Author Topic: Efficient Markets, RIP  (Read 93662 times)

smedleyb

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Re: Efficient Markets, RIP
« Reply #200 on: July 18, 2012, 04:49:20 PM »
I mean, you do realize that the ability to consistently generate 24% returns would make me -- a billionaire? 

So I repeat:

Quote
Okay, so duplicating your previous success is not only not repeatable, but the mere idea is "ludicrous." (And apparently you aren't a billionaire from it.)

What's the point of posting about it then? 

You haven't answered this.

To demonstrate that through hard work, research, and analysis, one can gain an edge on the market, anticipate it's next move, and potentially profit from it?; 

To show that my outsized returns throughout the years has been an equal mix of skill and luck?;

In order to contextualize my current 100% cash position, and to dispel the idea that I'm some kind of perma-bear (since I've made nearly all my money being long)?;

To highlight that while I'm cautious on stocks intermediate-term (do not find the risk/reward favorable at these levels), I think the growing chorus of negativity surrounding stocks (and the bond collapse I envision down the road) will generate the greatest bull market of all time?;

In order to demonstrate to other readers that the ideas espoused by the two most prolific posters on these boards represent their opinion and not some sacred, unwavering truths?

Look, you don't have to understand TA; you don't need to think about the historical context of price to earnings ratios and their relation to stock prices; there is little necessity to grasping the impact of investor psychology on price movements; and please, just ignore the fact that these markets today are anything but  "free" and at  the mercy of extraneous forces known as "central banks;"  none of this should be of any interest to anyone who is comfortable allocating their capital according to their adviser's recommendations.

But to those who find these topics interesting, if not fascinating [raises hand], then, well, I hardly see how everything that has been said so far is incompatible with a site which prides itself on being "an advanced personal finance resource," couched here in the "investor alley" forum, under the banner of "Efficient Markets, RIP." 






 





 
« Last Edit: July 18, 2012, 04:51:43 PM by smedleyb »

arebelspy

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Re: Efficient Markets, RIP
« Reply #201 on: July 18, 2012, 05:18:52 PM »
To demonstrate that through hard work, research, and analysis, one can gain an edge on the market, anticipate it's next move, and potentially profit from it?; 

So then why can't your results be duplicated?
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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smedleyb

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Re: Efficient Markets, RIP
« Reply #202 on: July 18, 2012, 05:36:24 PM »
To demonstrate that through hard work, research, and analysis, one can gain an edge on the market, anticipate it's next move, and potentially profit from it?; 

So then why can't your results be duplicated?

Not only can they, but they will.  Maybe not by me -- I'll never take the risks I took in the past (using 100% margin at times), but somebody, somewhere will be able to duplicate these results.  Like somebody said above, history doesn't repeat itself, but if often rhymes:

http://blog.redfin.com/lasvegas/2011/11/case-shiller-vegas-hits-60-off-peak-home-pricing.html

http://en.wikipedia.org/wiki/File:Tulip_price_index1.svg

The point to effective speculation is to understand your market, manage your risk, and identify your edge.  Without those,  you're just the next sucker at the table.  And nobody wants to be that, right?



 
« Last Edit: July 18, 2012, 05:38:30 PM by smedleyb »

arebelspy

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Re: Efficient Markets, RIP
« Reply #203 on: July 18, 2012, 06:32:22 PM »
Not only can they, but they will.  Maybe not by me -- I'll never take the risks I took in the past (using 100% margin at times), but somebody, somewhere will be able to duplicate these results.

If they can't be duplicated by you, but just "someone somewhere" then it's purely luck.

The law of large numbers says that with enough people gambling and buying lotto tickets, someone will win at some point.

So of course your results will be duplicated, but merely by random happenstance.

If you are saying even you can't duplicate that success... what exactly are you studying all this stuff for?

The point to effective speculation is to understand your market, manage your risk, and identify your edge.

Is it effective if it happens once, is not repeatable (except to someone else, at some point, simply due to the law of large numbers)?  Or is it luck?

If it was actually "effective speculation" ... wouldn't it be repeatable?  Wouldn't understanding your market, managing your risk, and identifying your edge mean you could do it again and again?
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

smedleyb

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Re: Efficient Markets, RIP
« Reply #204 on: July 18, 2012, 07:26:39 PM »
Not only can they, but they will.  Maybe not by me -- I'll never take the risks I took in the past (using 100% margin at times), but somebody, somewhere will be able to duplicate these results.

If they can't be duplicated by you, but just "someone somewhere" then it's purely luck.

The law of large numbers says that with enough people gambling and buying lotto tickets, someone will win at some point.

So of course your results will be duplicated, but merely by random happenstance.

If you are saying even you can't duplicate that success... what exactly are you studying all this stuff for?

The point to effective speculation is to understand your market, manage your risk, and identify your edge.

Is it effective if it happens once, is not repeatable (except to someone else, at some point, simply due to the law of large numbers)?  Or is it luck?

If it was actually "effective speculation" ... wouldn't it be repeatable?  Wouldn't understanding your market, managing your risk, and identifying your edge mean you could do it again and again?

Beating the market over time by a few percentage points is one thing; attempting to quadruple the market's average long-term returns consistently year after year is a feat entirely of a different order and magnitude.  Like Skyrefuge showed above, most of my "gains" came at the beginning, skewing the long term average.  Returns have been entirely more modest since -- yet my Fuck You Fund is large enough that capital preservation far outweighs risk taking at this point, hence the point that my past returns will seem outsized relative to future gains.

In the end, I just find it ironic that a real estate speculator is chastising a stock speculator for not only speculating, but for refusing to commit to the idea that future speculative activities will be as fruitful as past speculative activities.   I might not repeat the past, but I sure as hell ain't gonna give it all back -- precisely because I realize giving it all back is a very real possibility if I lose my discipline in the markets and start gambling away my hard earned gains... 

 






arebelspy

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Re: Efficient Markets, RIP
« Reply #205 on: July 18, 2012, 07:43:59 PM »
Grant already did a fairly lengthy post on the difference between real estate speculation and stock speculation.  I can dig it up if you forgot.

precisely because I realize giving it all back is a very real possibility if I lose my discipline in the markets and start gambling away my hard earned gains...

Right, sure.  If you lose your discipline and start gambling, you could lose it all.  We both agree on that.

What I'm asking is.. if this works, why couldn't you duplicate it if you keep your discipline?  If it was achieved through hard work, studying and learning the markets, and discipline, then it should be repeatable.

If you aren't willing to do it because it's too risky and you don't want to risk losing, then it is essentially akin to gambling and you got lucky earlier.  Otherwise the risk would mostly be removed, and you'd be comfortable taking those risks.  Clearly you aren't, so there must be more of a risk element than you're willing to admit.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

grantmeaname

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Re: Efficient Markets, RIP
« Reply #206 on: July 18, 2012, 07:52:53 PM »
To demonstrate that through hard work, research, and analysis, one can gain an edge on the market, anticipate it's next move, and potentially profit from it?;
Is that your plan? Go right ahead.
Quote
To show that my outsized returns throughout the years has been an equal mix of skill and luck?;
All you've shown is that you received outsized returns. In the process you've revealed that you managed to make one good trade, then using leverage realized a six percent return over 12 subsequent years. This exceeds market returns, but if (as by your own admission) it's not repeatable, then your slightly above average performance is nothing but a natural consequence of the law or large numbers and survivorship bias.
Quote
In order to contextualize my current 100% cash position, and to dispel the idea that I'm some kind of perma-bear (since I've made nearly all my money being long)?;
I don't think arebelspy was suggesting that you're a perma-bear so much as providing a litmus test that any bear can use to assess whether they're a perma-bear or not.
Quote
In order to demonstrate to other readers that the ideas espoused by the two most prolific posters on these boards represent their opinion and not some sacred, unwavering truths?
If you were interested in doing that, you would have risen to any of my myriad challenges to demonstrate a way to exploit an inefficiency in the market in order to receive greater than market returns with comparable risk characteristics, or even demonstrated how such an opportunity could exist. Yet you've without fail shrugged off this challenge every opportunity I've given you. Could it be that the emperor has clothes after all?
Quote
Look, you don't have to understand TA; you don't need to think about the historical context of price to earnings ratios and their relation to stock prices; there is little necessity to grasping the impact of investor psychology on price movements; and please, just ignore the fact that these markets today are anything but  "free" and at  the mercy of extraneous forces known as "central banks;"  none of this should be of any interest to anyone who is comfortable allocating their capital according to their adviser's recommendations.

But to those who find these topics interesting, if not fascinating [raises hand], then, well, I hardly see how everything that has been said so far is incompatible with a site which prides itself on being "an advanced personal finance resource," couched here in the "investor alley" forum, under the banner of "Efficient Markets, RIP."
Disagreeing with your interpretation of a topic is not the same as failing to understand it. Now, on the whole, I'm fascinated, but every time I try and engage you you either assign me a Soros circle-jerk memoir, ad hom me out of the thread, or quietly shrink away. If you want to talk, let's.

smedleyb

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Re: Efficient Markets, RIP
« Reply #207 on: July 18, 2012, 08:20:35 PM »
Indeed, let's talk:

In weak-form efficiency, future prices cannot be predicted by analyzing prices from the past. Excess returns cannot be earned in the long run by using investment strategies based on historical share prices or other historical data. Technical analysis techniques will not be able to consistently produce excess returns, though some forms of fundamental analysis may still provide excess returns. Share prices exhibit no serial dependencies, meaning that there are no "patterns" to asset prices. This implies that future price movements are determined entirely by information not contained in the price series. Hence, prices must follow a random walk. This 'soft' EMH does not require that prices remain at or near equilibrium, but only that market participants not be able to systematically profit from market 'inefficiencies'.

Grant, do you subscribe to this conception of weak EMH?  (p.s.: I'm attempting to use this definition as a touchstone for further debate, nothing more).

smedleyb

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Re: Efficient Markets, RIP
« Reply #208 on: July 18, 2012, 08:40:36 PM »
Grant already did a fairly lengthy post on the difference between real estate speculation and stock speculation.  I can dig it up if you forgot.

precisely because I realize giving it all back is a very real possibility if I lose my discipline in the markets and start gambling away my hard earned gains...

Right, sure.  If you lose your discipline and start gambling, you could lose it all.  We both agree on that.

What I'm asking is.. if this works, why couldn't you duplicate it if you keep your discipline?  If it was achieved through hard work, studying and learning the markets, and discipline, then it should be repeatable.

If you aren't willing to do it because it's too risky and you don't want to risk losing, then it is essentially akin to gambling and you got lucky earlier.  Otherwise the risk would mostly be removed, and you'd be comfortable taking those risks.  Clearly you aren't, so there must be more of a risk element than you're willing to admit.

You're attempting to reduce human behavior (and what are markets if not an amalgamation of humans buying and selling) to an epistemological model better suited to describe scientific phenomenon rather than human endeavors like speculation.  Repeatability, deduction, and reduction to universal laws is an arbitrary condition you've placed on my conception of the markets in order to undermine those views.  But human behavior -- and hence markets -- are not the same as natural phenomenon.   As psychology and sociology show, while individual cases may vary, there exits behaviors which, while not universally predictable, do settle into certain defined patterns that can be inductively estimated. 

Furthermore, by conceding that there exists a basic distinction between "disciplined investing" and gambling, you've basically agreed with the primary thrust of everything that I've been attempting to say -- namely, that the difference between the smart educated investor and the gambler is that the latter has no conception of risk control, money management techniques, or an appreciation of advantageous risk/reward situations (derived from closely analyzing fundamental, technical, and psychological conditions), whereas the disciplined trader cuts loses, adheres to risk control (doesn't bet everything on one trade, e.g.) and waits for the risk/reward to be solidly tilted in his or her favor before committing capital to the markets.
« Last Edit: July 18, 2012, 08:47:14 PM by smedleyb »

arebelspy

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Re: Efficient Markets, RIP
« Reply #209 on: July 18, 2012, 10:30:03 PM »
while individual cases may vary, there exits behaviors which, while not universally predictable, do settle into certain defined patterns that can be inductively estimated. 

If they fall into these patterns, why can't your success be repeated?

Furthermore, by conceding that there exists a basic distinction between "disciplined investing" and gambling, you've basically agreed with the primary thrust of everything that I've been attempting to say -- namely, that the difference between the smart educated investor and the gambler is that the latter has no conception of risk control, money management techniques, or an appreciation of advantageous risk/reward situations (derived from closely analyzing fundamental, technical, and psychological conditions), whereas the disciplined trader cuts loses, adheres to risk control (doesn't bet everything on one trade, e.g.) and waits for the risk/reward to be solidly tilted in his or her favor before committing capital to the markets.

1) I'll concede plenty of points to discuss an idea and see where it leads us. That doesn't mean I agree with a particular point, just that I don't feel like arguing it, or I want to accept it as a premise to see what would happen if it were the case.

2) I don't think that necessarily is a difference.  There are gamblers that have a conception of risk control, money management, appreciation of risk/reward situations, etc. 

3) Even if one is a "disciplined trader" and has all those qualities, they could still be gambling.  Plenty of people do it, and lose money.  And even if they aren't gambling persay, but basing it on analysis they feel is solid, they could be wrong.  And history has shown they basically always are!
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

arebelspy

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Re: Efficient Markets, RIP
« Reply #210 on: July 18, 2012, 10:33:57 PM »
You're attempting to reduce human behavior (and what are markets if not an amalgamation of humans buying and selling) to an epistemological model better suited to describe scientific phenomenon rather than human endeavors like speculation.  Repeatability, deduction, and reduction to universal laws is an arbitrary condition you've placed on my conception of the markets in order to undermine those views.  But human behavior -- and hence markets -- are not the same as natural phenomenon.   As psychology and sociology show, while individual cases may vary, there exits behaviors which, while not universally predictable, do settle into certain defined patterns that can be inductively estimated. 

Okay, after rereading this, here is my response: fine, human behavior changes, so markets are changing, etc. etc.

But if one could analyze all of that properly, and make correct speculative decisions, they should be able to repeat it.

Even with psychology, changing behaviors, and the waxing and waning of the moon support, resistance and pivot points all constantly in flux, if the solid analysis works, it shouldn't just work the one time.

The same strategy may not work again.  One may need to start over and revise.  But if the method of studying and analyzing works, then even with it being a constantly changing human endeavor the results should be repeatable.  Otherwise it's not skill, but luck.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

grantmeaname

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Re: Efficient Markets, RIP
« Reply #211 on: July 19, 2012, 07:08:19 AM »
In weak-form efficiency, future prices cannot be predicted by analyzing prices from the past. Excess returns cannot be earned in the long run by using investment strategies based on historical share prices or other historical data. Technical analysis techniques will not be able to consistently produce excess returns, though some forms of fundamental analysis may still provide excess returns. Share prices exhibit no serial dependencies, meaning that there are no "patterns" to asset prices. This implies that future price movements are determined entirely by information not contained in the price series. Hence, prices must follow a random walk. This 'soft' EMH does not require that prices remain at or near equilibrium, but only that market participants not be able to systematically profit from market 'inefficiencies'.

My definition of weak-form EMH comes from a functional or utilitarian place rather than an ideological one. As I've said before, it's not that inefficiencies cannot exist, but that inefficiencies large enough to be exploitable after transaction costs can't exist. I don't make that distinction just to raise the other side of the argument's standard of proof. I make that distinction because we're only talking about what matters to the investor. It's not that technical analysis is completely bunk, it's that it's completely toothless. There may be truth to it (I won't speculate either way, here), but I've never seen evidence that technical analysis can produce risk-adjusted better than market returns after transaction costs. Likewise, serial dependencies may exist, but they're not exploitable, and no fundamental analysis methodology can consistently outperform the market on a risk-adjusted basis unless it depends on insider knowledge. The posted definition alternates between absolute statements ("cannot be predicted") and functional statements ("not able to systematically profit"). I agree with the second category of statements but am not comfortable with the first category's absolutism. Does that make sense?

smedleyb

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Re: Efficient Markets, RIP
« Reply #212 on: July 19, 2012, 08:37:59 AM »
Sold VXX after 3% pop, offsetting small QQQ loss yesterday and then some.

Saving my ammo for SPX 1390-1400, which is coming up fast (plan to initiate short via SPY puts)

Grant, thank you for the detailed response. 

smedleyb

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Re: Efficient Markets, RIP
« Reply #213 on: July 23, 2012, 07:15:57 AM »
Sold VXX after 3% pop, offsetting small QQQ loss yesterday and then some.

Saving my ammo for SPX 1390-1400, which is coming up fast (plan to initiate short via SPY puts)

Futures point to huge drop at the open, SPX futes indicated down 20 points.

After touching SPX 1380, my feeling is SPX 1390-1400 is not attainable given the spreading European contagion.   I think many will look back at this time frame and wonder why they ever thought the US would be spared in this spreading global economic slowdown and European market collapse.

My multi-month SPX target is 950-1000, or roughly 25% lower than where we are today.

Caveat emptor.

arebelspy

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Re: Efficient Markets, RIP
« Reply #214 on: July 23, 2012, 11:15:05 AM »
I think many will look back at this time frame and wonder why they ever thought the US would be spared in this spreading global economic slowdown and European market collapse.

I agree. If people think we will be unaffected, they're wrong.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

grantmeaname

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Re: Efficient Markets, RIP
« Reply #215 on: July 23, 2012, 11:23:00 AM »
My multi-month SPX target is 950-1000, or roughly 25% lower than where we are today.
So are you shorting it now or just waiting? How do you plan to monetize this gut feeling?

smedleyb

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Re: Efficient Markets, RIP
« Reply #216 on: July 23, 2012, 12:20:54 PM »
My multi-month SPX target is 950-1000, or roughly 25% lower than where we are today.
So are you shorting it now or just waiting? How do you plan to monetize this gut feeling?

Since when is objectively measurable economic facts (Europe on the brink of depression, slowing global economy, including the US with sagging retail sales data and contracting ISM) a manifestation of my personal "gut feelings?"   When these markets get whacked over the next 12 months, we'll look back and see the writing on the wall and say "of course the market was due to sell off hard."  Usually the markets discount future information and reflect that data in the current prices -- this is clearly not one of those times.   

And I think my posts above lay out my plan of attack.  Am I upset that I sold my (rather large) VXX long  the other day for a decent 3% gain only to watch it explode 15% higher the next several sessions?  A little, but personal obligations forced me to take a step away from the markets last week.   Besides, there will be plenty other opportunities to make money.



grantmeaname

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Re: Efficient Markets, RIP
« Reply #217 on: July 23, 2012, 12:30:18 PM »
If it was meant as an insult, I would have been much snarkier. I don't mean 'gut feeling' derisively, I was actually using it to descriptively refer to your statement about SPX. Let me reword. My question is: if your hunch is that sometime in the next handful of months SPX will settle into the 950-1000 range, what are you doing about it now? Are you shorting it until that point is realized, starting immediately?

smedleyb

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Re: Efficient Markets, RIP
« Reply #218 on: July 23, 2012, 12:45:03 PM »
I posted this on July 11th, and the technical framework it lays out is still valid today:


Market note:  a couple weeks ago I said that the SPX breaking over 1340 was bullish and my technical work showed that the market has some room to run to SPX 1390.  Well, while the SPX did touch 1375 last week, but has since sold off and is currently bouncing around this important 1340 level as we speak.  1340 now represents support for the market, and it's critical that it hold here if the bulls stand a chance.

But I'll say this: the news flow (especially earnings) has been outright negative, which is not surprising since 50% of S&P profits are derived overseas and Europe is an economic mess.  My sense is that these levels don't hold.  The strategy before was to unleash shorts at or near 1390, but maybe that level doesn't come into play.  Plan B  is to see how the market acts around 1330-1340, and if it breaks (drops below 1320), the strategy will be to short the first bounce back to 1340 (markets almost always seem to retest broken support levels after they break, and these retests represent the best trading set-ups IMO). 


So 1390-1400 is the "layup" short level, IMO.  But see how the market keeps getting repelled as it approaches that level, and see how it keeps finding support between 1330-1340 (1337.56 is today's low).  In TA, each test of support weakens it.  I think 1330-1340 is toast soon enough, but I'm, sticking to the game plan from July 11th as represented by Plan A or Plan B, whichever comes first.

smedleyb

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Re: Efficient Markets, RIP
« Reply #219 on: July 23, 2012, 01:01:15 PM »
If it was meant as an insult, I would have been much snarkier. I don't mean 'gut feeling' derisively, I was actually using it to descriptively refer to your statement about SPX. Let me reword. My question is: if your hunch is that sometime in the next handful of months SPX will settle into the 950-1000 range, what are you doing about it now? Are you shorting it until that point is realized, starting immediately?

What's funny is I'm the only one really saying anything about the market, while you've settled into the comfortable position of simply critiquing my statements.  On top of that, when I'm right, I'm just lucky.  When I'm wrong, I'm obviously a fool and a charlatan.  Must be nice to criticize others about their market forecasts while never having to proffer one your own. 

How about that VXX trade?  A 15%move in an EFT in a couple of sessions is not too shabby, right?  (never mind those QQQ puts I bought last Wed; could have sold those too for a 30% gain this morning, but got stopped out for a small loss -- such is the opportunity cost of disciplined trading). 

 

grantmeaname

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Re: Efficient Markets, RIP
« Reply #220 on: July 23, 2012, 01:12:09 PM »
I was calmly asking you to explicitly state what you were doing because I thought part of it was unclear and I was trying to figure out what you meant by it. How you are so thin skinned that you take that as an insult and start up your cries of martyrdom, even after I explicitly state my intention and mindset in asking you, is totally beyond me.

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Re: Efficient Markets, RIP
« Reply #221 on: July 23, 2012, 01:16:05 PM »
I posted this on July 11th, and the technical framework it lays out is still valid today:


Market note:  a couple weeks ago I said that the SPX breaking over 1340 was bullish and my technical work showed that the market has some room to run to SPX 1390.  Well, while the SPX did touch 1375 last week, but has since sold off and is currently bouncing around this important 1340 level as we speak.  1340 now represents support for the market, and it's critical that it hold here if the bulls stand a chance.

But I'll say this: the news flow (especially earnings) has been outright negative, which is not surprising since 50% of S&P profits are derived overseas and Europe is an economic mess.  My sense is that these levels don't hold.  The strategy before was to unleash shorts at or near 1390, but maybe that level doesn't come into play.  Plan B  is to see how the market acts around 1330-1340, and if it breaks (drops below 1320), the strategy will be to short the first bounce back to 1340 (markets almost always seem to retest broken support levels after they break, and these retests represent the best trading set-ups IMO). 


So 1390-1400 is the "layup" short level, IMO.  But see how the market keeps getting repelled as it approaches that level, and see how it keeps finding support between 1330-1340 (1337.56 is today's low).  In TA, each test of support weakens it.  I think 1330-1340 is toast soon enough, but I'm, sticking to the game plan from July 11th as represented by Plan A or Plan B, whichever comes first.


Read back through and find the words "sense", "seems", "maybe", "if"...  I would call all the the above "speculation".  Increased speculation is not bad or wrong, it simply carries higher amounts of risk.  Hopefully your speculation pays off for you in greater returns.


Beating the market with the same amount of risk is what would interest me, otherwise it's not apples to apples.  There are lots of ways to speculate with great potential to beat the market at higher risks.  Would you agree about that difference?

smedleyb

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Re: Efficient Markets, RIP
« Reply #222 on: July 23, 2012, 01:25:45 PM »
I was calmly asking you to explicitly state what you were doing because I thought part of it was unclear and I was trying to figure out what you meant by it. How you are so thin skinned that you take that as an insult and start up your cries of martyrdom, even after I explicitly state my intention and mindset in asking you, is totally beyond me.

There's the Grant we know and love.  lol!




grantmeaname

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Re: Efficient Markets, RIP
« Reply #223 on: July 23, 2012, 01:37:53 PM »
I'm being totally serious here. I've never called you a charlatan or a fool, and I've never called you lucky on one of the trades you've been journaling the past month or so. If you've made your mind up that that's what the world thinks about you, fine, but your interpretation of things isn't borne out by the facts and it's verifiably false.

smedleyb

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Re: Efficient Markets, RIP
« Reply #224 on: July 23, 2012, 01:39:44 PM »
Read back through and find the words "sense", "seems", "maybe", "if"...  I would call all the the above "speculation".  Increased speculation is not bad or wrong, it simply carries higher amounts of risk.  Hopefully your speculation pays off for you in greater returns.

These words are no accident.  TA is equal part objective observation and subjective interpretation. 





grantmeaname

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Re: Efficient Markets, RIP
« Reply #225 on: July 23, 2012, 01:44:11 PM »
These words are no accident.  TA is equal part objective observation and subjective interpretation.
Then why the hell are you mad I called it acting on a hunch?

smedleyb

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Re: Efficient Markets, RIP
« Reply #226 on: July 23, 2012, 01:54:53 PM »
These words are no accident.  TA is equal part objective observation and subjective interpretation.
Then why the hell are you mad I called it acting on a hunch?

Because "hunch" is just another word for "gut feeling" which is another word for "guessing" which is a far cry from what I'm doing with my capital.



 

grantmeaname

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Re: Efficient Markets, RIP
« Reply #227 on: July 23, 2012, 01:56:12 PM »
No, gut feeling and hunches are intuition, which is the same thing as "subjective interpretation". Like, literally the exact same thing.

smedleyb

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Re: Efficient Markets, RIP
« Reply #228 on: July 23, 2012, 01:58:39 PM »
No, gut feeling and hunches are intuition, which is the same thing as "subjective interpretation". Like, literally the exact same thing.

You're absolutely right.  Half "gut feeling," half "objective observation."  Like I said, half art, half science.






smedleyb

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Re: Efficient Markets, RIP
« Reply #229 on: July 27, 2012, 12:49:08 PM »
And just like that, the SPX rips the bears a new one as it chugs mercilessly up to the 1390-1400 zone I've been writing about as my preferred level to short.  I just took a break from work to find it tickling the underbelly of 1390 (1388.42 to be exact); since I prefer to enjoy my weekends risk free, I'm likely gonna hold off on any shorts today unless this puppy ramps another 10 SPX points into the close; then I'll probably layer into 1/3 or 1/2 my desired max short position.

(Oh, and kudos to the numerous Mustachians who avoided/warned against the Facecrook IPO by having the good sense to see through the hype.  With declining year over year revenue and earnings growth, and with the stock currently languishing between 22-24 bucks, it's obvious the $38 IPO price was nothing more than another royal screw job by Wall Street). 

sol

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Re: Efficient Markets, RIP
« Reply #230 on: July 27, 2012, 01:11:38 PM »
And just like that, the SPX rips the bears a new one as it chugs mercilessly up to the 1390-1400 zone I've been writing about as my preferred level to short.

I was wondering if we were going to hear from you, given the recent run, and whether or not you were going to follow through with your previous plans.  Sounds like not quite yet.

How often do you actually place such bets?  My impression from reading this thread so far is that you've got all kinds of ideas about what to do if the market behaves in a certain way, but it never seems to quite hit your trigger levels so I'm assuming you've been sitting on 100% cash through this entire thread.  Is that correct?

smedleyb

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Re: Efficient Markets, RIP
« Reply #231 on: July 27, 2012, 01:50:06 PM »
And just like that, the SPX rips the bears a new one as it chugs mercilessly up to the 1390-1400 zone I've been writing about as my preferred level to short.

I was wondering if we were going to hear from you, given the recent run, and whether or not you were going to follow through with your previous plans.  Sounds like not quite yet.

How often do you actually place such bets?  My impression from reading this thread so far is that you've got all kinds of ideas about what to do if the market behaves in a certain way, but it never seems to quite hit your trigger levels so I'm assuming you've been sitting on 100% cash through this entire thread.  Is that correct?

Just to give some proper perspective Sol:  my trading account represents about 15% of my liquid assets.  I trade pretty infrequently (although I've made a couple small trades over the course of this week).

My primary brokerage account and my and my wife's IRA money is all cash, but I have every intention of putting all the IRA money to work over the next couple years if/when the markets come for sale; my primary brokerage account will stay mostly in cash unless prices really break down.

That said, I think day trading is a loser's game (the more I trade, the more I lose).  But this 1400 SPX level has been on my radar for weeks.  Also, I'm not saying the market is topping out here; I'm just saying I plan to short it for a trade which could last hours or even weeks -- I don't know yet.

Again, just a real time demonstration of an idea I've been cultivating for weeks; I'm not professing to be an awesome trader or anything like that -- this market has kicked my ass plenty over the years so I stay humble every time I put money to work.  Along these lines, my first thought if/when I pull the short trigger is: "how much can I lose, and what is my cut-and-run level?"  If I make money in the end, well then I'll gratefully take what the market giveth.

Looks like things will close out right around 1390, but I'm content to wait until Monday-Tuesday to place my bets.  There should be some follow through (to the upside) to start the week, at which point I intend to let the bear out of it's cave!

smedleyb

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Re: Efficient Markets, RIP
« Reply #232 on: July 27, 2012, 02:01:08 PM »
Market note:  see how the past two sell-offs in the SPX were confined to the 1330-1340 level that I discussed above as representing resistance in late May and early June, but which has functioned as support throughout July (once the market broached that level to the upside -- in charting past resistance when overcome becomes future support).

Uncanny shit, really. 

edit: it's worth noting (although I've been avoiding this to keep things simple) that the SPX has been in a nice uptrending channel the past two months -- what we refer to in TA as a series of higher highs, and a succession of higher lows, and today's rally brings the SPX near the top of that trend channel.

Furthermore, the SPX is approaching it's multi-year high of 1420 which it touched in April.

All this -- in addition to the horizontal resistance/support level of 1330-1340 and head and shoulders measured move to 1390-1400 -- creates a powerful nexus of resistance levels that should keep the market in check for now. 

The thing with technical analysis is to not be married to either the bull or  bear position, but to allow the charts to speak for the market itself.  Should the SPX claw and chew it's way through the multiple layers of resistance currently residing between 1390-1420 over the course of the next few weeks or months, I see the SPX working to 1575 (old, all-time high set in 2007) in time -- fully 10% higher than where we are today.  In my estimation, for the market to break above 1420, we'd have to see a couple things happen:

(1) Europe prints, and prints hard

(2) bonds (10 year) sell off

(3) the dollar weakens

(4) economic data show more of a "bend, but not broken" environment out there. 

Not a probably outcome, IMO, but definitely possible and one I'm always looking at as I form my investment strategy.

 
« Last Edit: July 27, 2012, 02:54:27 PM by smedleyb »

grantmeaname

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Re: Efficient Markets, RIP
« Reply #233 on: July 27, 2012, 02:25:52 PM »
Sure, it's uncanny, whatever. But you haven't demonstrated that it can be systematically profited from on a risk-adjusted basis.

tooqk4u22

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Re: Efficient Markets, RIP
« Reply #234 on: July 27, 2012, 02:29:25 PM »
Also didn't he say that once it hit that level he would effectively be going all in (with his investment pot) on the short at that time - sounds like he is waning a bit.

smedleyb

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Re: Efficient Markets, RIP
« Reply #235 on: July 27, 2012, 02:58:52 PM »
Also didn't he say that once it hit that level he would effectively be going all in (with his investment pot) on the short at that time - sounds like he is waning a bit.

I wane?  Do tell...

arebelspy

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Re: Efficient Markets, RIP
« Reply #236 on: July 27, 2012, 03:47:14 PM »
(Oh, and kudos to the numerous Mustachians who avoided/warned against the Facecrook IPO by having the good sense to see through the hype.  With declining year over year revenue and earnings growth, and with the stock currently languishing between 22-24 bucks, it's obvious the $38 IPO price was nothing more than another royal screw job by Wall Street).

Yeah, I'm one of those.  Notice though, I didn't short it. Because despite my thoughts that it was overvalued, the market might disagree.  It happened to agree.

But due to that psychology involved that you're always talking about, others may be buying FB even when I personally think it's overvalued.  Then I lose. 

The only way to beat that?  Investing in solid prospects over a long term.  Then you can ignore the short term irrational fluctuations.

But trying to beat irrationality, just because you know you're right, doesn't work.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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smedleyb

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Re: Efficient Markets, RIP
« Reply #237 on: July 27, 2012, 04:16:17 PM »
(Oh, and kudos to the numerous Mustachians who avoided/warned against the Facecrook IPO by having the good sense to see through the hype.  With declining year over year revenue and earnings growth, and with the stock currently languishing between 22-24 bucks, it's obvious the $38 IPO price was nothing more than another royal screw job by Wall Street).

Yeah, I'm one of those.  Notice though, I didn't short it. Because despite my thoughts that it was overvalued, the market might disagree.  It happened to agree.

But due to that psychology involved that you're always talking about, others may be buying FB even when I personally think it's overvalued.  Then I lose. 

The only way to beat that?  Investing in solid prospects over a long term.  Then you can ignore the short term irrational fluctuations.

But trying to beat irrationality, just because you know you're right, doesn't work.

You couldn't short it because you couldn't get a borrow the first day, nor buy puts. ;)

And you're probably right about the difficulty of systematically profiting form short term irrational fluctuations, but a keen grasp the manifold forces impacting stock prices can give you an edge in properly allocating your capital over the long term by finding the right sectors/markets to invest in while avoiding potentially overvalued ones, both in terms of price and time

Technical analysis, human psychology, and corporate/economic fundamentals each impact stock prices to varying degrees.  And sometimes -- I'm pretty sure this is one of those times, like, right now -- our markets fail to properly price in the future (and markets are, after all, discounting mechanisms.)

smedleyb

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Re: Efficient Markets, RIP
« Reply #238 on: July 27, 2012, 04:29:31 PM »
Sure, it's uncanny, whatever. But you haven't demonstrated that it can be systematically profited from on a risk-adjusted basis.

Does the inability to systematically profit off it on a risk adjusted basis render the practice invalid or useless? 

Technical analysis -- which is but one tool in my investment tool box -- is systematically rejected by weak EMH.  I beg to differ with this conclusion, but I'm not attempting to impose my view on you or anybody else; I'm merely attempting to demonstrate it's use in a real-time market trade and let the reader decide if there is any value here or not. 

grantmeaname

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Re: Efficient Markets, RIP
« Reply #239 on: July 27, 2012, 04:46:25 PM »
Useless, clearly.

smedleyb

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Re: Efficient Markets, RIP
« Reply #240 on: July 27, 2012, 04:50:07 PM »
Useless, clearly.

Clearly one investor's garbage is another investor's treasure. 

smedleyb

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Re: Efficient Markets, RIP
« Reply #241 on: August 02, 2012, 07:51:47 AM »
Buying Facebook (FB) here at 20.36.  Buying half a position.  Entering a buy order at 19.90 for the other half.

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Re: Efficient Markets, RIP
« Reply #242 on: August 02, 2012, 08:16:21 AM »
Buying Facebook (FB) here at 20.36.  Buying half a position.  Entering a buy order at 19.90 for the other half.

Any exit points in mind?

smedleyb

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Re: Efficient Markets, RIP
« Reply #243 on: August 02, 2012, 08:35:15 AM »
Buying Facebook (FB) here at 20.36.  Buying half a position.  Entering a buy order at 19.90 for the other half.

Any exit points in mind?

Tentative stop below $18?  Not sure yet... 

This last move lower reeks of capitulation. 

arebelspy

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Re: Efficient Markets, RIP
« Reply #244 on: August 02, 2012, 10:12:02 AM »
It's going lower.

But I have the discipline not to bet on it.

(This is my analysis.  It's based mostly on my gut feeling, along with recent readings about mobile advertising and Zynga issues.  Those are already priced in, but I don't see them getting better.  Ot, to put it another way, it's past the head and shoulders and moved on to the knees and toes.)
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smedleyb

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Re: Efficient Markets, RIP
« Reply #245 on: August 02, 2012, 12:02:16 PM »
I posted this on July 11th, and the technical framework it lays out is still valid today:


Market note:  a couple weeks ago I said that the SPX breaking over 1340 was bullish and my technical work showed that the market has some room to run to SPX 1390.  Well, while the SPX did touch 1375 last week, but has since sold off and is currently bouncing around this important 1340 level as we speak.  1340 now represents support for the market, and it's critical that it hold here if the bulls stand a chance.

But I'll say this: the news flow (especially earnings) has been outright negative, which is not surprising since 50% of S&P profits are derived overseas and Europe is an economic mess.  My sense is that these levels don't hold.  The strategy before was to unleash shorts at or near 1390, but maybe that level doesn't come into play.  Plan B  is to see how the market acts around 1330-1340, and if it breaks (drops below 1320), the strategy will be to short the first bounce back to 1340 (markets almost always seem to retest broken support levels after they break, and these retests represent the best trading set-ups IMO). 


So 1390-1400 is the "layup" short level, IMO.  But see how the market keeps getting repelled as it approaches that level, and see how it keeps finding support between 1330-1340 (1337.56 is today's low).  In TA, each test of support weakens it.  I think 1330-1340 is toast soon enough, but I'm, sticking to the game plan from July 11th as represented by Plan A or Plan B, whichever comes first.

And just like that, after touching SPX 1392 (right into the short zone I've been discussing for weeks), the market rips to to the downside by 3%.

Again, the goal is to demonstrate the use of technical analysis in real time. 

That's all.     


smedleyb

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Re: Efficient Markets, RIP
« Reply #246 on: August 02, 2012, 12:08:49 PM »
It's going lower.

But I have the discipline not to bet on it.

(This is my analysis.  It's based mostly on my gut feeling, along with recent readings about mobile advertising and Zynga issues.  Those are already priced in, but I don't see them getting better.  Ot, to put it another way, it's past the head and shoulders and moved on to the knees and toes.)

Probably.

But not before it goes higher.

Also, your definition of "discipline" bears no relation to the real world use of the concept of discipline as applied to the practice of trading. 

So, like, if you said what you just said to the floor traders at Goldman, Morgan, or any other financial firm that actually buys and sells stocks for a living, you would be laughed right out of the room.

Not my opinion, but fact. 


smedleyb

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Re: Efficient Markets, RIP
« Reply #247 on: August 02, 2012, 12:13:59 PM »
Buying Facebook (FB) here at 20.36.  Buying half a position.  Entering a buy order at 19.90 for the other half.

19.91 is the day's low; still only have 1/2 of my trading position on. 

Cancelling the second order and going into watch mode.

arebelspy

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Re: Efficient Markets, RIP
« Reply #248 on: August 02, 2012, 12:43:22 PM »
Buying Facebook (FB) here at 20.36.  Buying half a position.  Entering a buy order at 19.90 for the other half.

19.91 is the day's low; still only have 1/2 of my trading position on. 

Cancelling the second order and going into watch mode.

If you were willing to double your current position today at 19.90, but not 19.91... why would you not be willing to do so tomorrow?  Is it going to change that fast?  If it does change by a few percent, are you going to sell that fast?

One big reason why day trading doesn't work is both the costs involved in frequent trading as well as the tax liabilities incurred.

My prediction of it going lower is based on the next few weeks and months.  Not on what it'll do today or tomorrow.  I have no clue what it'll do in the next 48 hours.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

smedleyb

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Re: Efficient Markets, RIP
« Reply #249 on: August 02, 2012, 12:46:26 PM »
Buying Facebook (FB) here at 20.36.  Buying half a position.  Entering a buy order at 19.90 for the other half.

19.91 is the day's low; still only have 1/2 of my trading position on. 

Cancelling the second order and going into watch mode.

If you were willing to double your current position today at 19.90, but not 19.91... why would you not be willing to do so tomorrow?  Is it going to change that fast?  If it does change by a few percent, are you going to sell that fast?

One big reason why day trading doesn't work is both the costs involved in frequent trading as well as the tax liabilities incurred.

My prediction of it going lower is based on the next few weeks and months.  Not on what it'll do today or tomorrow.  I have no clue what it'll do in the next 48 hours.

Pure tape reading instinct at work, nothing more.

You say it's going lower, I say it's going higher first. 

Loser buys the other a beer!

« Last Edit: August 02, 2012, 04:57:06 PM by smedleyb »