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Old 03-04-2018, 02:11 PM   #226
TrustySam
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Re: 2018 Stock Picking Contest

Warren Buffett is my e-mentor That piece was brilliant!!!!! Did everybody read it? Thanks so much for posting it JupiterO


This interview/talk was from 1999 at the height of the dot.com bubble, and Warren was talking about what moves stock prices, and how to find buy and hold stocks that will stand the test of time across any market conditions.

Will try to post a cliffs - but some of the points may have gone over my head a little bit ...

From 1964-1981, people would have made a 13%/yr return by being in bonds because interest rates were sky-high.

From 1981-1998, people would have made a 17%/yr return by being in stocks because interes rates came down, and there were corporate tax cuts.

But Warren says there's two market conditions that need to exist to achieve these sorts of returns from the stock market:
  1. Interest rates need to stay low for stocks to do this well
  2. Corporate profitability has to rise in relation to GDP

And he says it's rare for these conditions to last for long periods of time. #2 doesn't tend to last because competition and redistribution should cause corporate profitability to come more into line with GDP.

He says there's another way stocks can achieve outsized gains - and that's by finding finding a transformative industry that changes the world as we know it - stuff like cars and airplanes back in the day. He says people made a lot of money investing in car and airplane companies, but that tv and radio was also transformative and nobody made money. So the #3 way people can achieve outsized gains would be to ...
  1. Find a transformative industry
  2. That has a durable competitive advantage over the competition

Guess he was saying that if there's big gains from a transformative industry, and they're happening to companies that haven't yet been shown to have lasting competitive advantages, then it's likely a bubble that can't last?

Then Warren went on to predict that the gains from the dot.com boom wouldn't last - so for the stock market for 2000-2017 he was expecting the returns to come back down to 4%/yr. Guess they did wind up being about 0% overall for 2000-2010?

This isn't from the article, but Warren never sells even when the p/e ratio of stocks is sky-high - guess he just waits for the p/e ratios to fall, and then starts buying even more?

His perspective's amazing, and he's got such wisdom - his optimism's so lovely as well.


Still not sure what should be doing in this climate of highly-valued stocks and great turbulence if Warren doesn't usually sell. Guess his tip sheet was a great reminder of stuff to maybe look for in a company that should do fine in the long-run, no matter what happens?

To find an outperforming company, we should maybe look for:
  1. A growing industry
  2. A company that's doing better than the competition
  3. In a way that will likely endure over time
  4. And ideally it'd be nice to be able to pick it up at a good price?


Wonder what will happen to the economy next year when Trump's corporate tax cuts kick in? 2019 may make this year seem like a walk in the park?


Awesome article - thanks Jupiter!!
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Old 03-04-2018, 02:29 PM   #227
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Re: 2018 Stock Picking Contest

hasn't buffett performed close to the indexes and had a couple 50% drawdowns over the past 20 years? that would be catastrophic for a fund manager if your name wasn't warren buffett. not trying to dismiss his success or wisdom but its not the 80's anymore

also, have we decided how much margin we are giving brian yet?
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Old 03-04-2018, 02:52 PM   #228
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Re: 2018 Stock Picking Contest

Buffett is an assclown with zero and probably negative edge in the stock market.

He's fantastic at buying up businesses privately, doing private deals, at making +EV bets leveraging insurance floats and his cash pile. But he's cuck of a stock picker. Look at the returns on his stock picks where he's trading like any other retail in the public market, they're awful and underperform the index. The guy is a loser at that particular task and should be avoided imo.
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Old 03-04-2018, 03:16 PM   #229
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Re: 2018 Stock Picking Contest

Tough crowd


Well, Warren is something like 87 yrs old - and does appear to still be living in the 1950s.

Is seems like Berkshire Hathaway has been doing okay? Haven't checked in a while though?


Okay, am headed outside now for a little fresh air before the Academy Awards start - hope everybody's having a lovely Sunday Funday
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Old 03-04-2018, 03:32 PM   #230
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Re: 2018 Stock Picking Contest

Berkshire is doing great and Buffett's returns are very impressive. He's exceptional in his wheelhouse - old school non-public business acquisition and business management.

That doesn't mean I'd go to Buffett to have a mole removed, or to make me a nice breakfast. He has no demonstrated competence in those tasks.

Similarly, Buffett has no demonstrated competence in picking publicly available retail stocks at the prices that retail buyers pay for them.
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Old 03-04-2018, 08:14 PM   #231
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Re: 2018 Stock Picking Contest

Oh yes - just went to take a look at Berkshire Hathaway's holdings and can see what you mean now: https://www.cnbc.com/2018/02/14/phil...ubsidiary.html

In JupiterO's piece, Warren talks about the companies who get the largest returns being for transformative industries where the company has a durable competitive advantage - but then looking at Berkshire's holdings, they're the total opposite. Instead of holding Amazon, they've got Walmart. Instead of Nvidia, they've got IBM. Instead of solar companies, they've got Phillips66.

Wonder if it's because Warren hasn't ever gotten comfortable with the internet, and still wonders if it may be a fad or something? Or if he feels some of the stocks are too expensive, so instead he'd rather take his chance on stuff like Wells Fargo and Teva Pharmaceuticals?

Guess these days all the solid companies are expensive, so the only companies with cheap prices may be cheap for a reason - maybe different kinds of risk, to buy AMZN at a p/e of 240, and GM at a p/e of 4?


That's a really important point you made TS, that many of Warren's stock picks haven't done that great - thanks for pointing that out!!
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Old 03-04-2018, 08:28 PM   #232
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Re: 2018 Stock Picking Contest

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Originally Posted by juan valdez View Post
also, have we decided how much margin we are giving brian yet?
Oh hey - was working on the month-end summary on Thursday night, and it looks like things maybe changed on Friday? Special mention to twelve yr old as well for having 6 double-digit gainers as well, and not too many that are down by much

If people feel like it, maybe there's a bunch of things we could do with the contest. Guess everybody could have unlimited e-funds in their margin accounts - or maybe if an account hits -100%, a person could be given a reload ... and maybe the chance to start fresh with new picks, where they can pick their starting point, although they'll be 2 months behind?

If Brian gets a rebuy, wonder if he'll make the same picks and go from short to long? That could be interesting to have as part of the mix?
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Old 03-05-2018, 01:12 AM   #233
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Re: 2018 Stock Picking Contest

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If Brian gets a rebuy, wonder if he'll make the same picks and go from short to long? That could be interesting to have as part of the mix?
Next year, I will make different picks. UVXY and SVXY have been neutered, so they won't due. In real life I have just under 50% in PUTW (consider it a permanent stock replacement allocation) and the rest in cash.

If you like Buffet, then just buy BRK.B as part of your allocation to stocks. Outsourcing your thinking is an excellent life-strategy.

Try to keep in mind that Tooth and I are absolutely horrible investors. We trade, which is a completely different mindset and you are wise to ignore at least one of us when we give our advice on long-term investments and in particular our opinions about other long-term investors.

PUTW is good as a long-term investment, but that is just easy math
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Old 03-05-2018, 07:07 PM   #234
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Re: 2018 Stock Picking Contest

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Next year, I will make different picks. UVXY and SVXY have been neutered, so they won't due. In real life I have just under 50% in PUTW (consider it a permanent stock replacement allocation) and the rest in cash.

If you like Buffet, then just buy BRK.B as part of your allocation to stocks. Outsourcing your thinking is an excellent life-strategy.

Try to keep in mind that Tooth and I are absolutely horrible investors. We trade, which is a completely different mindset and you are wise to ignore at least one of us when we give our advice on long-term investments and in particular our opinions about other long-term investors.

PUTW is good as a long-term investment, but that is just easy math

What kind of info do you use to make your trades Brian - is it fundamental as well as technical analysis? Do you read a lot of news every day, or have tip alerts set up and stuff like that? Have heard that for traders volatility matters more than a rising market - does uncertainty make things more complicated?

Haven't actually done very much except buy and hold, but read a lot while watching tv, to see what other people are up to - and that's always interesting to see. Guess there's lots of different ways to make $ in the market, and different approaches, and all that sort of stuff?


As a trader, are big single-day losses maybe a top priority to avoid? Was looking at PUTW in relation to some of the other things out there on the market, like a NASDAQ index fund, and Berkshire Hathaway, and the loss during the last correction does indeed appear to be substantially smaller. It looks like PUTW only dropped about 7%, while the NASDAQ dropped about 9%, and BRK-B dropped about 12%?

Guess is the theory for buying and holding that over the long-term, stocks tend to do better than savings accounts - so in theory guess we're not supposed to worry about the size of any downturns in the short-term? Although in practice, drops aren't fun! Like ... guess with buying and holding, in theory are we only supposed to be looking at long-term timelines? So when we do that, guess the dips aren't supposed to look quite as bad as they feel?

Here's the same 3 things, the PUTW, the NASDAQ composite, and Berkshire Hathaway on a 1-yr timeline from the beginning of 2017:

And here's the 1-yr timeline from the beginning of 2017 with those 3 things - and a 10-bagger added, Nvidia (NVDA):

Guess is the idea of going with a single outperformer maybe that if one is able to accumulate big gains in a short period of time, even if the market crashes then hopefully there may still be gains in the net?

Have been studying past crashes to see if they may offer up any clues for how big a crash might be due for some of these stocks with high valuations, and for the market as a whole. Guess in the dot.com bust AMZN lost 90% of it's value Was wondering if that could happen again, with it's p/e of 240. Although guess last time they weren't yet turning a profit?


Do you see the crash happening soon Brian? Any estimates on how big it might be, how it might happen, stuff like that?

Hope Trump reconsiders his tariff idea - apparently the US has a net surplus of steel exports with Canada, so people feel like maybe there might be room for him to adjust his plans?
( !!)


Last edited by TrustySam; 03-05-2018 at 07:13 PM.
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Old 03-06-2018, 01:06 AM   #235
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Re: 2018 Stock Picking Contest

Your PUTW results don't include the big distribution (where it looks like it dropped off last December) and the little distribution.

I'll try to answer the rest in the coming days.
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Old 03-06-2018, 01:43 AM   #236
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Re: 2018 Stock Picking Contest

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Was wondering if that could happen again, with it's p/e of 240.
I thought the PE multiple of 240 here was a typo or a mess up. Been a while since I peeked at AMZN numbers. lol Growing earnings at almost 100% year over year with their size. It really is a modern day US Steel. Still there is almost no way to say a PE ratio over 100 or lol 200 isn't priced for perfection and inevitably due a correction.
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Old 03-06-2018, 07:05 PM   #237
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Re: 2018 Stock Picking Contest

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Originally Posted by BrianTheMick2 View Post
Your PUTW results don't include the big distribution (where it looks like it dropped off last December) and the little distribution.

I'll try to answer the rest in the coming days.

Oh yes, there's those 'D's' on the bottom - you're right


Am being a big pest asking so many questions Was just rattling questions off the top of my head, but now that have looked back at my post, gosh there do seem to be lots of them

And the stock market can be a stressful place - most days it can be nice to just relax and not talk so much about stuff. Only have a handful of things in my portfolio, and even that can be stressful. WTW's not looking so hot these days - Oprah, where are you?? lol And then have AMZN, with it's p/e of 240 250

Really enjoy your posts Brian, but also hope you feel free to just talk about whatever you want to talk or not talk about, so please feel free to only answer whatever you really feel like answering It's gotten cold and snowy again, so will probably just be taking a break from posting and burrow into my couch for the rest of the month and just watch cheesy tv and stuff anyways


Quote:
Originally Posted by Jupiter0 View Post
I thought the PE multiple of 240 here was a typo or a mess up. Been a while since I peeked at AMZN numbers. lol Growing earnings at almost 100% year over year with their size. It really is a modern day US Steel. Still there is almost no way to say a PE ratio over 100 or lol 200 isn't priced for perfection and inevitably due a correction.

Netflix' is even higher! lol

Found this neat thing that shows old p/e ratios ( http://www.macrotrends.net/stocks/ch...-ratio-history), and was shocked to see how high Amazon's p/e has actually been - it looks like it was even higher than 250 for a good 3 years between 2012 and 2015, while Amazon's earnings took a hit because of their attempt to break into the cell phone market? The chart says the p/e was between 500-1000 for a good year ...

Something that was really neat to see from the chart was what things were like for Amazon around the time of the market crash in 2008 ...

It's neat to see that they were able to double their eps while their price was falling along with the market - so then their p/e came back down to earth, but got a lot of help from their strong earnings? And then because earnings were so strong, they were in really good shape within a year of the big market crash?

Guess they really are like US Steel Next time the market crashes, if they're able to keep earnings growing, maybe they'll be able to bounce back quickly like they did the last time?


Wish the chart went all the way back to the dot.com crash - guess the internet was just getting started back then, so haven't been able to find as many resources for the 2000 crash as there seem to be for the 2008 crash?

Anyways - hope things go okay with the market for the rest of the month! GL to all of us with our real-life portfolios!!
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Old 03-08-2018, 02:35 AM   #238
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Re: 2018 Stock Picking Contest

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Really enjoy your posts Brian, but...
Flattery will get you nowhere, I tell you!

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Originally Posted by TrustySam View Post
What kind of info do you use to make your trades Brian - is it fundamental as well as technical analysis?
I use a theory that is broadly similar to the one put out in this paper: http://www.naaim.org/wp-content/uplo...ony-Cooper.pdf

I'm into having a theory first and then checking to see if said theory holds water when it is compared to reality.

The checking part involves a lot of data crunching and checking for robustness.

Enacting it is pretty algorithmic. When the model says "do x," I do x.


Quote:
Do you read a lot of news every day, or have tip alerts set up and stuff like that? Have heard that for traders volatility matters more than a rising market - does uncertainty make things more complicated?
I do read a lot to pass the time. It doesn't affect my trades at all, but it does stress me out a lot.

Quote:
Haven't actually done very much except buy and hold, but read a lot while watching tv, to see what other people are up to - and that's always interesting to see. Guess there's lots of different ways to make $ in the market, and different approaches, and all that sort of stuff?
Watching tv to decide what/how to trade is a lot like watching sitcoms or The Bachelor to decide how to find love.

Buy and hold (assuming you are still young enough to be adding to your investments) beats most strategies. The hard part is holding and adding.

Quote:
As a trader, are big single-day losses maybe a top priority to avoid?
Since I trade products that lock in losses, yes.

Quote:
Was looking at PUTW in relation to some of the other things out there on the market, like a NASDAQ index fund, and Berkshire Hathaway, and the loss during the last correction does indeed appear to be substantially smaller. It looks like PUTW only dropped about 7%, while the NASDAQ dropped about 9%, and BRK-B dropped about 12%?
It is safer than stocks in that it can't drop more than SPY.

Quote:
Have been studying past crashes to see if they may offer up any clues for how big a crash might be due for some of these stocks with high valuations, and for the market as a whole. Guess in the dot.com bust AMZN lost 90% of it's value Was wondering if that could happen again, with it's p/e of 240. Although guess last time they weren't yet turning a profit?
Things that have happened once can happen again.

Quote:
Do you see the crash happening soon Brian? Any estimates on how big it might be, how it might happen, stuff like that?
I don't worry too much about such things. I think/hope my model will continue to work in the future.
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Old 03-08-2018, 10:27 PM   #239
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Re: 2018 Stock Picking Contest

Have to apologize for asking so many questions Brian - investing can be very hard, so guess it's not often one has a chance to hear from people who have been successful at it. So then when JupiterO posted the piece from Warren Buffett about his investing, that was very exciting to get to read!!1! And then when you mentioned trading, guess that was also very exciting!! Didn't notice myself asking so many questions - that was incredibly generous of you to indulge me by answering them. Thank you!! Will try not to be such a pest in the future


Really liked what you said about buying and holding being a solid trading strategy, and how you pointed out that implementation does require being able to (1) hold, and (2) buy. Have actually been extremely worried about my ability to follow through now that the market's no longer solidly bullish - what Warren Buffett does actually sounds really hard to do during the down times ... it seems like there's a chance it might feel counterintuitive to hold while one's portfolio is shrinking, and buy while everybody else is selling?

Really wanted to try to find a strategy would be able to stick with in all markets - that will do well in the good times, that will also hopefully help me do the least amount of damage to my portfolio in the bad times?


Guess the idea of there being a strategy like trading where market conditions don't matter seems neat in theory - but for sure the implementation has always seemed much more complicated.

And then that was super neat to get to see that theory piece for how to trade volatility thingies - wow lol That paper brought back memories of my first couple of years of university. Didn't have to struggle too much in high school, but found myself very middle of the pack my first year of university when guess the talent pool sort of concentrated, and there were all these super smart people in every class. Have always tried to be someone that people could count on, and so was very worried about possibly being someone who only knew and had mastered like 65% to 75% of the material - so set about to try and be someone who people could feel had tried their best and stuff? In first year, was still trying to decide between two majors, one that was a bit more technical, and one that was non-technical. And so that turned out to be kind of interesting, because with the technical thing wound up working about twice as hard as some people, and was still only able to achieve about half the results! While in the non-technical area, the extra effort did help improve my results ...

Maybe there's different ways one can achieve an 'edge'? And with really complex stuff, intelligence may be a barrier to entry for many of us? Not sure if trading's that hard that most traders have to be capable of understanding and implementing that level of complexity - but have heard that trying to find an edge with trading is very, very hard. So that was interesting to see just how hard it can be


Wonder if maybe there may be a 3rd way to invest?
  1. There's buying and holding, where we try to not care how the market's doing in the short-term by trying to stay focused on the long-term
  2. There's short-term trading, where it sounds like it really doesn't matter if the market's going up or down, the market only needs to be volatile? But it may be very hard to develop an edge?
  3. Is there maybe a 3rd possibility of buying and holding longs during bull markets, buying and holding shorts during bear markets ... and maybe avoiding the market altogether in times of uncertainty?

Have only ever invested during obvious bull markets - but if bear markets are just as obvious, maybe might it be a possibility to just wait for the market to have more clear of a direction to participate? Like buy longs when the buying is strong, sell when things get dicey, short-sell when the selling is strong, sell when things get dicey again??

Still trying to figure out how to make the most and hopefully lose the least Investing's not so easy when the market's not shooting to the moon


GL everybody!! Thanks Brian!!
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Old 03-09-2018, 02:11 AM   #240
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Re: 2018 Stock Picking Contest

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Originally Posted by TrustySam View Post
Maybe there's different ways one can achieve an 'edge'? And with really complex stuff, intelligence may be a barrier to entry for many of us? Not sure if trading's that hard that most traders have to be capable of understanding and implementing that level of complexity - but have heard that trying to find an edge with trading is very, very hard. So that was interesting to see just how hard it can be


Wonder if maybe there may be a 3rd way to invest?
[LIST=1][*] There's buying and holding, where we try to not care how the market's doing in the short-term by trying to stay focused on the long-term[*] There's short-term trading, where it sounds like it really doesn't matter if the market's going up or down, the market only needs to be volatile? But it may be very hard to develop an edge?[*] Is there maybe a 3rd possibility of buying and holding longs during bull markets, buying and holding shorts during bear markets ... and maybe avoiding the market altogether in times of uncertainty?
If you like Buffett you should read about his early days of his partnership. There are numerous books out there. He traded a much smaller account when he started out obviously. He did things everyday retail people like us can do. In his early days he primarily invested in special situations and merger arb. You might be interested in reading about going private transactions and merger arbitrage or any type of arbitrage for that matter.

For strategies, think of it more as finding a niche than an edge. The thing about capital markets is they are dynamic so a lot of things come and go quickly. I remember some people traded FAZ the financials 3× short ETF with a mechanical system in 2008 that printed money. Anyway, there are tons of strategies out there other than buy and hold or stock picking.
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Old 03-09-2018, 11:00 AM   #241
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Re: 2018 Stock Picking Contest

Sam, your #3 could look like this: http://econompicdata.********.com/20...-benefits.html
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Old 03-09-2018, 04:29 PM   #242
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Re: 2018 Stock Picking Contest

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If you like Buffett you should read about his early days of his partnership. There are numerous books out there. He traded a much smaller account when he started out obviously. He did things everyday retail people like us can do. In his early days he primarily invested in special situations and merger arb. You might be interested in reading about going private transactions and merger arbitrage or any type of arbitrage for that matter.

For strategies, think of it more as finding a niche than an edge. The thing about capital markets is they are dynamic so a lot of things come and go quickly. I remember some people traded FAZ the financials 3× short ETF with a mechanical system in 2008 that printed money. Anyway, there are tons of strategies out there other than buy and hold or stock picking.

Oh hey, so you know what ... so in my first couple of years of university, with the non-technical area, since it wasn't an area of high complexity guess maybe results wound up hinging more on stuff like ... maybe thoroughness and meticulousness? So that was kind of neat to see, that there were still opportunities available in life for us more average people

One thing have found that can sometimes stand in the way of being able to be as thorough as possible with stuff is sometimes our own personal 'stuff', like self-doubt and skepticism? In looking at your list of resources, have to say my first instinct is to feel like, wow those sound over my head as well, they're probably too hard for me and stuff But neverthess, will totally check them out - because sometimes maybe everybody assumes the same thing, and then so nobody really tries, and so maybe sometimes that may be where some of the opportunity may wind up being found in life?

Guess will have to see Do super enjoy all things Warren Buffett!! And that was a really fantastic suggestion to try and see it more like a missed opportunity instead of needing an edge - thanks JupiterO ... really appreciate those tips!! This is a great thread you started


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At first, couldn't get the link to work - so started wondering to myself, like oh gosh ... hope it's not a gif of me lighting my money on fire by buying high and selling low

May have found the page - does it have this picture on it?

Guess it's also got the pic of what's possible when the strategy is properly executed as well Guess no matter what strategy one chooses to go with, to make money with investing execution will be key, and it's going to be crucial to learn to weed out the FUD and FOMO buying/selling?

Actually, looking at the chart now, guess a big part of the money for #1 and #3 comes from being able to buy low, so #3 would be no easier than #1 ... hmmm ....


Something people may be able to relate to - since getting into investing, seem to have made every noob mistake in the book that everybody warns us not to make, like buying high and selling low Especially since a lot of articles seem to focus their reports on the day-to-day price movements - and maybe too because the long-term outlook right now really isn't clear? Like today all the headlines make it sound like the bull market is back ... but last week, weren't they saying full employment was bad and not good??

Have been trying to look at other stuff besides day to day prices to see of that may be helpful in better predicting the direction of the market? Here's a little experiment am in the middle of right now - was noticing today that the DJIA has started to consolidate, with there potentially being a breakout around March 20 ... isn't that the day the Federal Reserve is set to meet to discuss raising interest rates? So will see if the market starts moving down towards 23,500 by the end of the month?

Or will people consider higher interest rates a good thing, and start pushing the Dow up to 27,000? Will have to watch and see how things turn out by the end of the month - guess on the longer timeline, things aren't really going anywhere, so maybe there's still some time to explore the different options?


Thanks for the article Brian - it's super helpful!!


Am going to burrow into my couch again for the rest of the month, and read stuff and watch cheesey tv - not for the educational value, but for entertaining cheesey goodness


Hope everybody has a great weekend!!
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Old 03-12-2018, 11:56 PM   #243
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Re: 2018 Stock Picking Contest

Brian, had a chance to take a closer look at that blog post, and it's incredible ...

Have been looking and looking all over the internet, hoping to find something that might reliably help show when a big shift in the market might be imminent, and haven't been having any luck. And here this blog offers up such a simple solution


Guess with investing there's short-term and long-term timelines, and fundamental and technical analysis. And some of the long-term fundamental analysis signs of an impending crash may be stuff like ...
  • interest rates around 5%
  • bond yield spread around 0%
  • market starts to slow and approach a recession
  • big companies start to run out of money and go under?

In the link that Brian posted, the blogger has also noticed a long-term technical analysis sign of an impending crash ...

So the signs to buy and sell would be:
  • Sell - September 2000
  • Buy - March 2003
  • Sell - November 2007
  • Buy - June 2009

It seems like it's pretty common for a lot of people to be skeptical about the utility of technical analysis? Am open to anything that seems like it might help paint a clearer picture of what's going on - perhaps this spot from 2008 may show a situation where having long-term technical indicators may potentially help one figure out how the market is actually doing, amidst all the chaotic headlines? In the midst of the market crash, apparently the Treasury Secretary did the interview rounds and had the following to say in July 2008 ...
https://www.reuters.com/article/us-e...36130120080721

Quote:
WASHINGTON (Reuters) - The U.S. economy needs months to recover from its slowdown, but the banking system remains sound despite a home mortgage crisis that could cause more problems, Treasury Secretary Henry Paulson said.

The treasury secretary has been trying to reassure nervous financial markets and is scheduled to deliver an important speech on markets and the economy in New York on Tuesday.

“We’re going to be in a period of slow growth for a while,” Paulson told“Face the Nation” on CBS.“I think it’s going to be months that we’re working our way through this period.”

He added that U.S. banking problems were manageable despite this month’s highly publicized failure of mortgage lender IndyMac IDMC.PK bank.

“Our banking system is a safe and a sound one,” Paulson insisted on CNN’s“Late Edition.”

He had earlier told CBS, the list of troubled banks would grow. But “this is a very manageable situation ... our regulators are focused on it.”
So people totally trusted him, and went and started buying back into the stock market because he said it was on the road to recovery - and then look where the stock market wound up going after his interviews

Whereas with the blogger's system, guess he'd wait for a clearer sign that the market was truly on the road to recovery before buying back in (the orange arrow)?


Guess it's up to each person to decide which pieces of info seem reliable, but found this blogger's system to be really neat


There was another part of the market where this 12 month moving average was kind of neat to see - it also seems to show how 'bubbly' the market is running? Like guess when the market is growing at a normal rate, there should be dips back to the 12 month moving average support every once in a while, like when there's news that interest rates are being raised and stuff like that? But when the market's running hot, the market may not react to negative news as much as it should, and so it may tend to overheat and have larger corrections when they do eventually happen?

It looks like when the market's more bubbly, the blogger's system may tend to give the occasional false positive?



An interesting thing about the Trump era - it looks like interest rates have been raised 4 times already since he's been in office, and the market didn't cool off at all like it did when Obama was in office. So maybe the market could have a big response if there's a 5th one next week - or it could stay hot like it has the last 4 times? But then with each time the market doesn't respond to negative news the way it should, guess that makes the market go higher and higher, and more sensitive to negative news, so when a normal correction does wind up happening, it may wind up being fairly severe just because one's been building up for a while?


One interesting thing about this system though, is how early it sets off the alarm bells - guess it detects shifts in movement as soon as they happen, but to look at the graph from 2007/2008 as if it were happening in real-time and without the benefit of hindsight, am a bit worried may look at the sell point and wonder if it's really going to work, if everything still looks like it may be okay?
12 month moving average sell point: November 2007


The buy point for the dot com crash was also a bit ... less clear than would have hoped for it to be?
12 month moving average buy point: March 2003


Brian, am such a pest to you, and you offer me so much amazing help Have to offer you a huge thank you for posting that blog. Still have to study the crashes from 2000 and 2008 more closely, but it feels amazing to have something in addition to the funddamental analysis indicators that should work to help point out that the market's taking a large and sustained shift in direction, so thank you!!

Last edited by TrustySam; 03-13-2018 at 12:20 AM.
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Old 03-13-2018, 08:09 PM   #244
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Re: 2018 Stock Picking Contest

Moving averages are what is called a "lagging indicator". Most aren't predictive. Better in hindsight. Bollinger bands are better but still can't be the only thing you look at.

It's really hard to time the market and usually a waste of time really. It's fun to think about though. In the late 90s near the top more and more retail money kept pouring into the market via index mutual funds like S&P 500 funds. So as a result S&P 500 companies like KO Coke saw their PE ratios skyrocket to ridiculous levels. So thats always something to think about. After the dot com crash in 2000 most people thought it would take years and years for the market to recover. Greenspan cut rates though and that was all that mattered. In 2007 Bernanke was frantically cutting rates in desperation up until the recession. 2009 QE and ZIRP started the market recovery. So it always makes sense to pay attention to what the FED is doing.
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Old 03-14-2018, 12:34 AM   #245
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Re: 2018 Stock Picking Contest

JupiterO, thanks so much for bringing up the lag issue - it helped me notice more stuff from the graphs that wasn't quite so clear before?


It sounds like the blogger may be something of a TA purist, who just buys and sells anytime the S&P crosses over the 12 month moving average? Maybe because it's such a long time frame, so any time it crosses the movement will always at the minimum be fairly severe?

But like you, also enjoy following all the latest news - about what people see in the market, and what the Federal reserve is doing, and stuff like that


The S&P12 month moving average almost seems to act as almost like a ... directional derivative maybe? In the way it only moves in a downwards direction during major crashes?



But yes guess since it's the average price of the last 12 months (or 200 days), it looks like in 2008 the change in direction of the moving average didn't start to show until the S&P had already dropped quite a bit? It looks like by the time the moving average actually started to show a move in a downward direction, the price for the prior 12 months (200 days) had been moving up for about 5 months, then had gone sideways for about 5 months, and then had dropped for 2 months? And it seems like the only reason the moving average started to drop when it did might have been because the rate of growth for the 5 months was fairly mild, while the rate of decline in the 2 months (60 days) was quite severe?



It looks like there may have also been quite a bit of lag at the bottom of the 2000 crash - with it taking about 10 months for the moving average to show that the crash had hit a bottom and had been there for 10 months already? Guess because the S&P spent almost a year flat at the bottom, it was maybe just a lucky thing that when the market finally started to turn upwards, the upturn wound up showing up almost immediately on the moving average?



So guess the time lag on the visible shift downwards in the moving average the next time the market crashes will maybe depend on what's happened in the market in the 12 months before the S&P crosses over the 12 month moving average?

Am not sure what to do if there's a crossover, and the downturn actually hasn't started to show yet - probably things will sound so scary in the news by then, lots of people may want to sit on the sidelines of our tax free accounts by then? So maybe yeah will mostly still look at fundamental news like you It sure feels nice to have the technical analysis stuff as well


Thanks JupiterO for the tips - they helped a lot!!

Last edited by TrustySam; 03-14-2018 at 12:54 AM.
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Old 03-14-2018, 12:50 AM   #246
BrianTheMick2
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Re: 2018 Stock Picking Contest

Give me a minute or two, woman!

As a sort of prequel to what I will write, there is no perfection. At best, you can just make it easy to not **** your future self over. Also, sma's are leading indicators across every single asset class known to man. Bollinger Bands are not so much a leading indicator. Nothing works great all the time, but after a ton of research into them it turns out that they don't offer much value to investing bang for the effort.

Again, give me some time to answer sensibly.
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Old 03-14-2018, 12:57 AM   #247
TrustySam
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Re: 2018 Stock Picking Contest

Gosh, probably my post makes no sense - please, nobody read it! lol

Ahhh, will have to save the reread for tomorrow - will make corrections as need be then


Okay, g'night everybody - have a nice evening!!
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Old 03-14-2018, 04:03 AM   #248
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Re: 2018 Stock Picking Contest

Moving averages don't give trading signals but can be useful as filters. Market is above and upward sloping MA? Buy the dips! Market is below a downward sloping MA? Sell the rips!

Problem is there are multiple (infinite!) timeframes and MA lengths. But a quick glance at a reasonable MA will tell you the general trend currently in place and as we all know "the trend is your friend!"

MAs are just one more piece of the puzzle and can be useful when used in conjunction to other factors and indicators. On their own they won't really tell you much.
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Old 03-14-2018, 01:18 PM   #249
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Re: 2018 Stock Picking Contest

That's a great summary mrbaseball!!


It seems to have helped me see things more clearly, and am seeing fresh stuff in the graphs now, for how moving averages may be able to help supplement the fundamental stuff?

Will have to wait until tonight to look over stuff even more - will maybe post more later


Thank you!!
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Old 03-15-2018, 01:05 AM   #250
BrianTheMick2
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Re: 2018 Stock Picking Contest

Quote:
Originally Posted by TrustySam View Post
JupiterO, thanks so much for bringing up the lag issue - it helped me notice more stuff from the graphs that wasn't quite so clear before?


It sounds like the blogger may be something of a TA purist, who just buys and sells anytime the S&P crosses over the 12 month moving average? Maybe because it's such a long time frame, so any time it crosses the movement will always at the minimum be fairly severe?
He isn't a TA purist. He is a data-driven person who likes to test claims using empirical data. The blog post was just a specific study to test an idea.

Quote:
The S&P12 month moving average almost seems to act as almost like a ... directional derivative maybe? In the way it only moves in a downwards direction during major crashes?
It is just a specific way of quantifying momentum. Kind of like price to cash flow is a specific way of quantifying value.

Quote:
But yes guess since it's the average price of the last 12 months (or 200 days), it looks like in 2008 the change in direction of the moving average didn't start to show until the S&P had already dropped quite a bit?
Yes. That is how momentum works. You never catch the very top or the very bottom. You win by getting the meat of the move and avoid some of any major downturn.

You also win because it is easy and markets will screw with your brain. How many friends do you have that didn't get back into the markets in 2009 when they (obviously with the aid of hindsight) should have? How many (include yourself in this one if applicable) just became interested in investing in the last two years (when they should have gotten interested in 2009)? How many friends do you have that sold everything after losing half their money? If you beat any of them, then you've won.

Quote:
It looks like by the time the moving average actually started to show a move in a downward direction, the price for the prior 12 months (200 days) had been moving up for about 5 months, then had gone sideways for about 5 months, and then had dropped for 2 months? And it seems like the only reason the moving average started to drop when it did might have been because the rate of growth for the 5 months was fairly mild, while the rate of decline in the 2 months (60 days) was quite severe?
If it had dropped suddenly, it would have crossed on a different date. If it had dropped slowly, it would have crossed on a different different date.

Quote:
It looks like there may have also been quite a bit of lag at the bottom of the 2000 crash - with it taking about 10 months for the moving average to show that the crash had hit a bottom and had been there for 10 months already? Guess because the S&P spent almost a year flat at the bottom, it was maybe just a lucky thing that when the market finally started to turn upwards, the upturn wound up showing up almost immediately on the moving average?
That one turned out very well. In other cases, you get above the SMA after a steep rise in the asset. Either way, you'd be better following the SMA than being like most people who waited years before putting a toe back in the market.

Quote:
So guess the time lag on the visible shift downwards in the moving average the next time the market crashes will maybe depend on what's happened in the market in the 12 months before the S&P crosses over the 12 month moving average?
We kissed the 200-day SMA (that is the one I happen to use) in the middle of one day during the correction we just had. No mechanical system works well when markets are markets make huge fast moves.

Quote:
Am not sure what to do if there's a crossover, and the downturn actually hasn't started to show yet - probably things will sound so scary in the news by then, lots of people may want to sit on the sidelines of our tax free accounts by then? So maybe yeah will mostly still look at fundamental news like you It sure feels nice to have the technical analysis stuff as well
You sell when it crosses below and rebuy when it crosses above. Sometimes that means you are long for a day and that sucks. It is far better than just sitting out waiting until your heart says it is a good day to buy (or sell).

I think you asked about the gazillion times when there are tons of sma crossovers that don't pan out. It sucks when that happens but no system is perfect. If you discover a perfect system that you can't stick to, that system is useless. This one at least is easy to stick with.
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