Author Topic: Random Walk Theory: Challenging “Buy and Hold” - seeking opinions  (Read 1042 times)

evme

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https://fattailedandhappy.com/random-walk-theory/

I'm not advocating for or against the thesis in this article. I would just like some opinions from other users on this board who may offer insight and positive or dissenting views on the opinion expressed. The thesis is that "long term returns are nearly entirely dictated by starting valuation", in particular in regards to equities. And that though you can't predict the market or know when a recession is coming, you *can* wait until a valuation measurement (say CAPE or "BI" (Buffett Indicator = Market Cap/GDP) is relatively low and then buy in with a lump sum with the idea of having a much better chance of good long term returns going forward.

libertarian4321

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Re: Random Walk Theory: Challenging “Buy and Hold” - seeking opinions
« Reply #1 on: December 23, 2018, 03:56:54 AM »
https://fattailedandhappy.com/random-walk-theory/

I'm not advocating for or against the thesis in this article. I would just like some opinions from other users on this board who may offer insight and positive or dissenting views on the opinion expressed. The thesis is that "long term returns are nearly entirely dictated by starting valuation", in particular in regards to equities. And that though you can't predict the market or know when a recession is coming, you *can* wait until a valuation measurement (say CAPE or "BI" (Buffett Indicator = Market Cap/GDP) is relatively low and then buy in with a lump sum with the idea of having a much better chance of good long term returns going forward.

I did a very quick read through of this article and some of the other stuff on the blog.

Frankly, it sounds like it's written by a kid who took a bunch of college classes, read some theories and has no experience to speak of.

Maybe he's right and Buffet/prevailing wisdom is wrong. 

He'd be about the 832,456,986th young person to think he had all the answers and was going to show all the old (over 30) folks wrong.

Unfortunately, probably 99.997% the first 832,245,985 geniuses found out the hard way that they did not have a better answer.  And some of them really got hammered with their attempts to prove themselves superior.

I'll just keep NOT market timing for the next few million, just as I did for the last few million.  Maybe this latest hot shot will make a fool of me, but I doubt it.

- a cranky old guy (over 50) who is more than a bit skeptical of the next new genius with "all the answers"

Maenad

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Re: Random Walk Theory: Challenging “Buy and Hold” - seeking opinions
« Reply #2 on: December 23, 2018, 05:06:12 AM »
If he knew as much about the stock market as he thinks he does, he'd know that you never publicize a winning strategy - you play it, quietly and stealthily, and then retire with millions. Stop before you hit billions, so the SEC doesn't start an investigation.

And pick up "A Random Walk Down Wall Street" - Malkiel makes a good point about treating academics and theoreticians with skepticism - how many of these people are wealthy, with how well they understand the stock market?

ScarElbow

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Re: Random Walk Theory: Challenging “Buy and Hold” - seeking opinions
« Reply #3 on: December 23, 2018, 05:32:28 AM »
That article doesn't make very strong argument against indexing. Try this one

https://www.google.com/amp/s/seekingalpha.com/amp/article/4136261-problem-index-funds
« Last Edit: December 23, 2018, 06:05:25 AM by ScarElbow »

jacoavluha

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Re: Random Walk Theory: Challenging “Buy and Hold” - seeking opinions
« Reply #4 on: December 23, 2018, 07:37:47 AM »
^^^ from this link
“Buying an index is not investing, it is speculating”

Sorry, all credibility is lost with such a statement. Index investing is simply investing with the humility and sense to admit one isn’t smarter than everyone else. To call it index investing “speculation” suggests the author is a) stupid or b) a liar.

Also look at who wrote that trash.