Obama keeps fucking up, Part III

[firespin]

If you had even a shred of awareness about how investing works, you'd know that money is made on up-and-down movement, not so much only upward.

Just a massively ignorant post on your part really.

WTF?

This has been pretty extensively researched. There are no systems that consistently beat the broad market averages. Daytraders lose. Market timers lose. Not every time, and not every one...but over time, everybody reverts to the mean.

You sold out, yes...but now you are missing upside. What if it dip you await doesn't come?

 

[cebalrai]

WTF?

This has been pretty extensively researched. There are no systems that consistently beat the broad market averages. Daytraders lose. Market timers lose. Not every time, and not every one...but over time, everybody reverts to the mean.

You sold out, yes...but now you are missing upside. What if it dip you await doesn't come?

I didn't sell out. I sold some investments that had really skyrocketed in value and took the profit. Maybe 12% of my portfolio.

I then took some of the cash and put some of it in long-term retirement investments, bought more Schlumberger (which shot up 6.78% on Friday alone!!!), and put the rest in a tax-exempt money market account.

 

[cebalrai]

WTF?

This has been pretty extensively researched. There are no systems that consistently beat the broad market averages. Daytraders lose. Market timers lose. Not every time, and not every one...but over time, everybody reverts to the mean.

You sold out, yes...but now you are missing upside. What if it dip you await doesn't come?

Incidentally, every stock that's been in my portfolio for the past two years has outperformed the S&P 500.

 

[TurdFergeson]

Can any of you experts explain this to me?

http://research.stlouisfed.org/fred2/series/BOGNONBR

http://research.stlouisfed.org/fred2/data/BOGNONBR_Max_630_378.png

It seems unprecedented. Well, at least as far back as that chart goes.

 

[IrezumiKiss]

Can any of you experts explain this to me?

http://research.stlouisfed.org/fred2/series/BOGNONBR

http://research.stlouisfed.org/fred2/data/BOGNONBR_Max_630_378.png

It seems unprecedented. Well, at least as far back as that chart goes.

Stop beating Firespin at his game, T. You know he's the chart/graph/stat/diagram master here. You don't wanna mess with his Stat-Fu.

 

[TurdFergeson]

Stop beating Firespin at his game, T. You know he's the chart/graph/stat/diagram master here. You don't wanna mess with his Stat-Fu.

Obama fixed it...anyway. Whatever it means.

No one of any political persuasion has been able to explain it.

 

[trysail]

When the banking system seized up, the Fed opened up the discount window in its role as the lender of last resort ( below ). It also began the direct purchase of loans and securities from banks ( this accounts for the rapid increase of bank non-borrowed reserves ) AND commercial paper. The combination— as we have seen and as one would expect, resulted in an explosion of the Fed's balance sheet ( since the beginning of the financial market turmoil in August 2007, the Federal Reserve's balance sheet has grown in size and has changed in composition. Total assets of the Federal Reserve have increased significantly from $869 billion on August 8, 2007, to well over $2 trillion ).

http://www.federalreserve.gov/monetarypolicy/bst_recenttrends_accessible.htm
http://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm

The return of a semblance of normalcy has seen the cessation of Fed direct purchases and a reduction of discount window borrowing.

http://www.federalreserve.gov/releases/h41/hist/h41hist1.htm

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=0&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=true&fo=ve&id=DISCBORR&transformation=lin&scale=Left&range=Max&cosd=1959-01-01&coed=2010-03-01&line_color=%230000FF&link_values=&mark_type=NONE&mw=4&line_style=Solid&lw=1&vintage_date=2010-04-25&revision_date=2010-04-25&mma=0&nd=&ost=&oet=&fml=a

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=0&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=true&fo=ve&id=CPFAC1690&transformation=lin&scale=Left&range=Max&cosd=2002-12-18&coed=2010-04-21&line_color=%230000FF&link_values=&mark_type=NONE&mw=4&line_style=Solid&lw=1&vintage_date=2010-04-25&revision_date=2010-04-25&mma=0&nd=&ost=&oet=&fml=a


... and here's what people worry about:
http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=0&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=true&fo=ve&id=AMBSL&transformation=lin&scale=Left&range=Max&cosd=1918-01-01&coed=2010-03-01&line_color=%230000FF&link_values=&mark_type=NONE&mw=4&line_style=Solid&lw=1&vintage_date=2010-04-25&revision_date=2010-04-25&mma=0&nd=&ost=&oet=&fml=a

Value~8 USD:
http://wattsupwiththat.files.wordpress.com/2010/04/z100_trillion.jpg



Zimbabwe
ZimbabweCurrency

 

[Beco]

You should really rethink who is the fly and who is the shit, Beco.

I'll do that Luke

 

[RightField]

There's a pattern here that I've been watching for years. Firespin and Trysail and others bring thorough analysis, well-thought-out arguments and convincing points based in facts and fitting within a logical contruct.

The others come in with arguments such as "liar, liar, pants of fire" and facts such as "your position on bank loans is wrong because Rolling Stone took a poll that said bankers cause pollution"

It's like a PhD trying to describe to a busboy the finer points of nuclear physics. Some people just aren't going to get it no matter how hard you try.

 

[Sonny Limatina]

I didn't sell out. I sold some investments that had really skyrocketed in value and took the profit. Maybe 12% of my portfolio.

I then took some of the cash and put some of it in long-term retirement investments, bought more Schlumberger (which shot up 6.78% on Friday alone!!!), and put the rest in a tax-exempt money market account.

Cebel, Fire's right. Over time, returns in the market exactly mirror chance. That doesn't mean that that there aren't people on either end of the spectrum performing better or worse than average--even for many years. But it does mean that those performances are more the result of occupying a lucky spot among randomly distributed possibilities than any skill (or lack), no matter what we prefer to think of ourselves.

 

[islandman]

Cebel, Fire's right. Over time, returns in the market exactly mirror chance. That doesn't mean that that there aren't people on either end of the spectrum performing better or worse than average--even for many years. But it does mean that those performances are more the result of occupying a lucky spot among randomly distributed possibilities than any skill (or lack), no matter what we prefer to think of ourselves.

Err, no. If this were true, the only product (sorry Trysail) sold to investors would be index funds.

Qualitative analysis and a healthy respect for beta can achieve better-than-market results by identifying multiple 'lucky spots'. Is it consistent? No. But qualitative analysis can help you identify the intangibles that increase the odds in your favor. So why can't everyone use qualitative analysis to beat the market?

Well, that's where the skill part comes in.

 

[trysail]

[ Emphasis mine ]


© 1997 Warren E. Buffett
( Excerpted from the 1996 Annual Report of Berkshire Hathaway Corporation )

Let me add a few thoughts about your own investments. Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.

Should you choose, however, to construct your own portfolio, there are a few thoughts worth remembering. Intelligent investing is not complex, though that is far from saying that it is easy. What an investor needs is the ability to correctly evaluate selected businesses. Note that word "selected": You don't have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.

To invest successfully, you need not understand beta, efficient markets, modern portfolio theory, option pricing or emerging markets. You may, in fact, be better off knowing nothing of these. That, of course, is not the prevailing view at most business schools, whose finance curriculum tends to be dominated by such subjects. In our view, though, investment students need only two well-taught courses - How to Value a Business, and How to Think About Market Prices.

Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now. Over time, you will find only a few companies that meet these standards - so when you see one that qualifies, you should buy a meaningful amount of stock.

You must also resist the temptation to stray from your guidelines: If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio's market value.

The Superinvestors of Graham-and-Doddsville
by: Warren E. Buffett
http://www.tilsonfunds.com/superinvestors.pdf

 

[Sonny Limatina]

Err, no. If this were true, the only product (sorry Trysail) sold to investors would be index funds.

Qualitative analysis and a healthy respect for beta can achieve better-than-market results by identifying multiple 'lucky spots'. Is it consistent? No. But qualitative analysis can help you identify the intangibles that increase the odds in your favor. So why can't everyone use qualitative analysis to beat the market?

Well, that's where the skill part comes in.

I may defer on this, but I have read in numerous places that over the long run, expert stock analysts do not, in fact, outperform the market--only in impressive short bursts that may give the illusion of outperformance. In fact, computers generating random picks perform as well as the "experts," in some (or perhaps even many) cases. But I'm asserting without substantiating right now, because I can't easily do the search at the moment.

One bit I can offer is this:

WSJ: If you can pick an index-outperforming stock 51% of the time, how many picks do you need to make to have better than a 99% chance of outperforming the index? (We’ll assume your picks are uncorrelated and that the magnitude of any outperformance or underperformance is the same.)

Mr. Mlodinow: Consider a stock analyst versus an index fund in a kind of stock-picking World Series. The law of large numbers says if you play a best-of-X series you can be confident that the best team will win — if X is large enough. But for small X, say, a best-of-seven series, there is a surprisingly large chance that the lesser team will win. So in sports just because one team is superior doesn’t mean it will win the series.

The same uncertainty applies to the market. For example, suppose the stock picker has a 51/49 edge over the index fund, meaning he or she will outperform it, in the long run, in 51% of the years in which they compete. How long is the long run in this case? The mathematics shows that in order to justify 99% confidence that the stock picker will outperform the index fund more often than it underperforms it, the contest would have to go on for about 13,700 years.

WSJ: Just because a certain human achievement — say, clutch hitting, or successful stock picking — exhibits the normal statistical variation, does that necessarily mean the best performers were just lucky? Or is there something about human intentionality that makes it possible that the best performers really did exhibit extraordinary skill and were deserving of the result?

Mr. Mlodinow: Intentionality and talent always matter. An extraordinary feat is certainly made more likely by someone’s focus, hard work, etc. But chance also matters. And since there are few situations outside the science laboratory in which the random influences can be eliminated, luck is almost always a part of the statistical variation we observe in people’s feats.

In order to judge which is dominant, we have to consider the specific endeavor. In sports this has been studied extensively. For instance, though basketball players often make many baskets in a row, you can compile a player’s probability of making a basket after making the previous shot and compare it to that player’s probability of making a basket after missing the previous shot. This has been done for many players, even players known to be “streaky,” and the probabilities always come out to be equal, and so the streaks seem to be due to random variation rather than a “hot hand.” Moreover, the patterns of streaks that occur in most major sports have been studied, and look exactly like what one would expect from a purely random process, such as a coin-tossing model. This leads me to believe that that is probably what is going on.

 

[islandman]

I may defer on this, but I have read in numerous places that over the long run, expert stock analysts do not, in fact, outperform the market--only in impressive short bursts that may give the illusion of outperformance. In fact, computers generating random picks perform as well as the "experts," in some (or perhaps even many) cases. But I'm asserting without substantiating right now, because I can't easily do the search at the moment.

No need. In the long run, yes, you're absolutely right. Monkeys throwing darts at the stock tables and all of that jazz. I was responding to your 'lucky spots' comment. It's just like gambling; the house always wins in the long run, but if you know how to count cards, you can pick your spots and make a killing.

 

[TurdFergeson]

So the discount window being opened like a floodgate caused the historical dip in reserves?

But , now the fed buying securities and such en masse has also caused the opposite effect on reserve holdings?

Anyway...it looks as though they are stockpiling reserves for a "rainy day".

 

[trysail]

There's a pattern here that I've been watching for years. Firespin and Trysail and others bring thorough analysis, well-thought-out arguments and convincing points based in facts and fitting within a logical contruct.

The others come in with arguments such as "liar, liar, pants of fire" and facts such as "your position on bank loans is wrong because Rolling Stone took a poll that said bankers cause pollution"

It's like a PhD trying to describe to a busboy the finer points of nuclear physics. Some people just aren't going to get it no matter how hard you try.

It does occasionally feel like an exercise in futility. On C-SPAN today, I watched Richard Fuld ( late CEO of Lehman Brothers ) attempt to explain an obscure bit of corporation finance to several members of the House Financial Services Committee. Their blank expressions made it patently obvious that they didn't have the foggiest idea in hell what he was talking about.


Frank Borman ( yes, the former Apollo astronaut and later CEO of Pan American Airways ) likely had the same experience as he attempted to explain the economic facts of life to the Pan Am branch of the International Association of Machinists. He was faced with an audience that didn't care, wasn't interested and didn't want to hear what he was trying to explain, anyway ( which is, of course, why Pan Am eventually went bust ).



"We are but actors upon a stage... "

(sigh) Silly me.

 

[cebalrai]

There's a pattern here that I've been watching for years. Firespin and Trysail and others bring thorough analysis, well-thought-out arguments and convincing points based in facts and fitting within a logical contruct.

The others come in with arguments such as "liar, liar, pants of fire" and facts such as "your position on bank loans is wrong because Rolling Stone took a poll that said bankers cause pollution"

It's like a PhD trying to describe to a busboy the finer points of nuclear physics. Some people just aren't going to get it no matter how hard you try.

No idea what you're talking about.

With only a couple exceptions, the righties here - ESPECIALLY YOU - utilize C&Ps of lying partisan blogs to support your arguments.

 

[cebalrai]

Sound advice Trysail.

I have two index funds, one on the S&P and one on NASDAQ. They're not glamorous, but it's impossible for them to under-perform the S&P 500.

One nifty trick for stock picking is to see what stocks mutual fund managers are picking up, especially value fund managers. This is how I came to invest in Schlumberger. Their business is a no-brainer though. They provide oil exploration services and technology to Shell, BP, and Exxon and have been making loads of technological breakthroughs over the past few years.

 

[Beco]

Sound advice Trysail.

I have two index funds, one on the S&P and one on NASDAQ. They're not glamorous, but it's impossible for them to under-perform the S&P 500.

One nifty trick for stock picking is to see what stocks mutual fund managers are picking up, especially value fund managers. This is how I came to invest in Schlumberger. Their business is a no-brainer though. They provide oil exploration services and technology to Shell, BP, and Exxon and have been making loads of technological breakthroughs over the past few years.

pick up a little C, CitiGroup

 

[Sonny Limatina]

Sound advice Trysail.

I have two index funds, one on the S&P and one on NASDAQ. They're not glamorous, but it's impossible for them to under-perform the S&P 500.

One nifty trick for stock picking is to see what stocks mutual fund managers are picking up, especially value fund managers. This is how I came to invest in Schlumberger. Their business is a no-brainer though. They provide oil exploration services and technology to Shell, BP, and Exxon and have been making loads of technological breakthroughs over the past few years.

It is a nifty trick. Exactly as effective as reaching into a hat and pulling a name, it turns out, but still nifty.

 

[mercury14]

It is a nifty trick. Exactly as effective as reaching into a hat and pulling a name, it turns out, but still nifty.

Reaching into a hat and picking a random stock is not nearly as effective as investing off of research.

Someone has never invested before...

 

[Sonny Limatina]

Reaching into a hat and picking a random stock is not nearly as effective as investing off of research.

Someone has never invested before...

Sure I have. I talk all about it here.

 

[cebalrai]

Sure I have. I talk all about it here.

You pick stocks at random?

 

[firespin]

Reaching into a hat and picking a random stock is not nearly as effective as investing off of research.

Someone has never invested before...

Sure about that?

http://www.slate.com/id/2134672/?nav=tap3

"The real, um, revelation has been [Amy] McCarthy and her fellow Playmates. Last Saturday, the Wall Street Journal noted with astonishment that Amy McCarthy "was up more than 20%" through Thursday, Jan. 19, "beating every single one of the more than 6,000 mutual funds tracked by Morningstar" (my italics). McCarthy didn't do much research and chose five volatile small-cap stocks with very low prices. A couple of them—Law Enforcement Associates, and Terax Energy—are up big. Through yesterday's close, she's still up 13.5 percent for the year."

 

[trysail]

Thus far, Grantham couldn't have been more wrong. But, we'll see what unfolds— it ain't over yet. The Federal Reserve is still in uncharted waters.


​

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aQxfRBAiW7ak

GMO’s Grantham Says Bernanke Risks Fueling New Bubble
By Charles Stein

April 23 (Bloomberg) -- Jeremy Grantham, chief investment strategist at Grantham Mayo Van Otterloo & Co., said a longer period of below-average economic growth carries the risk of fueling a third stock-market bubble because Federal Reserve Chairman Ben Bernanke would likely keep interest rates low.

“If we get lucky and have a strong, broad, and sustained economic recovery, interest rates will probably rise before we reach real bubble territory,” Grantham wrote in his quarterly newsletter, posted on GMO’s Web site. “If, however, the economy only limps along, which seems more likely to me, then we run a very real danger of a third dangerous bubble in stocks and in risk-taking in general.”

Grantham said the market’s 80 percent rally in one year is “excessive” and was fueled more by the Fed’s monetary policy than by the rebound in the economy, which is facing “seven lean years...”

..., as the biggest jump in new home sales in almost five decades bolstered optimism the economy is improving.

“Speculators are not stupid. They see that after each crash, a long, artificial period of low rates and easy financial borrowing has been delivered,” Grantham wrote. “They see that Bernanke is an unreconstructed Greenspanite in that he refuses to address bubbles, but will leap to help ease the pain should a bubble break. With asymmetry like that, why not speculate?”

*****​

...In his current newsletter Grantham also criticized Bernanke for helping bail out weaker companies, rather than let them be acquired by stronger competitors. Last year, he compared giving Bernanke a second term as Fed chairman to reappointing the captain of the Titanic.

“We are helping to restore the financial health of the banks and bankers, who under these conditions, could not fail to make a fortune even if brain dead,” Grantham wrote in the current newsletter.

Grantham is usually right. Not good news....