" which is controlled, so they believe, by the headlines.
So what works? Inside information works. Knowledge of a particular industry or sector works. Hard work works.
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A story to warm the hearts of antisemites. The great-grandson of Mikhail Kaganovich, the brother of one Lazar Kaganovich, is serving in the IDF.
http://www.nrg.co.il/online/1/ART2/339/458.html
Note that the boy isn't actually Jewish. He is converting.
If you live in this city of Kever Benjamin, you must have met many people like that. In the ulpan of Rh, Moshe Dayan I shared the bed with the daughter of Romania's former communist president, and so on. In my last job, my next door college was the son of a high KGB executioner. Since age zero I am running into famous people.
Note that the boy isn't actually Jewish.
my next door college was the son of a high KGB executioner.
Gentile Slavs enjoy immigrating to Israel if they have any Jewish ancestry whatever.
Aliyah for Ana Kornakova?
My son says that the markets are driven by cycles and that the explanations given in the news for the ups and downs generally have no relation to the actual causes of the changes (putting aside obvious major events such as 9/11) . They are "just so" stories or myths that we use to explain things we don't understand - the sun is being pulled across the sky by chariots, etc.
My cousin's son has a big long beard and wears a black hat, the likes of which have been unseen in my family for a century (my grandfather had a beard but it was neatly trimmed like Freud's). So history does not repeat itself but it at least rhymes.
K
We notice cycles but we dont know the why of it.
And we dont know the right timing to make use of them.
Cycles of man and timing were crucial to Solomon's magic.
Meditate about the cosmology more.
"So what works? Inside information works. Knowledge of a particular industry or sector works. Hard work works."
In essence it means (I think): if you don't have good knowledge about a field of activity you's better stay out of it.
Of course you can see a general direction, like sovereign debts will be solved through inflation, the alternative being default and collapse. But when and how and in the end if this happens - society moves erratically - in order to use this for profit is anyone's guess. And earning something out of it seems improbable.
Investment and pension funds used a lot of smart people and a lot of math. And managed to initiate and create the greatest missalocation of capital from the history of mankind. Looks like math used in excess makes people stupid.
Any religious person would laugh at this. How some arrogant dumb people thought they were like God and could predict and plan anything.
Of course wish you the best of luck. I'd love to give a personal opinion about what is best to on the stock market. But unfortunately I don't have any you didn't mention already: "Inside information works. Knowledge of a particular industry or sector works.".
Otherwise stay out of it.
As a curiosity. How is that you are still alive? I mean borrowing money and losing some of it on the stock market.
My wife would have endangered my life for something like this. How did you manage to solve this problem?
Maybe hmmmm the anger control course you participated in helped? ( the one which stopped the killing of wives lol).
Hope is something else and I can learn something usefull out of it. I don't know your case , but in mine everything is family money. Lose some money - doesn't matter the source anyway like earning them yourself short time before - and wife comes enraged on my head.
So - how did you manage? You seem OK. No black eye or other unpleasant stuff.
I think one can make an argument that the expectation of an early retirement (ie before 80) that can be paid for in a sustainable way by a genuine pile of wealth that actually lasts long enough to cover one's needs, and leaves something over for one's heirs, is, for the vast majority, a myth; and furthermore, is responsible for a lot of the socio-economic pathology that we see about us, eg Greece, mass immigration, asset bubbles, market crashes, etc.
The "racket scientists" employed to sustain pension earnings will never admit their task is not possible (except for themselves, due to insider information) and therefore engage in in this endless mathematical mumbo-jumbo and chicanery, and the politicians also cannot admit it is all a lie and a Ponzi scheme.
I think this explains a great deal of the world around us today.
Anon.
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