Why I believe we are about to embark on a historic bull market run

[Running_Man]

Does he publish an annual report (I assume nothing we would have access to)? I'd love to see how his investments have done.

He appears to be a brilliant well-grounded guy. His approach just might work to identify miss-priced items in the market. And I think he generally finds this miss-pricing out at the tail ends, and those rarely get hit. Kind of like betting on the horse with the worst record, and seeing that the odds of that horse placing are actually better than the betting odds. You don't win often, but you win big. That's a tough game to play!

Related to that - I'm not interested in real gambling, but DW likes to go to the horse races with friends once or twice a year, just as a get together. So I made the "safe bets", but then you might win $1.20 or something from time to time, not worth it to stand in line to redeem it. So then I went for the long shots. Just threw my money away. Either one was boring for me.


-ERD50

Taleb's investment strategy is 3.33% Universa fund and 96.67 SPY with no bonds and returns over last 10 years have been 12.1% compounded.

And as for the most recent periods: "A client of Universa Investments LP, a $4.1 billion Miami-based risk mitigation specialist, saw money allocated to the firm's tail hedging strategy gain around 1,000% in February and "multiples" of that in March, according to Claude Bovet of Lionscrest Capital. That implies a gain of at least 3,000%; the net return on Lionscrest's total portfolio was not available."

https://finance.yahoo.com/news/3-000-tail-risk-funds-161022793.html

But it sure is a lot easier to just declare passive investing as unbeatable and proven by Nobel Prize winners. Certainly allows for a lot more time to post about how smart Nobel prize winners are and how lucky and stupid individuals posting on the individual stock board are.

 

[bmcgonig]

Well I don't know if he does or not, but I do know that your comment is irrelevant to the concept of "silent evidence."

Yes but not irrelevant to the point you never tire of making.

 

[2177V]

This guy did not believe in the word "Can't" either:

(Note: Effel Tower video was cut)

-ERD50

Since I successfully dodge the big hit on my portfolio during this 2020 bear market, I will attempt to reallocate my 60/40 bull market portfolio to an asset preservation portfolio AGAIN....shortly after the yield curve inverts AGAIN in about 8 to 10 years.

Regarding the video, I thought that it was amusing. However, there is a big difference between success and failure...like the 1903 video of flight of the Wright brothers at Kitty Hawk....who also don't believed in the word "can't".

 

[ERD50]

Taleb's investment strategy is 3.33% Universa fund and 96.67 SPY with no bonds and returns over last 10 years have been 12.1% compounded. ....

So he under-performed the market?


Portfolio Analysis Results (Jan 2009 - Jan 2019)
Portfolio 1 Ticker Name Allocation 100%
SPY SPDR S&P 500 ETF Trust

Initial Balance Final Balance CAGR
$100,000 $366,973 13.76%

https://bit.ly/392a2Ij << short link

Taleb's investment strategy is 3.33% Universa fund and 96.67 SPY with no bonds and returns over last 10 years have been 12.1% compounded.

And as for the most recent periods: "A client of Universa Investments LP, a $4.1 billion Miami-based risk mitigation specialist, saw money allocated to the firm's tail hedging strategy gain around 1,000% in February and "multiples" of that in March, according to Claude Bovet of Lionscrest Capital. That implies a gain of at least 3,000%; the net return on Lionscrest's total portfolio was not available."

https://finance.yahoo.com/news/3-000-tail-risk-funds-161022793.html

But it sure is a lot easier to just declare passive investing as unbeatable and proven by Nobel Prize winners. Certainly allows for a lot more time to post about how smart Nobel prize winners are and how lucky and stupid individuals posting on the individual stock board are.

Sigh. It also seems easier to "prove" someone wrong by misstating what they said, and then call a "gotcha!".

I never said no one could beat the market. I fully believe that ~ 50% of dart throwing monkeys will beat the market.

What we've said is the average investor has little chance of identifying someone, or a strategy for themselves, to reliably beat the market over the long run. Lot's of people will do it, for a while. Fewer will do it over the long term, and some of those will be due to luck, and good luck identifying them upfront, which is all that counts in real life.

If there was a reliable, definable strategy that worked, and was made available to large numbers, it wouldn't work any more. It would get arbitraged away. Everyone would be above average.

-ERD50

 

[ERD50]

....

Regarding the video, I thought that it was amusing. However, there is a big difference between success and failure...like the 1903 video of flight of the Wright brothers at Kitty Hawk....who also don't believed in the word "can't".

Yes, there certainly was a big difference between the Eiffel tower jumper and the Wright Brothers.

But not believing in the word "can't" was not one of them.

Actually, I'll recant that (no pun intended). The Wright Brothers were successful because they did believe in the word "can't". Like:

We can't rely on these older books on aerodynamics, we will need to build a wind tunnel and rewrite the books.

We can't get a good enough power/weight ratio with existing gas engines, We will hire someone to build one out of aluminum for us.

We can't get airborne with a stable design. An unstable design will be much, much harder to control, but it is more efficient, and we barely have enough power/weight as it is.

We can't fly that crazy unstable aircraft w/o a lot of training.

Recognizing the appropriate time to say "can't" is how you avoid the pitfalls between an idea an implementation.

-ERD50

 

[bmcgonig]

Actually Taleb can be seen to vary a lot. There's one interview out there where he's 120% short stocks and 20% short bonds.

The point is he's been used here as an authority on randomness and therefore not timing the market when that's all he does.

We get it. The average person can't time the market. Some of us that do, especially those of us from Lake Woebegone, obviously are above average [emoji16].

 

[audreyh1]

S&P500 at 2953 is approaching that 3100 upper bound!

 

[tdv2]

Conditions look good.....low borrowing costs, businesses have right sized for lower demand, actual demand coming back....let's see what happens.

 

[HadEnuff]

what could go wrong?

 

[target2019]

what could go wrong?

A lot. Unemployment continues to rise. Political stalemate. No effective vaccine. Bacon shortage...

 

[HadEnuff]

A lot. Unemployment continues to rise. Political stalemate. No effective vaccine. Bacon shortage...

yeah, well there is that.

 

[tdv2]

There are two sides to every argument. Rest assured, the market will sort it out.

 

[audreyh1]

Conditions look good.....low borrowing costs, businesses have right sized for lower demand, actual demand coming back....let's see what happens.

Actual demand coming back? That’s hard to do with very high unemployment.

Rest assured? I’m getting plenty of rest, but the assured part - not so much.

 

[audreyh1]

Somewhere, I thought it was in this thread, Running_Man said he would get back in at 3100 on S&P500.

 

[pb4uski]

Actual demand coming back? That’s hard to do with very high unemployment. ...

... and when 70% of the economy is consumer spending.

 

[tdv2]

... and when 70% of the economy is consumer spending.

I guess we will have to do our part and spend, that will help to improve the jobs problem....

 

[Running_Man]

Somewhere, I thought it was in this thread, Running_Man said he would get back in at 3100 on S&P500.

Yes and I did with 25% of my portfolio and the options of 1% of my portfolio are multiples above my purchase price, with the S&P500 up 12% from the start of the thread where I was looking for 30-35% by the end of this year for a 100X move in the option. Amazing year, can still happen. People may not be working but they sure are buying stocks!

 

[audreyh1]

Where was your near June 3 post about getting back in?

 

[2177V]

I tend to make decisions based on data and not by people's opinions.
Here is some data for people to ponder:

https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-earnings-chart

With the PE ratio going up, this means the stock market "price" is exceeding the historical "earnings". Note that the PE ratio crashes historically and this correspond to a stock market crash.

IMO...This data implies a stock market being "over-valued" and there is a "higher risk" of changing your AA to become more aggressive. I personally feel more comfortable when the PE ratio is about 20...and not 36 where it is now. In March 2020 the PE ratio was about 22.

Are we experiencing a bubble? People can bet their life's savings and retirement that we are NOT in a bubble and that is OK by me since it is not my money.

 

[Lsbcal]

I tend to make decisions based on data and not by people's opinions.
Here is some data for people to ponder:

https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-earnings-chart

With the PE ratio going up, this means the stock market "price" is exceeding the historical "earnings". Note that the PE ratio crashes historically and this correspond to a stock market crash.

IMO...This data implies a stock market being "over-valued" and there is a "higher risk" of changing your AA to become more aggressive. I personally feel more comfortable when the PE ratio is about 20...and not 36 where it is now. In March 2020 the PE ratio was about 22.

Are we experiencing a bubble? People can bet their life's savings and retirement that we are NOT in a bubble and that is OK by me since it is not my money.

It seems that you are posting an opinion and not convincing data. Why not backtest your theory complete with buy/sell criteria? Then if it works come back and let us know the results of the data.

I personally have not found a process based solely on the PE ratio that works in the short term (say, 1 year). Plenty of studies have been done on Shiller's PE10 method and point to some correlation with very long term timing but not short term. I think valuation based timing does not seem to work but please prove me wrong by using convincing data and buy/sell criteria.

 

[OldShooter]

It seems that you are posting an opinion and not convincing data. Why not backtest your theory complete with buy/sell criteria? Then if it works come back and let us know the results of the data. ...

The nice thing about backtesting is that you can tune the criteria until you have positive results. Its one of the most popular ways to sell new mutual funds and anyone with an IQ above room temperature should be able to do it. The only catch is that the effectiveness of the criteria seems to crumble when the backtest period ends and the future begins.

Essentially it allows the backtester to follow Will Rogers' wise words: "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."

 

[audreyh1]

Too bad, I bumped this old thread to hopefully find a link to Running_Man’s post shortly after June 3 when he bought back in.

 

[Lsbcal]

The nice thing about backtesting is that you can tune the criteria until you have positive results. Its one of the most popular ways to sell new mutual funds and anyone with an IQ above room temperature should be able to do it. The only catch is that the effectiveness of the criteria seems to crumble when the backtest period ends and the future begins.

Essentially it allows the backtester to follow Will Rogers' wise words: "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."

What are you reacting too? Yes, some backtest methods are suspect but we all backtest at least informally i.e. we all base our investing on some historical knowledge. Done wisely backtests can point out well rounded methodology that might work going forward. Investing is a weird art form.

 

[corn18]

What are you reacting too? Yes, some backtest methods are suspect but we all backtest at least informally i.e. we all base our investing on some historical knowledge. Done wisely backtests can point out well rounded methodology that might work going forward. Investing is a weird art form.

More importantly, it can point out a poorly thought out plan. The 4% rule is based on backtesting. Before the 4% rule, everyone was using 8%-10% as a safe withdrawal rate. I was using 2% average real return to plan my retirement. 2% real is very conservative. Until you plug in a start date of 1969. That 35 year period had an average real return of 5.7%. But if you use actual real returns by year, it gets ugly.

 

[OldShooter]

What are you reacting too? Yes, some backtest methods are suspect but we all backtest at least informally i.e. we all base our investing on some historical knowledge. Done wisely backtests can point out well rounded methodology that might work going forward. Investing is a weird art form.

I was reacting to your suggestion that Vchan produce a backtest to support his timing ideas. Almost certainly he can, but it proves nothing.

Backtests are indeed useful, but not for designing investment strategies. Backtests are too prone to overfitting. (https://www.investopedia.com/terms/o/overfitting.asp)

I find backtests very useful to compare portfolios, especially to see how closely one portfolio correlates to another and/or with benchmarks. One common thing I have seen around here is that a multi-sector portfolio (large, mid, small, value, growtn, etc.) ends up producing essentially the same results as a total market fund. Its just that the portfolio achieves its result by combining slices of salami instead of just buying a whole one.

Re "might work going forward," I can't argue with that. But the fact that a scheme backtests well IMO doesn’t affect the "might" part. But it "might" work going forward, too, even if it doesn't backtest well.

Edit:

More importantly, it can point out a poorly thought out plan. ...

Yes. Another good use for the tool., although it produces only point data.