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Beyond this land...There will be Dragons!
Old 12-15-2018, 09:18 AM   #1
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Beyond this land...There will be Dragons!

I love this quote from Art Cashin last week referring to a drop in the S&P below the 2600 (psychological level). For myself, I went into the week with 30% equities (net short) and on Thursday became more bullish as we held this level on a closing basis all week. So, on the close Thursday I covered my shorts and went long S&P and now am 80% stocks. We all saw what happened Friday and my only hope is the Fed comes to work next week on a shiny white horse and wearing a suit of armor!
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Old 12-15-2018, 09:29 AM   #2
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place your bets and spin the wheel
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Old 12-15-2018, 09:31 AM   #3
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You are playing the market and market timing. The Fed has no obligation to come in on a white horse and bail you out.
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Old 12-15-2018, 09:36 AM   #4
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It's life , it's all a gamble.
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Old 12-15-2018, 09:59 AM   #5
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It's life , it's all a gamble.
True, but some games have historically better odds than others. Market timing, for example, has worse odds than buy and hold. So does individual stock trading.

I was talking to a TDAmeritade branch manager a couple of years ago and I asked her what the national average return of their individual investor stock traders was. She kind of hesitated and then sheepishly said "1 1/2 percent." This was compared to overall 2016 market close to 10% with several sectors up over 20%. Further, the figure would have reflected survivorship bias. If all the dropouts had been accounted for I'm pretty sure the average return would have been negative.
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Old 12-15-2018, 10:03 AM   #6
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If I remember correctly, NYEXPAT was ahead of the market quite a bit a month or two ago, when he was mostly in cash. Then, the market tanked, so he would be ahead even more.

So, now if he moves back in, whether the market goes up or down, he is still ahead regardless.
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Old 12-15-2018, 10:20 AM   #7
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If I remember correctly, NYEXPAT was ahead of the market quite a bit a month or two ago, when he was mostly in cash. Then, the market tanked, so he would be ahead even more.

So, now if he moves back in, whether the market goes up or down, he is still ahead regardless.
So your point is that @NYEXPAT got lucky this time? No news there. The people who are not lucky tend not to post their results. This is what Nassim Taleb calls "silent evidence."

This is the story from Cicero that Taleb uses to illustrate the concept:
Diagoras, a nonbeliever in the gods, was shown painted tablets bearing the portraits of some worshippers who prayed, then survived a subsequent shipwreck. The implication was that praying protects you from drowning.

Diagoras asked, “Where are the pictures of those who prayed, then drowned?”
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Old 12-15-2018, 10:23 AM   #8
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You are playing the market and market timing. The Fed has no obligation to come in on a white horse and bail you out.
You are absolutely correct on all counts! You saw how we collectively "Wall St" got him to walk back his famous "Oct comments" and I am pretty sure we will do it again on Wednesday?
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Old 12-15-2018, 11:09 AM   #9
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Originally Posted by OldShooter View Post
True, but some games have historically better odds than others. Market timing, for example, has worse odds than buy and hold. So does individual stock trading.

I was talking to a TDAmeritade branch manager a couple of years ago and I asked her what the national average return of their individual investor stock traders was. She kind of hesitated and then sheepishly said "1 1/2 percent." This was compared to overall 2016 market close to 10% with several sectors up over 20%. Further, the figure would have reflected survivorship bias. If all the dropouts had been accounted for I'm pretty sure the average return would have been negative.
There are outliers though. I am an outlier (not an liar lol). I am up 141.6% this year, which means there are quite a few individual investors who must be down to account for my gains.
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Old 12-15-2018, 11:26 AM   #10
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There are outliers though. I am an outlier (not an liar lol). I am up 141.6% this year, which means there are quite a few individual investors who must be down to account for my gains.
There are always winners; it's a statistical distribution not an individual prediction. Same as the casinos and the lotteries; there are always big winners. But we all know that the average result is to lose.

For example, there is no statistical data or academic research to support the myth that stock-picking works, but for any given year about 1/3 of stock picker mutual funds will beat* their benchmarks. Since its basically luck, next year the 1/3 that beat will mostly be different funds. Cumulatively over 10 or 15 years, the number that end up beating deteriorates to a very few percent. Sadly, there is no known way to pick the winners in advance.

Not to insult but just to raise a caution flag: The main theme of Nassim Taleb's book "Fooled by Randomness" is scenarios where a trader gets lucky and from that concludes that he is a genius.

*(About 7% are such abject failures that their funds are closed or merged, but that is another thread.)
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Old 12-15-2018, 11:35 AM   #11
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If I remember correctly, NYEXPAT was ahead of the market quite a bit a month or two ago, when he was mostly in cash. Then, the market tanked, so he would be ahead even more.

So, now if he moves back in, whether the market goes up or down, he is still ahead regardless.
You are correct and I will continue to update the Investment performance thread once a month regardless. I retired as a professional trader 30+ years ago and only tinker around with trading as a hobby in volatile markets. Much like you retired engineers/gadgeteers with your projects.

I have no problem with being an outlier on this forum and have tremendous respect for you and several others on this forum! I understand and respect the "60/40 crowd" and what they are hoping to achieve and wish them all luck.

I am not an "option guy" like you, but have no problem with it and am impressed with your results this year. While I do not use options, I trade,hedge,spread and even short as instincts guide me. I have been "lucky" my entire life and will continue to ride the train.
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Old 12-15-2018, 11:54 AM   #12
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... I am not an "option guy" like you, but have no problem with it and am impressed with your results this year...
No, don't be.

Yes, I made more than $105K this year on covered call writing, but what I "lost" on my stocks/ETFs going down is several times that.

So, you are in a much better position. I had a feeling the market was topping out, but expected it to flounder around and not going down this hard, hence the option writing.

At this point, I am going to stay put. Don't feel like writing options until the market bounces up a bit. You can see that my greed is still strong.
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Old 12-15-2018, 12:04 PM   #13
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You are absolutely correct on all counts! You saw how we collectively "Wall St" got him to walk back his famous "Oct comments" and I am pretty sure we will do it again on Wednesday?
True story and part of the reason for the choppiness they should pick a course and stick to it....this back and forthing trying to "calm" the markets doesn't work.
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Old 12-15-2018, 12:31 PM   #14
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There are outliers though. I am an outlier (not an liar lol). I am up 141.6% this year, which means there are quite a few individual investors who must be down to account for my gains.
That tells me all I need to know about what you know!
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Old 12-15-2018, 12:38 PM   #15
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No, don't be.

Yes, I made more than $105K this year on covered call writing, but what I "lost" on my stocks/ETFs going down is several times that.

So, you are in a much better position. I had a feeling the market was topping out, but expected it to flounder around and not going down this hard, hence the option writing.

At this point, I am going to stay put. Don't feel like writing options until the market bounces up a bit. You can see that my greed is still strong.
If it makes you feel better, I hold positions in some US & Chinese tech stocks and Ford as well that are down anywhere from 14%-40% (JD.com) from Sept highs. I find myself "pedaling" twice as hard to keep my YTD performance up!
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Old 12-15-2018, 12:53 PM   #16
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I tend to look at the market moves in monthly chunks. One nasty market was in 1962 and it was not associated with a recession. Just seemed to be panic from what I understand. Below is a comparison of the monthly performances to the current market:



You can see 3 very bad months in 1962 in a row. Note some extremely good months too like July and November 1962.

I've never found a way to time such things that I could have confidence in. And I've tried a bunch of spreadsheet methods including moving averages of various sorts.

Hat is off to those who can make timing moves based on market price movements alone.
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Old 12-15-2018, 12:54 PM   #17
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You are correct and I will continue to update the Investment performance thread once a month regardless. I retired as a professional trader 30+ years ago and only tinker around with trading as a hobby in volatile markets. Much like you retired engineers/gadgeteers with your projects.

I have no problem with being an outlier on this forum ...

, I trade,hedge,spread and even short as instincts guide me. I have been "lucky" my entire life and will continue to ride the train.
And the other side of that, none of us could prove that it isn't skill instead of luck. Perhaps you are the outlier in being able to use skills to beat the market.

But bottom line, I don't have that skill, and don't know how to hire someone that might. Studies say it is rare, so I'll stick with my B&H. It's all good. Good Luck!

-ERD50
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Old 12-15-2018, 01:17 PM   #18
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That tells me all I need to know about what you know!
If being ignorant keeps me this far ahead of the index, then I am ok with that.
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Old 12-15-2018, 02:29 PM   #19
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If being ignorant keeps me this far ahead of the index, then I am ok with that.
First off, my apologies I did not mean to imply you are ignorant. Secondly, you have outperformed me by 10x YTD, which means to me that you have both luck and skill in trading. Thirdly, I am 65 and also posses skill and luck in trading and yet can not explain how electricity works to my children.

For me "Skill in trading" as opposed to talent or ability is easily acquired and really only requires risk management, discipline and understanding probabilities to be successful. In my 20's I knew/worked with/learned from many HS dropouts who learned these skills and made millions.

Lastly, what I was originally referring to in your post was a popular phrase on Wall St back in the 70's called "Money Heaven" to explain what I thought you did not understand. Turns out if you google the phrase there is nothing there. So again my apologies.
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Old 12-15-2018, 06:01 PM   #20
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First off, my apologies I did not mean to imply you are ignorant. Secondly, you have outperformed me by 10x YTD, which means to me that you have both luck and skill in trading.
Nah, no offense taken. I fully admit it is likely dumb luck that I have been so successful this year (and last year wasn't bad but I was just starting out). I don't have all of the fancy charts or access to level xx trading or a server farm with 5mS ping to the exchange. I just watch the news and watch the market and try to judge if there is what I consider to be a over-reaction. If it seems to be an over-reaction, such as the market dropping 700 points because Trump said something silly like we are going to build a wall around China, I buy. I sell when people realize there really is no other place to make a decent return and money starts flowing back into the market. It sounds stupid but really that is how I have managed to make so much return this year. I am never greedy though. I don't try to hold out for every penny and sometimes have to sit out for weeks waiting for someone to say something silly again to tank the market.
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