Author Topic: Why top-down macro active managers necessarily fail (Brooklyn Investor)  (Read 2272 times)

innerscorecard

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The corollary, of course, is that you as an individual investor aren't hamstrung by many these factors.

But many of them do apply to individuals as well. It's safe to say that market timing really isn't a good strategy. Benjamin Graham said that many years ago, of course.

http://brooklyninvestor.blogspot.com/2015/01/the-perils-of-market-timing-iii.html

Indexer

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Re: Why top-down macro active managers necessarily fail (Brooklyn Investor)
« Reply #1 on: January 09, 2015, 06:42:32 AM »
To feed off that article.  I don't know any stock I can say for sure won't go down 30% in the next year.  I will also have a hard time saying what companies will still be around in 10 years.  I would imagine Coke, McDonalds, Starbucks, WalMart, etc.  But with Apple its hard.  With facebook its even harder.

Which brings me to the total market index or the 500 index, either one.  I don't know if it will go down 30% next year, but I'm 99.99999999999%(baring end of the world) that ALL of those companies won't go under in the next 10 years.  So I'm positive it will still be there in 10 years, and I have a pretty strong feeling it will also be worth more in 10 years.

innerscorecard

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Re: Why top-down macro active managers necessarily fail (Brooklyn Investor)
« Reply #2 on: January 09, 2015, 08:48:09 AM »
To feed off that article.  I don't know any stock I can say for sure won't go down 30% in the next year.  I will also have a hard time saying what companies will still be around in 10 years.  I would imagine Coke, McDonalds, Starbucks, WalMart, etc.  But with Apple its hard.  With facebook its even harder.

Which brings me to the total market index or the 500 index, either one.  I don't know if it will go down 30% next year, but I'm 99.99999999999%(baring end of the world) that ALL of those companies won't go under in the next 10 years.  So I'm positive it will still be there in 10 years, and I have a pretty strong feeling it will also be worth more in 10 years.

The problem is that you can't build a financial career or attract assets by merely buying an index fund or doing something simple like the Magic Formula, even those a system approach like that is pretty much guaranteed to work. The institutional incentives are just so mis-aligned. But that's good for individual investors, especially those who are value investors. You get to profit from this structural stupidity.

LordSquidworth

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Re: Why top-down macro active managers necessarily fail (Brooklyn Investor)
« Reply #3 on: January 11, 2015, 06:33:12 PM »
To feed off that article.  I don't know any stock I can say for sure won't go down 30% in the next year.  I will also have a hard time saying what companies will still be around in 10 years.  I would imagine Coke, McDonalds, Starbucks, WalMart, etc.  But with Apple its hard.  With facebook its even harder.

Which brings me to the total market index or the 500 index, either one.  I don't know if it will go down 30% next year, but I'm 99.99999999999%(baring end of the world) that ALL of those companies won't go under in the next 10 years.  So I'm positive it will still be there in 10 years, and I have a pretty strong feeling it will also be worth more in 10 years.

It doesn't take that many solid individual companies to achieve a similar diversification as the S&P 500. IMO: S&P 500 is filled with a lot of junk/speculative.

It's common sense that anything tech related is iffy. However, there are many out there that in any world event, consumers are still going to need their wares.

hodedofome

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Re: Why top-down macro active managers necessarily fail (Brooklyn Investor)
« Reply #4 on: January 11, 2015, 08:04:30 PM »
The corollary, of course, is that you as an individual investor aren't hamstrung by many these factors.

But many of them do apply to individuals as well. It's safe to say that market timing really isn't a good strategy. Benjamin Graham said that many years ago, of course.

http://brooklyninvestor.blogspot.com/2015/01/the-perils-of-market-timing-iii.html

I think his article should be rephrased 'why alternative mutual funds suck and why some hedge funds don't.'

Also, I wish we'd come to a common definition as to what is considered market timing. There are those that time the market and do quite well, and plenty who try it with a poor methodology and fail.

innerscorecard

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Re: Why top-down macro active managers necessarily fail (Brooklyn Investor)
« Reply #5 on: January 11, 2015, 08:28:06 PM »
The corollary, of course, is that you as an individual investor aren't hamstrung by many these factors.

But many of them do apply to individuals as well. It's safe to say that market timing really isn't a good strategy. Benjamin Graham said that many years ago, of course.

http://brooklyninvestor.blogspot.com/2015/01/the-perils-of-market-timing-iii.html

I think his article should be rephrased 'why alternative mutual funds suck and why some hedge funds don't.'

Also, I wish we'd come to a common definition as to what is considered market timing. There are those that time the market and do quite well, and plenty who try it with a poor methodology and fail.

I don't fetishize "don't time the market." It's a very useful heuristic to tell individual investors who are just starting out, because otherwise their first instinct is to worry they're coming in at a bad time. But you can obviously see that great investors have been more or less fully invested depending on the set of opportunities in the market at any one time. Now, it may not come from making an explicit market call, and instead from "letting cash build up" due to a lack of good opportunities, but it is market timing nonetheless.

But...and this is a very big but, I think that really doesn't apply so much to individual investors who aren't fantastically wealthy. There will always be opportunities in securities that institutional investors can't touch, especially if you're not confining yourself to the US. Hong Kong and Korea seem to be very decent ponds to fish in right now, for example.