Ask me anything about finance/investing - Page 4

Thanks for the compliment. Right now as far as investing and making money goes, poker is all I know. For the time being I find it to be a very good investment but think it might be foolish to rely on it for life, and that I'd definitely be wise to diversify and learn other investing skills at some point. What I'm trying to get an idea of for myself is, what's best between:

- learning about the financial world and learning to trade and invest in financial instruments
- learning about business and starting/investing in various businesses
- learning about real estate and investing in real estate
- is there some other good option?

trade and invest in financial instruments, business and starting/investing in various businesses and real estate and investing in real estate have one thing in common with poker. and that's risk. trading stocks, futures or forex, setting up your own business, etc. is also a gamble. you aren't really sure what's gonna fall on the 'flop, turn and river', but you can control your bet sizing, manage your money well and really learn to be skillful enough to have an edge and only go all in when you have the odds to win.

dude... you already know this. the question is 'what do you want to do?'

but if you really aren't sure. i recommend you read 'the complete turtle trader' http://www.amazon.com/exec/obidos/ASIN/0061241717/trendfollowin-20

richard dennis is like one of the laggiest traders during his time. a very good book about him and his group of traders.

Any comments on energy (oil, uranium etc) as a sector to invest in? What's more important? Resources in the ground, production etc?

On January 06 2010 06:11 DvoBoardRider wrote: sicks macks, would you recommend people here learn charting and technical analysis and let the ppl here trade stocks/futures/forex on their own?

I would specifically recommend against this. Success stories among chartists and technical analysts working for themselves occur in almost the exact proportion that a normal distribution would expect, or if anything, less. As I've mentioned before in this thread, I think you probably need about $50mm, natural talent, and no better use of your time before it starts to make sense to trade & research on your own. Even if this is the case, I think other investment strategies with higher time and talent barriers to entry lead to more genuine sucesses relative to technicals. I think a lot of people get blinded by the high returns possible in some sectors, and attribute skill to the people who achieve them. Some ridiculous percentage (read 95%+) of your realized gains in the long run will be a direct function of the risks you take, not the skills you have, so introducing security selection as a part of anyone on here's investment process is not going to materially change their expected return, but it is going to take a lot of time and introduce a whole lot of risk. I'll get to the other questions in a bit, but I thought it was very important to disagree publicly here as quickly as possible.

On January 06 2010 05:56 Robinson47 wrote: im in the uk, can i buy us shares? i have a modest $10k to invest in some shares and im not fussed if its high risk and high potential return or a stable share. Is there any company you would recomend? Do you have any knowledge of the uk banking crisis, and if so what are your estimates on the future of shares such as rbs, lloyds and barclays?

You can buy US shares, but I'm not sure of the exact process. Ask your brokerage firm if you can, and if you can't through them, you probably can through someone else. Again, I'd recommend buying any individual companies in general without the capacity to conduct extensive research yourself, and legally I can't suggest any. Sorry, that's one area I can't really even get into. I know a lot about the UK banking crisis, but again I can't really say much because it's an area I actively cover. I will generally say that companies that survive the crisis with a profit culture intact will find a much gentler competitive market than before (some already have), pricing and volumes will rise accordingly relative to normalized levels. It's important to note which company's have a capital structure that allows shareholders to participate most actively in these profits. One other note, global investment banks are really black-box operations. You can do incredibly rigorous analysis, have full access to management and still get just part of the picture. The head of research at a very large hedge fund (not mine), once told me: "you can do all the work you want on these guys, no one really knows what's going on until they tell us what they made".

On January 06 2010 06:18 Ket wrote: Is there such thing as millionaires that can make a living doing nothing but investing their money in the markets? Are they common? Do people try it and fail?

Yes lots of people do nothing but run their own money. Many hedge funds have only 1-10 investors. This is pretty common, among everyone from tested asset managers to older rich people who just have nothing else to do. I'm sure some people lose it all, but remember, unlike poker (a negative EV game on average, with significant opportunities to set your own place on the distribution), investing inherently has a positive expected value (though it's much harder to set your own place on the distribution). Most people who "fail" at investing their own money still make money, it's just that they spent a lot of time and didn't outperform an index of similarly-risked securities.

On January 06 2010 06:32 Ket wrote: Thanks for the compliment. Right now as far as investing and making money goes, poker is all I know. For the time being I find it to be a very good investment but think it might be foolish to rely on it for life, and that I'd definitely be wise to diversify and learn other investing skills at some point. What I'm trying to get an idea of for myself is, what's best between: - learning about the financial world and learning to trade and invest in financial instruments - learning about business and starting/investing in various businesses - learning about real estate and investing in real estate - is there some other good option?

I think learning about business and investing go together. People who teach you how to "trade" are usually trying to teach you something variance-filled and gimmicky. I'd suggest trying to approach things broadly and seeing what interests you. Remember, investing doesn't have to occupy a ton of your time, and isn't mutually exclusive from poker. Something as simple as having a well-diversified portfolio of ETFs or mutual funds can grow the money you've already made another 8% a year or so over the long run.

On January 06 2010 08:14 DustySwedeDude wrote: Any comments on energy (oil, uranium etc) as a sector to invest in? What's more important? Resources in the ground, production etc?

Energy is a sector I cover very closely so I can't get too deep here for legal/ethical reasons. Energy is like any other industry, there is a supply chain and understanding where the pressures on the supply chain can occur is key to understanding where to invest.

For example, oil gets in your car like this:

Upstream (Integrateds and E&Ps contract with seismic companies, drilling companies, other wellhead service companies to drill oil)
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Midstream (Tanker co's, terminal co's all move oil from where it's drilled to where it's consumed)
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Downstream (Refiners and integrateds turn oil into gasoline, service station networks and integrateds sell it you)

An easy strategy here is to look for bottlenecks in the process that may develop in the future from geographical or structural shifts in demand and supply. The companies that straddle those bottlenecks generally gain pricing power and increased earnings. Again, I cover the sector so I can't get more specific, but hopefully this helps give you a framework of one way to think about it.

I'd also recommend only investing in natural resource linked stocks that you believe are cheap at current commodity prices, many of the things I said about the forex markets being a high variance perfect information solved game apply to commodity markets as well, so I'd avoid making direct or indirect bets on commodity price movements.

Also just in general, many investors in any type of investment focus a ton on what they're getting, but not very much on what they're paying for it. Any company, piece of real estate, block of wood is a good investment at the right price, and a bad investment at the wrong one.

Jim Rodgers is ________

fill in the blank

On January 06 2010 12:17 YoBaNaNaBoY wrote: Jim Rodgers is relatively unknown to me (a quick perusal of Wikipedia reminds me who he is, but I don't really have anything interesting to say about him) fill in the blank

2 solid replies, ty SicksMacks

Thanks a lot, I think I was on the right track but there was a fair but of new stuff. Really helpful

If forex is a solved game, do you know of any employed forex investors who have accepted this and spend 1hr a day randomly picking trades for their company and the rest doing coke and whores?

On January 06 2010 14:39 Oly wrote: If forex is a solved game, do you know of any employed forex investors who have accepted this and spend 1hr a day randomly picking trades for their company and the rest doing coke and whores?

well I guess the difference is that it's not really a game. There is still money to be made in arbitrage trades between forward and spot rates (need quicker execution than is available to any of us to do this), and there are plenty of non-speculative reasons to trade forex (investors and companies alike need to hedge out forex risk inherent in their other investments or operations, and international commerce itself demands frequent forex trading). I was more saying that it's a game of perfect information and is also pretty solved, so speculative trading is going to be neutral EV - transaction costs.

I do know buy-side traders who don't do a ton other than hit up sell-side people for restaurant and club dates (sell-side depends on them for business) and then route trades based on who gives them the best night plan. As for ducking out during the day for an 8-ball and a quickie, I must not run in the right crowds.

To add, I think most of the people who are just "clicking buttons" so to speak, really think they have a valuable process. They'll say things like "people don't understand the importance of the fiscal deficit like I do", or "no one fully appreciates the BRIC growth like I do"; but you know what? People do, it's priced in, and your intuition doesn't give you an edge.

What do you mean intuition doesn't give you an edge ? You're saying that people who have shortened stocks pre to subprime crisis didn't have an edge against those who were going long ? Also, those who were going long @ the beggining of last year didn't use simple logic which gave them "the edge" ?

If you're saying that everything is priced in how come you make any money ?

Also, saying that there are no trends in currency exchange is silly



Would you say that in Q3'08 it was a 50/50 wheter it was going down or up ?
- btw PLN is polish zloty

On January 06 2010 14:53 Sicks Macks wrote: Show nested quote + On January 06 2010 14:39 Oly wrote: If forex is a solved game, do you know of any employed forex investors who have accepted this and spend 1hr a day randomly picking trades for their company and the rest doing coke and whores? To add, I think most of the people who are just "clicking buttons" so to speak, really think they have a valuable process. They'll say things like "people don't understand the importance of the fiscal deficit like I do", or "no one fully appreciates the BRIC growth like I do"; but you know what? People do, it's priced in, and your intuition doesn't give you an edge.

Cool, exactly like poker fish lol.

On January 06 2010 17:44 Qyvs! wrote: What do you mean intuition doesn't give you an edge ?

I'm saying everyone thinks their intuition is an edge, 0.00001% are right, and variance is too large to ever test for this in a career. I prefer finding solid, mathematical mis-pricings.

On January 06 2010 17:44 Qyvs! wrote: You're saying that people who have shortened stocks pre to subprime crisis didn't have an edge against those who were going long ?

Yep. Results orient-aments. Because their process lead them to the correct conclusion in one case does not mean that their analytical mindset is a predictably profitable tool relative to the market.

On January 06 2010 17:44 Qyvs! wrote: If you're saying that everything is priced in how come you make any money ?

I refuse to take big positions, or spend a lot of time on any market or security that has been analyzed to death by smart people. My personal favorite stocks are distressed firms that other people have abandoned coverage of due to bankruptcy risk, plummeting market cap, or some other reason. Whenever I find an asset that I think is significantly over or under priced I spend a good deal of time trying to figure out why other financial professionals haven't come to this conclusion. Unless I can convince myself there is a reason they haven't performed a similar analysis, or that their process would lead them to a demonstrably incorrect conclusion, I assume I've missed something. I don't pretend to be able to get a repeatable edge on stocks like GE or MSFT.

On January 06 2010 17:44 Qyvs! wrote: Also, saying that there are no trends in currency exchange is silly

They certainly develop, it doesn't mean momentum investing is profitable. It is very easy to pick out peaks and troughs in retrospect.

On January 06 2010 17:44 Qyvs! wrote: Would you say that in Q3'08 it was a 50/50 wheter it was going down or up ?

Yes, and so would people who are far more well-versed in currency trading than you or I, hence the pricing at the time.

On January 06 2010 17:44 Qyvs! wrote: - btw PLN is polish zloty

tak, wiem!

double posting, whoops