Ask me anything about finance/investing - Page 7

trading is a zero sum game, and they say that 90% of traders LOSE money. imagine that.

how many % of poker players lose money again?

but i don't think it's that easy beating the markets. but there sure is money to be made in trading. you just need to work hard and try to be good at it.

read the interviews from http://thetechnicaltrader.net above. they're good reads.

Giyom, yeah, i think that book might be BS. i suggest reading michael covel's books. those are great.

Sicks Macks, it's sick generous of you to be doing this for us

Because I have literally zero experience in any form of personal investing whatsoever, I struggle to come up with relevant, concrete questions. But the one thing I worry about is fees. I presume that at the very least, 'they' will be looking to hide and fix in as many little fees as they can. Assuming that I am able to pick up on all of them, at what percent should alarm bells be going off? (I guess this would also depend on the amount of money I am investing, as well as the type and reputation of the manager I'm employing, but any kind of ballpark would be appreciated).

Thanks!

Sicks Macks,

you think the US markets will go up any further this year?

sicks macks,

iam owning like 350 vodafone.de stocks because iam working for them.
we got them as a present or smth i think because they use them for their taxes or what ever. so every year i get stocks in a value of 500€. You need to hold them 2 years and after that u can do what u want to do with them. august i guess is the month where i can sell them or do what i want. they ask you 2 month before if you want ot hold them and if you do not reply they will automatically sell it for you. so to say there are alot who just see the money but it isnt it rly -ev to sell them exactly at this time when everyone is selling because the equity price will sink alot? if so when do you think is a perfect time?

i can tell you that vodafone is making more winnings every year so i would assume to sell them when they release their quater numbers when they tell everyone how much they made? because when they did more than last year which like every year the equity price will raise?

lots of questions and i think i wrote it very confusing but i hope u get my point!

btw: iam a sick beginner in finance things. iam just a standard IT guy ;P
ty in advance

On January 20 2010 09:25 Uptown wrote: Sicks Macks, it's sick generous of you to be doing this for us Because I have literally zero experience in any form of personal investing whatsoever, I struggle to come up with relevant, concrete questions. But the one thing I worry about is fees. I presume that at the very least, 'they' will be looking to hide and fix in as many little fees as they can. Assuming that I am able to pick up on all of them, at what percent should alarm bells be going off? (I guess this would also depend on the amount of money I am investing, as well as the type and reputation of the manager I'm employing, but any kind of ballpark would be appreciated). Thanks!

Well there are a number of different fee structures for different services. If you're directing your own asset allocation among funds the only fees you're required to pay are management fees for the fund. Depending on the structure of the fund, these can be as low as 10 bps per year (basis points, 1% of 1%). Funds purchased through a broker will also charge a load (commission). Don't buy these, and don't use brokers who work off of commissions. Funds get more expensive if they are actively managed (invest at the manager's discretion, not based on the composition of an index, not necessarily a good thing because no one knows what they're doing), funds are also more expensive if they invest in less liquid or more complex securities such as REITs, emerging market equity, etc. Anything less than 1% (100bps) per year as an expense ratio is probably fine, but make sure to compare similar funds before you buy because expense ratios really make a difference.

If you're not directing your own asset allocation, you should expect to pay maybe another 1% or so (I really don't know actually) of assets per year to a financial advisor to manage your portfolio for you. Again, don't use financial advisors who work off of commissions (or sell funds with loads built into them), because their incentive is always to sell you new products, not protect your portfolio.

Let me know if you need clarification on any of that, I forget what's inside baseball and what's not sometimes.

On January 20 2010 11:20 DvoBoardRider wrote: Sicks Macks, you think the US markets will go up any further this year?

I'd say yes, only because the median year in equity investing has a positive return (and should be expected to), beyond that I don't have a valuable opinion, and I wouldn't think I could until I had done a lot of research on a majority of the market capitalization of the US.

On January 20 2010 14:35 keuner wrote: sicks macks, iam owning like 350 vodafone.de stocks because iam working for them. we got them as a present or smth i think because they use them for their taxes or what ever. so every year i get stocks in a value of 500€. You need to hold them 2 years and after that u can do what u want to do with them. august i guess is the month where i can sell them or do what i want. they ask you 2 month before if you want ot hold them and if you do not reply they will automatically sell it for you. so to say there are alot who just see the money but it isnt it rly -ev to sell them exactly at this time when everyone is selling because the equity price will sink alot? if so when do you think is a perfect time? i can tell you that vodafone is making more winnings every year so i would assume to sell them when they release their quater numbers when they tell everyone how much they made? because when they did more than last year which like every year the equity price will raise? lots of questions and i think i wrote it very confusing but i hope u get my point! btw: iam a sick beginner in finance things. iam just a standard IT guy ;P ty in advance

I would recommend that you sell them at some point. You're taking on a good bit of company-specific risk given that this is, I presume, the only stock you own. That said, you're describing a real technical phenomenon when you say you might not want to sell when everyone else is. Forced or suggested sales can often drive a company's stock price below it's fundamental value, and it will often return when the event is over. I'd suggest waiting a week after everyone else sells and then sell your shares. Other than that I wouldn't worry about timing. Individual stock price movements are for all intents and purposes random in the short term.

As for waiting for quarterly releases, remember that the market is constantly pricing in new information, so it doesn't matter how vodafone does relative to least year, it matters how well it does relative to expectations. Vodafone is a very well covered stock, and I'd imagine that it is pretty accurately priced at any given time (except the scenario we talked about before with employee stock sales). Again, don't stress over timing here.

when i got this stocks for my first time i talked to some colleagues and stuff and they said there are rly tiny stocks of some future projects i.e. a company whos trying to invent algea fuel. so they said they are at like 0.07€ and if you invest a good bunch and they get some high class contracts with some other companies then this stock will grow alot because its not worth atm? what you think about such stocks. they said that it is possible that this stock will be at 1-5€ in the next five years if they rly gets it working!

is this even possible to get equity price that huge?

On January 20 2010 15:46 keuner wrote: when i got this stocks for my first time i talked to some colleagues and stuff and they said there are rly tiny stocks of some future projects i.e. a company whos trying to invent algea fuel. so they said they are at like 0.07€ and if you invest a good bunch and they get some high class contracts with some other companies then this stock will grow alot because its not worth atm? what you think about such stocks. they said that it is possible that this stock will be at 1-5€ in the next five years if they rly gets it working! is this even possible to get equity price that huge?

they're talking about speculating in cheap stocks. It's definitely possible to find small stocks that go up 5 or 10 or more times your initial investment. That said, for every 1 that triples, 2 go to zero (not exactly obviously, but you get the idea). Both downside and upside risk are pretty accurately priced into stocks. If you research what sort of assets and cash flows you're actually buying when you buy the stock, then you can find real value, but if you're just buying the stock becausee you hope someone else will pay more for it later, you're just gambling.

As a side note, the nominal share price of a stock doesn't mean much at all. You're buying a piece of ownership of a company, so it's relevant how many pieces of ownership there are available. Berkshire Hathaway A shares cost over $100k each, but Exxon Mobil is a more valuable company despite its stock only costing $68 per share. Why? A Berkshire A share entitles you to more of the company than an Exxon share does.

Quality material.

Cliffnotes so far - please correct me if you disagree with my summary.

1. If you want a job in a related field, it's more about who you know, then how much you know or what your degree says.
2. Diversify. No really.
3. LOL technical analysis. (btw I personally think there's a place for it, partially from a self-fulfilling prophecy and psychology aspect - but as amateurs don't waste your time trying to create the next great stock model)
4. Past performance is not predictive of future performance. This is like saying you can win at roulette by tracking the numbers. (Past performance may be indicative of future performance, but it involves determining the sources that generated the performance and showing that it's a repeatable process with conditions that hold moving forward.)
5. In general, as amateur investors, stop trying to pick winners or the short term direction of the market. Also, see #2.

I may be putting these words in your mouth because you haven't said it explicitly, but I get the sense from your responses that you keep showing how you know more about a subject and yet feel you're not qualified to make a prediction so why would someone who knows less think they can do so.


Questions:

Do you or does your firm have any thoughts on long term secular market cycles? How would you feel about someone who changes long term allocations based on these while claiming to not be a market timer?

Your comments about gold and the Yuan, although directed mostly at the specific instruments themselves, led me to believe you're not particularly concerned about US inflation either. Is that correct? Do you not see significant risk for inflation above expectations that justifies an above average allocation to commodities or related investments?

Most pro sports bettors will tell you it's not about picking winners. It's about line-shopping, arbs, etc, etc. How do you feel about a fund manager that claims to be a pure bottom up stock picker?

On January 20 2010 17:03 Cray0ns wrote: Quality material. Cliffnotes so far - please correct me if you disagree with my summary. 1. If you want a job in a related field, it's more about who you know, then how much you know or what your degree says. 2. Diversify. No really. 3. LOL technical analysis. (btw I personally think there's a place for it, partially from a self-fulfilling prophecy and psychology aspect - but as amateurs don't waste your time trying to create the next great stock model) 4. Past performance is not predictive of future performance. This is like saying you can win at roulette by tracking the numbers. (Past performance may be indicative of future performance, but it involves determining the sources that generated the performance and showing that it's a repeatable process with conditions that hold moving forward.) 5. In general, as amateur investors, stop trying to pick winners or the short term direction of the market. Also, see #2.

1. This is definitely true for the first job unless you graduate from a top 20 school in the top few of your class (what we've been talking about ITT). This is much less true for the 2nd and 3rd job. The point is, no one who hasn't worked in finance can speak the language yet, regardless of their education, so first job applications focus on other things.
2. Lol, exactly.
3. Lol, exactly.
4. Lol, exactly.
5. Lol, exactly.

On January 20 2010 17:03 Cray0ns wrote: Questions: Do you or does your firm have any thoughts on long term secular market cycles? Your comments about gold and the Yuan, although directed mostly at the specific instruments themselves, led me to believe you're not particularly concerned about US inflation as well. Is that a true statement, or do you see significant risk for inflation above expectations and just prefer other forms or rather a more diversified approach to inflation protection.

I do and my firm does. Secular themes I'm bullish on include the expansion of financial instruments to more of the world's poor (mobile banking, microlending, etc, insurance, etc), the rescrambling of global shipping to account for more end-markets, and the biggie, globalization (but not decoupling, really). I use these opinions to inform my search for stocks, but at the end of the day I'm still looking for cash flows and assets on the cheap whether the stocks are exposed to a theme I like or not.

I think macro economists and fixed income investors can predict inflation better than I can, so I trust that the market prices are more accurate than my opinion. My gut tells me that inflation will be more of a problem in this decade than in the last, but my gut isn't worth much. I do prefer TIPS (which generate cash flow) or commodities that have productive economic use (oil) as inflation hedges relative to gold which I see as largely speculative. We invest in currencies to hedge out the FOREX risk inherent in overseas investing, but I do not think speculating on them is a good idea for reasons I outlined earlier.

On January 20 2010 17:03 Cray0ns wrote: Most pro sports bettors will tell you it's not about picking winners. It's about line-shopping, arbs, etc, etc. How do you feel about a fund manager that claims to be a pure bottom up stock picker?

This is what I try to do, so I can't be too negative. FWIW, arb spreads are hard to find, disappear in a second, and are razor thin in finance. I think the managers who do genuine arb for their clients are offering a better service than I am in theory, but usually they can't do enough of it and charge too much to do it.

I think bottom up stock picking is a genuine way to beat the market. There are simply too many stocks in this world, and too few financial professionals or qualified amateurs to accurately price everything. I think a lot of bottom-up guys live off of variance around a positive mean, and they're not providing a valuable service obviously; but given that I still find a stock or two every month that I can demonstrate mathematically is a cheaper way to buy asset x or annuity y even accounting for scenarios a,b,c,d, & e, I can attest to the market not being efficient in the least at the fringes.

On January 20 2010 17:03 Cray0ns wrote: I may be putting these words in your mouth because you haven't said it explicitly, but I get the sense from your responses that you keep showing how you know more about a subject and yet feel you're not qualified to make a prediction so why would someone who knows less think they can do so.

this is a pretty good way to describe how I feel. I encourage everybody to be very cynical about their own abilities to predict things (as well as those of their friends and experts).

On January 20 2010 17:41 Sicks Macks wrote: Show nested quote + On January 20 2010 17:03 Cray0ns wrote: Most pro sports bettors will tell you it's not about picking winners. It's about line-shopping, arbs, etc, etc. How do you feel about a fund manager that claims to be a pure bottom up stock picker? This is what I try to do, so I can't be too negative. FWIW, arb spreads are hard to find, disappear in a second, and are razor thin in finance. I think the managers who do genuine arb for their clients are offering a better service than I am in theory, but usually they can't do enough of it and charge too much to do it. I think bottom up stock picking is a genuine way to beat the market. There are simply too many stocks in this world, and too few financial professionals or qualified amateurs to accurately price everything. I think a lot of bottom-up guys live off of variance around a positive mean, and they're not providing a valuable service obviously; but given that I still find a stock or two every month that I can demonstrate mathematically is a cheaper way to buy asset x or annuity y even accounting for scenarios a,b,c,d, & e, I can attest to the market not being efficient in the least at the fringes.

Sorry for all the on the fly edits. Thank you for your responses.

My former position left me with the pleasure of interviewing fund managers. Some clearly knew what they were doing and could articulate why while others were clearly milking a random heater for all they could - hell sometimes the out-performance was all beta FCS. The phrasing of my question was a little harsh in its tone, but I like to hear a stock-pickers answer to it.

On January 20 2010 15:11 Sicks Macks wrote: Show nested quote + On January 20 2010 11:20 DvoBoardRider wrote: Sicks Macks, you think the US markets will go up any further this year? I'd say yes, only because the median year in equity investing has a positive return (and should be expected to), beyond that I don't have a valuable opinion, and I wouldn't think I could until I had done a lot of research on a majority of the market capitalization of the US.

ok thanks. i really appreciate you making this thread. i wish we could get a savvy technical analysis guy to get on board here too! that'd be nice.

i'm thinking about opening a US broker account since you can short sell the markets there. i can't do that in our local market here cos it's against the rules. and nothing is happening at the moment.

what do you think of http://www.lightspeed.com/ and http://www.sogotrade.com/ ? they any good? thanks.

I use lightspeed and like it a lot.
I also am all for liquidtrader.net. We've gotta get on that.

yeah, i like it too. i'm using their demo atm. still can't decide which broker to choose tho. i'm also trying to find out if lightspeed's customer support is any good. so i contact them every now and then and ask random questions. so far so good.

damn need to sleep... haven't slept for 3 days. been watching your market.

sicks macks,

what do you think what is the minimum amount you can work with when u want to start smth in the direction stocks etc.?


ty, sry for all the questions

On January 21 2010 03:37 keuner wrote: sicks macks, what do you think what is the minimum amount you can work with when u want to start smth in the direction stocks etc.? ty, sry for all the questions

I don't now what you mean by "direction stocks". As for the minimal amount needed to pick individual stocks as opposed to investing in funds, it matters how much you value your time. The incremental expected return of someone who is great at picking stocks and does it full time vs investing in an index is like 5% tops (just a guess) on an expected basis (unleveraged, market-level risk), and average returns are already 8-9%, so you can figure out the hourly EV of someone who is just starting based on how much money you're investing. Simply put, if you're doing it for the money, and you have anything else productive to do with your time, it's probably not worth it unless you have tens of millions of dollars and are very good analytically and competent with math. If it's for fun or to learn, there's no reason not to get started, just make sure you use a cheap brokerage.

sicks macks,

when do you think that my fuckin donkey will change in smth cooler?