Rolling US Economy Into The Shitbin Thread

if i wanted to buy a house in a few years i would not save it in stocks. anyway i'm going to the gym to invest in my bod now

i’m a 3-fund guy (Total market index, total intl index, total bond index—weighted heavily toward the TMI) and many Bogleheads swear by it, but I just always did bc im dumb and lazy

harbl is your gym open?? mine is not :(

Empirically doesn’t the average *hedge fund* does worse than the s&p500. These people have plenty of time to spend on this. People suck at it. In the long run *all* people suck at it.

And averaged across all investors (institutions, hedge funds, etc.) the average investor does slightly worse than than the total stock market *by definition* (this isn’t an empirical claim, it’s a statement about how averages work in the presence of trading costs).

TBF, isn't it that the average hedge fund *investor* does worse, after all the fees? I might have my stats wrong about that. Also since pretty much anyone with access to rich people's money can call their scammy bullshit a "hedge fund," the average is likely weighed down by garbage a bit. Still do not advocate trying to beat the market, just saying.

The socially responsible investing service was called SWELL.

Oh yeah if you’re a hedge fund that takes fees from outside you personally should be doing better than the market unless you’re an idiot.

The most successful hedge fund doesn’t take outside investment though IIUC (Renaissance).

actually I just meant that I think there are hedge funds that, in pure returns, beat the market on a consistent basis (although again I could be wrong). I figure they do it through legal grey-area strategies, inside information etc.

There are a few quant/hft firms that have reliable track records of finding profitable strategies and exploiting them until they are no longer profitable and repeating that trick (the repeating that trick bit is the hard bit, https://www.nytimes.com/2019/11/13/books/review/the-man-who-solved-the-market-gregory-zuckerman.html is not great, but it’s good on that bit).

They are not using techniques available to private investors though, and they have a much higher tolerance for risk than any sensible individual person should have, so their existence is not an argument for doing something other than buying an low fee index tracker.

And averaged across all investors (institutions, hedge funds, etc.) the average investor does slightly worse than than the total stock market

It definitely is a perceptual issue -- since we are talking about "averages" -- like, say, your low fee index tracker is the mean at 50% -- assumedly there are individual investors who may be at 60% as well as those who are at 40% (just for example). Some people feel like that extra 10% is something they are capable of and is worth the risk/effort. Other people (who are also very sane and reasonable and might be at the gym right now) think, you know what, I am totally fine with 50% because I don't want to potentially end up at 40% (or lower) even if I could potentially get up to 60%.

Like, I am not even talking about the arrogant and often delusional investors who are gonna be "outliers" at like the 90% percentile -- just the "I bet I can do a little bit better than the average" investor ... idk, does that make sense?

It makes sense but it assumes you have control over whether you are in the 40th or 60th percentile, and there is extremely strong evidence that none of us do.

(And in fact it’s even worse because if the stock market is the 50th percentile, the average investor is not in the 50th percentile. They’re in the 49th percentile, because trading actively isn’t free.)

pimp shit

anything can happen anytime you make a choice that is why there are statistics and data you can look at to not "feel like you are capable" of things you are not!

caek/efficient markets hypothesis otm

finding strategies that don’t work consistently or over the long run is the key thing imo. there’s a whole field called behavioral finance that finds exceptions from the EMH, but then there’s a paper that shows that the deviations go away after the papers get published. the good hedge funds are beating the market by constantly finding new anomalies and then moving on once they stop holding, it’s not like a stable strategy

however there are empirical finance papers that show that the rule ‘buy in halloween, sell in may’ beat the market like 99% of the time in every country and decade in the last 200 years. so who knows

A question for y'all: for those of you who are vehemently anti-capitalist, progressive leftists, fuck Joe Biden and the Democratic Party -- do you feel awkward or any sense of conflict about having your money invested in some Vanguard-type managed fund?

not really, i'm forced to either save or spend money. i don't have a lot of money, i'm not a hedge fund that can control what these corporations do. if i put it in a savings account the bank is going to decide where to put it and take all the gains.

I know people say this (if by "maximize" you mean some version of "end up with the most money") but I have never seen any convincing evidence for it, and people have very motivated-cognition reasons for saying it. For a managed fund to be worth the fees, the manager has to be able to beat the market by a lot, and the evidence is sporadic at best that you can identify people who are going to beat it even by a little.

“ A question for y'all: for those of you who are vehemently anti-capitalist, progressive leftists, fuck Joe Biden and the Democratic Party -- do you feel awkward or any sense of conflict about having your money invested in some Vanguard-type managed fund?”

Absolutely. My participation is based on lack of a safety net that will support me as a self employed person in my old age. That guy who said in 08 or whatever that it’s stupid to not dance as long as the music is playing was basically right.

participation based on quotes from The Joker

FWIW, I have been actively avoiding the stock market and equity funds for decades now for ethical reasons. Simply participating in the system feels like too great a leap to do without turning my stomach.

That all said, I'm eying fifty from across the room and starting to wonder if I need to make the leap, perhaps with an ethical fund? I've been courted by Green Century for years, maybe after I read up on their vetting further.

just want to mention that given the topic of this thread and the current state of affairs all this fund talk feels like whistling past the graveyard

I mean that's the other thing to bear in mind! When would one choose to buy into this shitshow? Presumably post-MAGACOVID.

don’t try and time the market if you’re investing for the long term. slow and steady wins the race

yah, post-MAGA life suggest that the monopoly cast of rapacious dingleberries will be somewhat less performatively gluttonous and past experience suggests that leads to an indefinite bear market?

i don't wanna win the race, i want working parks departments and functioning infrastructure!

read taht as 'raspberry dingleberries' at first

available at nuts.com

This IS the time to think about it because it's so weird. The market is absurdly high and reality-proof at the moment, unless we're all just admitting the actual financial health of the world doesn't matter to the stock market. My parents watch CNBC every day, so I'm always seeing the reactions of the investor class. (As long as our portfolios are okay, nothing else matters, cue Metallica)

Every week I wonder if I should cut my 403b contributions or not...

i think we already admitted the financial and physical health of the world doesn't matter to the stock market, right? thought that was the one generally undisputed economic lesson of covid.

Needs to be shouted from the rooftops

assume the stock market is continuing on its merry way because investors’ view is that many firms fundamentals were sound pre-pandemic, the extraordinary government support pumped into the economy will pick up some of the interim slack, and the recovery will be fairly fast and robust. you can quibble with all three of those hypotheses but assume that’s what’s driving the rally... either that or irrational exuberance I suppose

the actual financial health of the world doesn't matter to the stock market.

The financial health of part of the world matters to the stock market, and that part is doing fine. That's what it tracks and that's what it's meant to track. Of course there comes a point where aggregate misery drags down even the comfortable, but trickle-up is only modestly more effective than trickle-down.

xp i've been chalking it up to inertia, terror and greed myself but i think we're saying the same thing.

Keep having visions of Dennis Hopper in his penthouse tower in Land of the Dead

I chalk it up to the fact that switching to a low-risk, defensive strategy or moving into a cash position looks riskier to their job security for the fund managers than plunging into the market and looking for big gains, because their clients actively demand maximum gains and if the market doesn't retreat they look incompetent to deliver that asset growth for clients, but if it crashes it will take down every fund hard and they can claim that they did no worse than anyone else.

Keep having visions of Dennis Hopper in his penthouse tower in Land of the Dead

― Nhex, Wednesday, August 19, 2020 9:14 AM (two hours ago)

hahahahah !!!!

yo I literally just started my 1st 401K at age 54, no I have zero guilt and yes I am pursuing an "aggressive" investment strategy, once I have some real money in there I may reconsider

also fuck Trump, etc. and I will happily take a hit for the greater good

FWIW, I have been actively avoiding the stock market and equity funds for decades now for ethical reasons. Simply participating in the system feels like too great a leap to do without turning my stomach.

That all said, I'm eying fifty from across the room and starting to wonder if I need to make the leap, perhaps with an ethical fund? I've been courted by Green Century for years, maybe after I read up on their vetting further.

― Fuck the NRA (ulysses), Wednesday, August 19, 2020 10:54 AM (yesterday) bookmarkflaglink

sorry but there are no ethical reasons not to buy some bonds and broad index funds, only innumeracy. if you think making yourself poorer is ethical there are much faster ways to do it

just want to mention that given the topic of this thread and the current state of affairs all this fund talk feels like whistling past the graveyard

― sound of scampo talk to me (El Tomboto), Wednesday, August 19, 2020 11:18 AM (yesterday) bookmarkflaglink

people thought this throughout the 20th century, during which those who passively invested a small share of their income made a killing

here's a useful calculation by brad delong:

If you had taken 1 in real value, invested it in the stock market in January 1871, reinvested the dividends, and paid no taxes, you would have 16,000 today. Such are the returns to patience, risk-bearing, diversification, and capital ownership in the extraordinary economic boom that was the extended American century.

note the dates. that's averaging over 2 world wars and the great depression

investing on a 150 year timeline is much easier (and lower risk) than investing on a 15 year horizon, which is what those of us in middle age are trying to do.

not me i'm retiring in 2130

Its also worth pointing out there was almost no avocado toast in 1871

caek you really think forks should just... what, put money in a savings account?

no but i don't think a 16000x return over the past 150 years is relevant to what he should do

unless you feel strongly and/or have enough time on your hands to eke out a a few basis points in fees then buying the vanguard target date fund for when you want to retire is a good option. but "we recovered from the great depression" doesn't mean it's guaranteed to work on short timescales.

https://delong.typepad.com/.a/6a00e551f08003883401bb09acd0ce970d-pi

(green is treasury bonds, red is s&p)

i don't see many 15 year periods where you'd come out negative. of course you need some flexibility about when to withdraw, but unless you're planning on withdrawing it all in one day in 15 years, that's fine

i believe caek is all about that red curve and not the single stocks or managed funds with fees

mama she told me don't worry about your size

xp i am too about the red curve

i personally don't think another great depression is possible because we know how monetary policy works now, the great recession is probably an upper bound on how bad things can get off of pure financials

i haven't dug into the details of this and my basic point is not "don't invest in stocks" but more "you need to think differently about investing the money you need to live on in retirement in 15 years to how you would invest a single dollar for 150 years".

but simplifications like "withdrawing it all on one day" notwithstanding, losing money happens:

https://github.com/zonination/investing

https://raw.githubusercontent.com/zonination/investing/master/returns-40yr.png

"Down after 15 years (4.73% chance historically): 1905 1906 1907 1929 1964 1965 1966 1967 1968 1969"

https://raw.githubusercontent.com/zonination/investing/master/snippets/short-probability.png

nice. yeah i agree with your general pt

4% chance you catch that 8 multiplier hoo boy