Genjix + Bitcoins

dat genjix

On August 14 2012 15:31 Arirang wrote: dat genjix

avg return @ financial markets is 12%??? how

edit: sry only glanced over it and didnt realise u lost so much.. thats horrible and its no good saying this now but how come u had so much value in bitcoin in the first place? surely bitcoin makes ftp look legit

@Ket : Yes. This is long time average (50y+) for most market, CAC, NASDAQ, DOW JONES, NIKKEI etc.

The nasdaq has higher average (because a little more risky) but most of the main indices are surprisingly near 12% over long term.
Edit : actually I am a bit off, it seems like it is closer to 10%

Anyway, right now the average should be more around 15%, given the financial crisis we are in.
Excluding markets growth, the average return is closely linked with the average P/E of a given market :
http://en.wikipedia.org/wiki/Price%E2%80%93earnings_ratio

This should be kinda intuitive : If the P/E is 5, that mean in 5 years the value of a company double via profit, which in turn means that you are doing around 20% a year.

Right now, there is a lot of reasonably solid companies with P/E around 7-8 so that mean the expected return should be somewhere around 15% or so.
And again, that excluding growth, that can add another 5-15% on top of P/E.

Given all that, and the fact that the exchange variance is ridiculous given you guys are poker professional (lol at 20% annual variance or so... That's just NOT sick ), I am still wondering why you guys dont invest more.

I am vastly poorer than you yet made around +170% investing just BEFORE the first crisis (donkey luck lol). Of course I know my shit but investing randomly should yield around 12% a year. And given that we are in a crisis, the timing is perfect, you can expect reasonably 20% or something in this context.
Imagine that this is set mining happy hours with -50% on calling cost, because that the market we are in

Thanks for the support Ket, you are one of my fav poster as well :D
as a life nit, I kinda share your views on the world :-)

Anyway, I only invested 20k or so, which is reasonable considering my "investment bankroll" and how much I believe in the growth potential of bitcoins.

Those 20k turned out to be 60k right now and no more reasonnable, and it actually hurts a lot more knowing that I made the good bet then getting robbed than making a bad one.

thanks for the love mate : )
sorry to hear u lost so much with that bitcoin thing, really reaally gay : (
teach me to beat stock markets for 12pct yearly? (im kind of serious lol maybe we can work out a deal if ure interested in learnin PLO)
If you have book recommendations Id def like to hear em !
cheers

Hello & thanks MiPwnYa,

Actually as a self-taught geek with interest in investing most of my knowledge comes from thinking on my own and internet sources (like wikipedia ).
Kinda like you must do in poker, except I think there is even more trahs in financial guide than in poker guide

However, most of my own conclusion are similar to those of Warren Buffet, and he inspired me a lot. Any of his quote is great knowledge.
http://en.wikipedia.org/wiki/Warren_Buffett

His mentor is Benjamin graham
http://en.wikipedia.org/wiki/Benjamin_Graham

So if you agree with this school of thought, which I do,
there is a book that is insanely good and that I would greatly recommend :
http://en.wikipedia.org/wiki/The_Intelligent_Investor

But actually most of investing is understanding basic accounting (what are ratio like P/E, P/B and what do they mean), why does random investing in "buy and hold" beats 75%+ of the found, stuff like that.

At heart, I remain a value investor :
http://en.wikipedia.org/wiki/Value_investing

----

I think that great investors are mainly people that use "common sense" kinda like you do in poker. It is common sense to shove when you have good equity & fold equity for example, it is common sense to set mine when you have odds and to fold when you dont, it is common sense to 3b for value when the fold% to 3bet is higher than a certain margin etc. etc.

Same goes with investing. If a company has 2 billions in asset and is valorised in 1 billion, there is like a "free 1 billion" waiting to be made.
If a stock is valued 10$ and makes 2$ a year of net revenue on a stable basis, then that is a 20% investment etc.

If what you want is advice, buy random stocks and HOLD them for a long time (I do not joke, random is good) and invest step by step like 10k a month for many month.

This protect you against :
- stock variance (picking the bad stocks)
- market variance (if you buy at the wrong time you can buy badly priced assets)

Now why random is not that bad ? we all know random sucks in poker !
Because all stocks pricing reflect the "consensus" of the funds, hedge fund manager and investors, and thus you are buying at the price they ageed on. You can not get "riped off". If a stock is overpriced some fund will short it, if a stock is underpriced some other analyst will buy it.

why holding stocks and not being very active is good ?
As rake is basically fee on sell & buy, If you dont know exactly what you are doing and are active, you end up burning your positive EV with fee, kinda like rake is doing. By just keeping stock and not doing anything, you are basically rake-free.

Now this should yield you random market average with minimun variance. If you want better, you'll need skill, but think of it as a great "newbie guide". Someone applying this will beat most of the funds as if you invest in a fund you'll have to pay 1-2% of fee each year, thus lowering your EV from 10% a year to 7-8%.

Nice blog mate. No offense, but why did you think investing into something as shady as bitcoins would be a good idea? I'm assuming you love risk, but it just seemed like a horrible idea in terms of an investment.

I think bitcoins are a bit like set mining on steroids, ie maybe 10% chance of succeeding but in the case they succeed they can be worth like *50 what they are.

In short, it seems like a hugely +EV bet to put a small part of an investment bankroll.

I wont list all the reasons why I think it is worth it.
Of course I am so angry now that there is no way I ll buy some again, especially since my average is around 4.5 and the current market price is around 12

In some weird way I hope for them to go to 0 now

---

As well I read the initial paper and found it truly awesome. And the maths behind is razor sharp, the system works.

The problem is see with bitcoins is that theft is kinda too easy, thats like internet cash

On August 14 2012 17:12 Emi wrote: If what you want is advice, buy random stocks and HOLD them for a long time (I do not joke, random is good) and invest step by step like 10k a month for many month. This protect you against : - stock variance (picking the bad stocks) - market variance (if you buy at the wrong time you can buy badly priced assets) Now why random is not that bad ? we all know random sucks in poker ! Because all stocks pricing reflect the "consensus" of the funds, hedge fund manager and investors, and thus you are buying at the price they ageed on. You can not get "riped off". If a stock is overpriced some fund will short it, if a stock is underpriced some other analyst will buy it. why holding stocks and not being very active is good ? As rake is basically fee on sell & buy, If you dont know exactly what you are doing and are active, you end up burning your positive EV with fee, kinda like rake is doing. By just keeping stock and not doing anything, you are basically rake-free. Now this should yield you random market average with minimun variance. If you want better, you'll need skill, but think of it as a great "newbie guide". Someone applying this will beat most of the funds as if you invest in a fund you'll have to pay 1-2% of fee each year, thus lowering your EV from 10% a year to 7-8%.

Interesting idea. What about buying low cost index etfs instead so you can keep buying the same thing at regular intervals and have the same benefits?

Well, thats kinda the same thing.
Once you have like 10+ stock or something, you'll basically make almost the same performance than the index. The average is anyway obviously the same.

The thing you have to look for is fee, I know etf have around 1% annual fee (so the EV is ~9% each year) while doing it on your own with good old dices you can probably get much lower fees (like 0.2% or something and ONLY on the year when you buy, so you can make an EV of 10% a year)

So it is all a matter of fees.
If you invest in low amount fees will rape you so ETF are better. If you are a baller you'll probably get a very slighly better EV with doing it yourselves.

thx for the insight mate
I actually did the random stocks buying thing for a while and I always thought it was a rather fishy approach but I didnt know better.
Gonna buy some more random stocks since apparently its not that stupid.
thanks for the recommendations, definitely gonna read the intelligent investor
cheers

no prob

Well it is obvious that buying @ random the expected EV is the average of the market, ie around 10%
By investing at different times during different years you'll minimise as well the different market variance (ie if you put all just before a crisis you can do -50%)

Since all the funds and stuff ARE the one making the market and the prices you'll perform just as well as them on average, without having to pay fees. The fact that random beats 80% or so funds has been proven empirically by several studies.

I however think that there is several way to do better but that requires more work and it cant be really proven in a mathematical kind of way

I dont like giving very specific stock advice (for example, the stock I wanna buy now is "groupe steria" after having bought TF1, CNP assurances and BNP the previous months. You ll notice I buy shitty compagnies : thats because I am a value investor. That means that I try to buy the stock as cheap as possible in regard to their different ratio : benefits and others stuff.

But if you buy facebook for example for 10k of stock the yearly company profit is only 100e.
For 10k of one of the company I listed the yearly profit of the company is 2k.
See the difference ?
Sounds kinda basics but it works for me and it worked for a lot of investor. Of course thats not the ONLY stuff I look but it would be too long to go trough all the financial stuff you can study

And ofc there are tons of other working strats

Ps : any good read or videos for plo ? what would you recommend ?

is there gonna be any legal action?

i may be wrong, but i highly doubt 12% a year returns are the norm. i have a very good friend who works for a prestigious investment company doing PE and they are happy with 7% annual returns

Yes, I actually skipped most of the details, but there is legal action

It is a legal minefield because bitcoin does not yet have a real legal status and because there is tons of country involved

The hacker has been found, he is an asian dude specialised in credit card fraud, but genjix and his co owners did not bother to sue him (WTF...)

So we are suing the company bitcoinica. We cant sue directly the hacker as he did not stole us but the bitcoinica company. Thats shit would be hilarious if no loss were involved

I decided to attack genjix personnal reputation because he and his co owners have shown absolutely no respect and concerns for me and the others guys that lost funds.Some people have more than 200k$ claims.

On August 14 2012 19:44 chris wrote: i may be wrong, but i highly doubt 12% a year returns are the norm. i have a very good friend who works for a prestigious investment company doing PE and they are happy with 7% annual returns

Well I dont remenber where I saw that 12%, it might have been wrong.It was averaged for all exchange. Nasdaq was even significantly higher (maybe 20% ? not sure)

According to this, for the US it was 9.4% or something.
http://observationsandnotes.blogspot....erage-annual-stock-market-return.html

Of course 7% return these last or so 10 years are pretty good since these last ten years it might have been even negative : we went through two financial crisis so 7% when the index does -40% is pretty awesome indeed :D

I would argue that if you can keep making your 120k a year, and you still enjoy it/want to or whatever, you absolutely should. I dont think 1mil capital is ALOT to live off for the rest of your life as your sole income. And even if you can grow your 1mil by 12% per year, if your living off this money, (i dont know if you are spending the 120k a year or only spending like 60k who knows). But for arguments sake if you are living off the return, in the years you only make 5-6% suddenly its alot harder for you, and in times like the GFC and you make no money/lose money for period of like 5 years, and youre still drawing on this capital to live. This is going to be very very pad. And suddenly your 1mil is like only 500k left, because you lost a portion of it, and another portion you kept drawing down to live off.

cliffs: Keep making your income per year for as long as you can while investing and continuing to grow your 'pie'.

*Also would argue it would be really dumb to just randomly pick a share and invest in it - but if you actually meant randomly picking to be doing some research and education and then picking then ok =)

Stop lurking and post more

hmm well i would go and say it's your own fault for losing the bitcoins. You could have safely kept them in your own harddrive, encrypted if needed etc. Trusting new companies that spring up out of thin air is kinda stupid.

Was there a reason to keep money in bitconica instead of just keeping them in ur own HDD?

Question: at what price did u get in on the bitcoins btw?

regardin good plo books and vids its been a while since anything good has been released
id just recommend u watch phil galfond and magic ninja videos, i hear jeans89 has made some videos from some site out there too, gotta check that out
cheers : )

On August 14 2012 19:44 chris wrote: i may be wrong, but i highly doubt 12% a year returns are the norm. i have a very good friend who works for a prestigious investment company doing PE and they are happy with 7% annual returns

Institutional investors often can't out perform intelligent individual investors (I'm not talking about mum and dad or random retards). This is usually due to rules in institutions about how and to what degree they can distribute their capital. They also usually find it inefficient to invest in small cap companies where small investors can make higher returns.

There are quite a few over simplifications and wrong statements in the previous posts. For example picking random stocks does not eliminate market variance, you can never eliminate market variance because you are always part of the market. You can however eliminate individual stock variance as stated (provided you have 15-20+ stocks). Another example is the topic of the efficient market hypothesis (EMH) (I will disregard strong, semi- strong or weak theories). While the consensus is that the market is highly efficient there are also many inefficiently priced securities, this is why traders maintain they can be profitable. As the joke goes, two economists are walking down the street. They spot a $50 note on the ground. One starts to pick it up but the other one says, "Don't bother, if the note were real someone would of picked it up already".

Even what I have written is hugely over simplified (obviously). I'm a big fan of guys like Buffett and Peter Lynch but their books are like Ace on the River compared to The Theory of Poker. Which I hope is a suitable analogy.

On August 14 2012 23:12 waga wrote: Stop lurking and post more

On August 15 2012 03:21 Funktion wrote: Show nested quote + On August 14 2012 19:44 chris wrote: i may be wrong, but i highly doubt 12% a year returns are the norm. i have a very good friend who works for a prestigious investment company doing PE and they are happy with 7% annual returns Institutional investors often can't out perform intelligent individual investors (I'm not talking about mum and dad or random retards). This is usually due to rules in institutions about how and to what degree they can distribute their capital. They also usually find it inefficient to invest in small cap companies where small investors can make higher returns. There are quite a few over simplifications and wrong statements in the previous posts. For example picking random stocks does not eliminate market variance, you can never eliminate market variance because you are always part of the market. You can however eliminate individual stock variance as stated (provided you have 15-20+ stocks). Another example is the topic of the efficient market hypothesis (EMH) (I will disregard strong, semi- strong or weak theories). While the consensus is that the market is highly efficient there are also many inefficiently priced securities, this is why traders maintain they can be profitable. As the joke goes, two economists are walking down the street. They spot a $50 note on the ground. One starts to pick it up but the other one says, "Don't bother, if the note were real someone would of picked it up already". Even what I have written is hugely over simplified (obviously). I'm a big fan of guys like Buffett and Peter Lynch but their books are like Ace on the River compared to The Theory of Poker. Which I hope is a suitable analogy.

Well, yes there is always some sort of "market variance". But I am sure that if you spread your investment in time, you eliminate one kind of "time variance". I have no idea how this one is called, but it sure exist and is important.

Anyway, great comments.

If you are talking about time diversification then it's a myth.

I fail to see why, and I still strongly disagree, but thanks, I ll get some read on it

Did not knew this was called like that

Google around and find out for yourself. If you want an exact source that is reputable I can recommend the text book 'Essentials of Investments' 8th Ed by Bodie, Kane and Marcus.

http://www.bookdepository.co.uk/Essentials-Investments-Zvi-Bodie/9780073382401

It's definitely not for beginners but it explains why time diversification is "snake oil" (page 175-177). If you search the internet high and low you can find the 7th edition floating around in pdf format for "free" with the relevant text from page 178-180.

On August 14 2012 18:51 MiPwnYa wrote: Gonna buy some more random stocks since apparently its not that stupid.

It is. Since Buffett seems to be the benchmark here, do you think he randomly buys stocks hoping to have the highest expected return while maintaining the lowest standard deviation? Do your due diligence.

And here is a simple article on what systematic (market) and unsystematic (company) risk is.
http://www.investopedia.com/articles/02/111502.asp#axzz23bDPrhJW

I disagree.

Of course you cant do average of +40% a year like Buffet did by going random, but you'll still do the average market of ~10% and that will be > to the average of funds due to fee.

Thats really good for a "beginner" which might be buying inferior to "random" stock by picking them himself

Why aren't me and Spets your favourite posters too!!

*Stomps feet*

On August 14 2012 23:12 waga wrote: Stop lurking and post more

We would all love to hear more of what you have to say about investments!

@Marius xD
yeah man you rocks as well, but I wont list everyone from the site :-)

@Zep thx !

On August 15 2012 10:33 Emi wrote: I disagree. Of course you cant do average of +40% a year like Buffet did by going random, but you'll still do the average market of ~10% and that will be > to the average of funds due to fee. Thats really good for a "beginner" which might be buying inferior to "random" stock by picking them himself

Man you make no sense on one hand you say random shares will replicate the market (they won't you need the entire market or a suitably large portfolio or you will get huge tracking errors) where you may as well just buy the index (it's cheaper than tracking it yourself). On the other hand you talk about value investing and selecting stocks based on P/E ratios etc. If you believe the market is super efficient ("Because all stocks pricing reflect the "consensus" of the funds, hedge fund manager and investors, and thus you are buying at the price they ageed on." ) then you can't believe in value investing like you claim (for which you weren't accurate on it's definition) because there is no value there to be had. So on one hand the market is efficient and then on the other hand there is value everywhere for guys like Buffett to find?

This is the sort of stuff I meant before when I said you'd over simplified complicated concepts and/or made wrong statements. I didn't want to go through and nit pick every little detail but careless investment advice from untrained non-professionals on a poker site can end up costing people money.

Funktion nailing spot some of the most common mistakes of beginning investors in their thought process. Especially irks me when they start citing big names as if they had even a remote understanding of their strategies or execution methods.

This isn't a personal shot at Emi, but no one on LP should be taking his advice (unless you're a degen who wants to flip coins for money)

careless investment advice from untrained non-professionals on a poker site can end up costing people money.

As an addendum to this, don't even take advice from most trained professionals as most have different interests than their clients.

While we are on this subject, I'd recommend watching this


and reading the market wizards books. They are a series of interviews with top traders and fund managers. They aren't books about any particular strategy, but an exploration of the thought processes that these successful managers have (which is much more valuable).

On August 15 2012 13:42 Funktion wrote: Show nested quote + On August 15 2012 10:33 Emi wrote: I disagree. Of course you cant do average of +40% a year like Buffet did by going random, but you'll still do the average market of ~10% and that will be > to the average of funds due to fee. Thats really good for a "beginner" which might be buying inferior to "random" stock by picking them himself Man you make no sense on one hand you say random shares will replicate the market (they won't you need the entire market or a suitably large portfolio or you will get huge tracking errors) where you may as well just buy the index (it's cheaper than tracking it yourself). On the other hand you talk about value investing and selecting stocks based on P/E ratios etc. If you believe the market is super efficient ("Because all stocks pricing reflect the "consensus" of the funds, hedge fund manager and investors, and thus you are buying at the price they ageed on." ) then you can't believe in value investing like you claim (for which you weren't accurate on it's definition) because there is no value there to be had. So on one hand the market is efficient and then on the other hand there is value everywhere for guys like Buffett to find? This is the sort of stuff I meant before when I said you'd over simplified complicated concepts and/or made wrong statements. I didn't want to go through and nit pick every little detail but careless investment advice from untrained non-professionals on a poker site can end up costing people money.

1 - Yes 10+ stocks taken from an index will very strongly correlate with the index performance. I sometimes do simulations based on markets history, so if you want I could run some number for you at some point.
The reason is that most actions are very strongly correlated between each other : If A goes down by 20%, B probably will etc. You'll notice that when an index goes down, most of the stock of that index goes down as well. Everything is correlated so a statistically significant subset of a index will perform generally as well.
But buying tracker is fine as well. And the average is the same anyway, so there is no higher EV from either.

2 - Yes, stock picking is obviously BETTER than random if you know what you are doing. Most people don't, so randomly picking stock is a good way to invest especially for beginner.
The market is NOT perfectly efficient. But it is not as well totally inefficient. It is somehow "a bit" efficient.

You can loose a lot as well putting money with professionnal. Actually, and if you want to I ll can go and get you a few article, but random perform on average better than giving your money to investment fund, so NO, you wont make a worst performance by going random than by giving the management of your assets to professionnals from a fund (and thats actually the reason behind the creation of trackers funds)

But yeah, I dont advice anyone to put a lot of money on market and stuff, and I advice everybody to think by themselves, as poker players, they already know how to do that else they would still be fishes

No offense intended as well.

And yeah you nitpicked a contradiction that is not one in my opinion.

->My claim : "Because all stocks pricing reflect the "consensus" of the funds, hedge fund manager and investors, and thus you are buying at the price they ageed on."

-> Your answer : "then you can't believe in value investing like you claim (for which you weren't accurate on it's definition) because there is no value there to be had.*

The efficient market hypothesis states that it is not possible to beat the market average, as all information existing is priced within the price.

The pricing does indeed reflect the pricing given by funds and brokers, but brokers and funds are NOT perfect, meaning they don't act perfectly and thus the pricing they end up at dont reflect an efficient market. It just reflect what the market think something is worth, which is, not at all perfectly efficient.
So there is no contradiction, there is still money to be made by Warren-like guys and thats precisely by beating the others fund, ie being more efficient than them, and finding a better pricing.

Stunning how many people here think the stock market is easy money .

i don't mean to pour salt in a wound, but trusting genjix with 60k is like helping a nigerian prince transfer his fortune.

Well from here
https://intersango.com/about-us.php
and here
http://en.wikipedia.org/wiki/Amir_Taaki
he looked pretty legit

Strangely I dont remenber him from these forums, even though I am lurking here since roughly ~2005-2006

On August 15 2012 17:44 Emi wrote: http://en.wikipedia.org/wiki/Amir_Taaki he looked pretty legit

Amir Taaki was born 6 February 1988 in London, the eldest of three children of a Scottish-English mother and an Iranian father.

Could it be any more obvious he wrote this Wikipedia article himself?

This is not even sourced. It could not be any more f-ing obvious.

But hindsight is 20/20 even though I said it from the beginning.

On August 15 2012 13:52 Spicy wrote: As an addendum to this, don't even take advice from most trained professionals as most have different interests than their clients.

Conflicts of interest in this country are getting exposed and reformed but it has gone on rampantly and to a degree continues to do so. Unfortunately the quality of advice as well isn't where it needs to be and is the next thing under scrutiny. The problem is that uninformed investors can gain advice that sounds solid but actually is poor, wrong or not suited to their needs. Personally I've worked with people who are passing courses at uni but still can't tell you basic information about accounting, economics or securities and those same people will be out there one day giving advice to clients (imo I blame group projects where people get to coast at the expense of others but anyway).

It's kind of a hot topic atm:
http://www.theaustralian.com.au/business/wealth/asic-tests-of-financial-advice-show-only-3pc-of-plans-are-of-good-quality/story-e6frgac6-1226252814729

On August 15 2012 15:05 Emi wrote: 1 - Yes 10+ stocks taken from an index will very strongly correlate with the index performance. I sometimes do simulations based on markets history, so if you want I could run some number for you at some point. The reason is that most actions are very strongly correlated between each other : If A goes down by 20%, B probably will etc. You'll notice that when an index goes down, most of the stock of that index goes down as well. Everything is correlated so a statistically significant subset of a index will perform generally as well. But buying tracker is fine as well. And the average is the same anyway, so there is no higher EV from either.

What you are talking about by saying when the index goes down and so stocks go down is a stocks beta (how correlated to market movements is the stock). This is the measure of market risk (that we spoke of earlier). Some stocks are highly correlated to each other like you say but also some are not. The degree of co-movement with each other can be calculated using the covariance or the correlation coefficient. Which could lead into a tirade on optimal risky portfolio theory, efficient frontiers and dominated portfolios but I won't bother. Saying "everything is correlated" is meaningless. Do you want automakers in a recession or providers of staples, both probably went down and both are probably correlated to the market the same right?

Anyway good luck randomly replicating an index to anyone who wants to try it. Let me know how great it turns out for you.

Very nice posts, as said before stop the lurking! LP needs to become more alive again. Also no offense to any French people here, but I know quite a few and your English is pretty much spot on.

As for the stock market discussions, it all sounds very interesting but I'm a complete and utter fish when it comes to finances and everything in relation to it. Would love to learn more, any idea where to start for a total beginner?

Right now I sincerely feel like this when reading through these posts:

On August 16 2012 11:52 Hoolz_1907 wrote: Very nice posts, as said before stop the lurking! LP needs to become more alive again. Also no offense to any French people here, but I know quite a few and your English is pretty much spot on. As for the stock market discussions, it all sounds very interesting but I'm a complete and utter fish when it comes to finances and everything in relation to it. Would love to learn more, any idea where to start for a total beginner? Right now I sincerely feel like this when reading through these posts:

fooled by randomness - nasim taleb

the above is not specifically about investment strategies. the book holds a ridiculous amount of important information about how to avoid bad advice and why so much of it occurs etc. this book is life changing IMO -- skip to his later book,The Black Swan, if you want a slightly less literary book, and more of an overview + drilling down of the ideas presented in the previous.)

then, you can't go wrong by starting with the intelligent investor by benjamin graham, just know that it is outdated and following it to a T is not what you should be getting from it; it serves better as a good overview of how to approach investments. I found the book boring tbh.

finally, the most accessible blog of wwww.fwallstreet.com

u can click "intro" and find his introductory articles to the general ideas of investing etc. Honestly I think fwallstreet.com substitutes quite nicely for reading the rather boring, strategically outdated, Intelligent Investor (written in 1934 I think?)

@Hoolz thx for the love buddy

Personally I have read Reminiscences of a Stock Operator, and it is interesting and easy to read but I don't think it is a investment book at all.

http://en.wikipedia.org/wiki/Reminiscences_of_a_Stock_Operator

Basically it is a bit like "ace on the river", where the author goes on about his life and money he won etc. but there is not really any real strategic advice or anything in it. Cool story still.

Also the author is kind of a "technical analyst" and I don't really believe in TA. There is some stuff in it that kinda work but most of the TA methods sounds like superstition to me.
(Technical analysis is the theory and methods that you can predict the future of a stock by reading the chart and guessing where it will go)

TA is extremely useful if you understand market microstructure, how orders get executed, and know how to gauge market liquidity/depth. TA is more of a trading concept not an investment theory. TA is used primarily for risk management, optimizing order execution, minimizing market impact, finding liquidity when taking on large positions, gauging what positions large players may have and at what prices. TA does NOT USEFUL if you think it somehow magically predicts the future. Because of the uses I've stated, it is possible to build profitable trading systems based on TA. However, the best traders I know use their own combination of various forms of analysis drawing from fundamentals, technicals, and tape reading to maximize their edge.

The reason TA has a bad rep with certain groups is because most people teach or explain it poorly. This leads to misapplication among noobs who don't understand market microstructure and then disbelief. Another thing to note is that the more money you manage, the harder it is to make money from pure TA because most TA strategies are not scalable to the point where you'll be taking enough size to move the market significantly.

Overall, TA has become increasingly important in recent years because of the vast increase in high frequency trading volumes. The only ways the HFTs trade is using TA so even if you don't apply it in your own strategy, it's valuable to know how these players are behaving the in the marketplace.

I think in the current trading // investing metagame, the only way to become successful is to develop and perfect your own strategy that meets your personal conditions, objectives and risk tolerance. Most important thing is to define why you're making a trade and what the projected holding period is. Rely more on TA and tape reading for short term, fundamentals for long term. I recommend reading the Market Wizards book series as they provide insight into the thought processes of top managers who all found success using different strategies. This will also offer exposure to a lot of smart managers who aren't well covered by the business media.

I will also argue that pure fundamental analysis is -EV for most beginners because most of the edge in this type of analysis comes from access to more comprehensive information and proprietary research (which you wouldn't have access to). And the reason business media tries to get beginners started through fundamental analysis is that it offers EXPLANATIONS for the change in a stock price (which is what people want to hear) under the guise of fundamental reasoning when the reality is that many market movements don't have a reason other than some hedge funds deciding to accumulate or dump during that particular time period. Fundamental analysis is also grounds for sell-side investment analysts to sell research reports and publicly upgrade or downgrade their rating of a stock to achieve their own objectives.

Very interesting and you really know your stuff as well as most of the comments that were posted

I would not really call HFT stragies ran by quant funds "TA" as I think most of the most sucessfull relies on some sort of hidden fundamental assumption.

For example, a lot of strategies like pair trading and stats arbitrage variants are basically "buy when the stock goes down compared to some indice".

You might call that TA, and yes I agree it fit the definition "a strategy relying on the tape & graph", but it is also kinda fundamental; stock that performed worst than the rest of correlated stock are expected to have lower fundamental ratios and to have their higher ratio when they are at their lowest.

But I agree that TA is not really bullshit, It is just that I have been to so many "traders conferences" where some bullshit teacher from "easy money university" explain that if the mobile average cross the tape then it is a very strong buy signal and it goes up almost always etc etc. Of course I went home and did some simulations and nothing is nowhere near as that.

Like you can achieve 90%+ predictability with signals. Edge are much lowers. A 55% or something edge is huge
Kinda like in poker

And even though you can have hidden information etc. I have always felt like the market is a fish. I don't know, being investing since like 10y and it seems like to me the market is always tilting and overreacting. I think that's why I am a graham & Buffet fan in the first place.

I mean come one, even the average day variation (+2% / -2%) is obvious proof that the market is not at all efficient in my opinion. You cant believe that something is truly worth 2% less or more within a single day ?

Some business does 19% net revenue instead of 20% as expected and booyah the stock enjoy a -30% in the 4 next day.
Sure -1% than expected mean the business is worth 30% less, am I right ?

There are several reason for that I think, I wont list them all but yeah, I truly believe there are lot of inefficiency, and both TA and fundamentals can catch those.

If there would not there would not be so many quant funds raking huge profits btw.

But contrary to you, I actually think it is harder to win via TA because if there is a simple analytic method it can be simply programmed into a trading bot, whereas it is harder to implement an automated fundamental method.

In my case I have my very own and weird on some points methods of fundamental picking and it must be quite unique even thought it is not that complex. I don't think it is that great, just that it can pick stock that are unfairly beaten by the market. Those low 6 per / 10% dividend / 50% lower than P/B that have been unfairly gang banged by the market, I pick them up

In a crisis, there is just plenty opportunity for good value stocks.

On scale 1-10 how good investment is Facebook after maybe 1 month when the price is prob. aroung 15$
Was arguing with my friend and you are a invester I would like your opinion on this hehe

investing and trading is difficult. anyone who thinks otherwise is fooling themselves.

Emi come on man, you make it sound like the market is super easy to beat and everyone else in the market is a "fish" ("I have always felt like the market is a fish".

Edit: And people shouldn't get hung up on investing in shares like it's the only option, there are other asset classes that may better suit your individual needs.

Yeah sorry Funcktion but thats just my personnal feeling lol. Can't help it. I am probably biased because of the positive vaiance ^^ Anyway mb I am wrong but playing the market has always worked good for me

I am not saying everyone & managers are bad. Fund have others problems that I don't have, for example in a crisis when I am "OMG everything is so cheap buy buy buy" theirs clients are ass scared by the context so they all want to withdraw, ending in the funds having to liquidate position at very bad price.

So basically even if you are the god of pricing and stuff when the TV says the end of the financial world is coming if half your clients are gonna come to you to move out funds you are fucked up

And conversely, when everything feels good and thus stocks price are skyrocketing everyone wants to buy so you end up with more monies at bad time.

The other edge we have is that when we make a trade we don't move the price at all. They thus have to get a bigger edge than we amateurs do.
As well, I have even invested in smallcaps companies for which I am a 0.1% percent shareholders lol. (edit : according to wikipedia thats actually nanocaps compagnies "Nano-cap": Below $50 million)
A big fund can not spend times studying these companies and investing in them because the profits will not even be worthwhile their time

As well lets not forget thats playing poker everybody gets hurt by rake so there will always be like 80% looser.

In the markets, if you dont make a lot of move (dont pay lot of rake), everybody gain dividends over and over and over so playing long term investment is not a 0 sum game, it is a positive one. In a theoretical world, everybody could be a winner, because of the endless dividends.

Of course in the practical real world most investment amateurs are huge donks that keeps making huge move so they often end up broke

On August 17 2012 13:22 doriipoker wrote: On scale 1-10 how good investment is Facebook after maybe 1 month when the price is prob. aroung 15$ Was arguing with my friend and you are a invester I would like your opinion on this hehe

I am really bad at pricing good & growth compagnies because thats not my speciality.
Thats like asking a NL player to rate your 7 stud play

However when it was at 30 the P/E was so fucking high (100+) that it felt almost scamy to me. Now it is a little bit more reasonable, but still with P/E 60 if the pricing is "fair" you have to believe that somehow within the 5-10 years the net revenue of facebook are gonna be multiplied by 6 or so (because a P/E ~10 is somewhere near average for growlthess companies).

That seems a lot especially as everybody in the world and their kids use facebook nowdays. So they cant really have 6 times more users, or in poor countries.

So well I dont know, maybe 4 ? As I said I am really bad at pricing top companies as I don't have much knowledge of the equivalent ones

Compared to a similar top growth company BAIDU (the china google) i am buying BAIDU 100% of the time. BAIDU has similar fucking skyhigh growth and revenue but the P/E is much more reasonnable (around 27)

(Edit : just verified and the P/E is not 27 but 40 don't know where i got that number, so all my reasoning on why baidu is better is kinda wrong)

http://fr.finance.yahoo.com/q?s=BIDU

Actually I would probably buy a little bit of BIDU

Again, not a financial adviser, my comments are only my opinion etc etc :D