“It’s GOING TO BE a stock pickers market”
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“It’s GOING TO BE a stock pickers market”
I have heard this at least a dozen times on CNBC over the last two weeks. Guests coming on and saying the usual “buy the indexes” won’t work for the coming new inflationary world. None of them ever explain why but it got me questioning why it would be any different. Any guesses besides just trying to sell their services?
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Re: “It’s GOING TO BE a stock pickers market”
Trying to sell news...
- arcticpineapplecorp.
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Re: “It’s GOING TO BE a stock pickers market”
If they didn't convince you why keep watching cnbc? If they didn't explain it's either because they don't really know or want you to buy their services. Either way you're better off turning the tv off.Lucky2Invest wrote: ↑Sat Oct 23, 2021 9:03 pm I have heard this at least a dozen times on CNBC over the last two weeks. Guests coming on and saying the usual “buy the indexes” won’t work for the coming new inflationary world. None of them ever explain why but it got me questioning why it would be any different. Any guesses besides just trying to sell their services?
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions |
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Re: “It’s GOING TO BE a stock pickers market”
Logically flawed thinking. If markets have flat to low return, index investing won't give profits, so we have to do something else right? Stock picking! By picking stocks, we can avoid the low returns plaguing indexes!
Except the same problem with picking stocks in bull markets is equally true in flat markets. Nobody has ever shown consistent skill at beating the market. If markets are flat, stock picking will be flat too - but with a lot more risk. Diversification eliminates this risk and the standard deviation of outcomes is reduced.
Except the same problem with picking stocks in bull markets is equally true in flat markets. Nobody has ever shown consistent skill at beating the market. If markets are flat, stock picking will be flat too - but with a lot more risk. Diversification eliminates this risk and the standard deviation of outcomes is reduced.
Re: “It’s GOING TO BE a stock pickers market”
IMO, you are being too lenient. I say they are inventing the news.
Re: “It’s GOING TO BE a stock pickers market”
John Bogel should have had his own channel. 24x7, just saying "stock picking doesn't work. Buy an index".
There would be no advertising.....
And it would probably go out of business in about 15 minutes, because it would be so boring. Our simple lizard brains can't focus on something like that.....
For people that are missing their trips to the casino, it's a stock pickers market....
CNBC "Warren Buffett" is the richest guy in the world, and he didn't do it buying index funds!"
There would be no advertising.....
And it would probably go out of business in about 15 minutes, because it would be so boring. Our simple lizard brains can't focus on something like that.....
For people that are missing their trips to the casino, it's a stock pickers market....
CNBC "Warren Buffett" is the richest guy in the world, and he didn't do it buying index funds!"
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Re: “It’s GOING TO BE a stock pickers market”
If you believe that then consider that "stock pickers" like to pick up cheap bargains right? After all, a stock picker isn't looking to spend top dollar on overpriced assets right? Buy some value indexes and let's see what happens.
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Re: “It’s GOING TO BE a stock pickers market”
It's a stock pickers market if you are a member of the Congress or part of some legal group that benefits from insider-ish information.
Many members there make Warren Buffett look like a straight out amateur in the field of investing (in terms of raw % returns). Some of those Congress members even had years with 3 digit percentile gains in the past.
Other than that, unless you figure out pump and dumps before everyone else (or you are the influencer doing the pump and dump), I don't see how it's a stock picker's market.
There's also sentiment trading. It seems with massive amount of retail FOMO-ing to 'meme stocks' nowadays, those who get in early and get out quick can make money (basically timing the pump and dump before millions of other retails joins in). And I wouldn't be surprised if some of them are good at doing such.
If you are just a regular American, then oh well. Unfortunately, I just have to accept the truth that I am neither a member of Congress nor an influencer who can create pump and dumps.
Plus, it's always more entertaining to hear 'you can win big!' than 'just accept wealth is built slowly'.
That said, with so much retail creating pump and dumps (especially in the 'crypto' markets), I do believe high end trading firms are having outsized returns this year. Just comes to show markets are not efficient. High end trading firms are enjoying this wave of teenagers throwing money at random stuffs and profiting off the spreads.
Markets are only as efficient as the competence of active pickers. With many retail who have no understanding of markets throwing money everywhere, it is a stock picker's market for top professionals in high frequency trading.
Many members there make Warren Buffett look like a straight out amateur in the field of investing (in terms of raw % returns). Some of those Congress members even had years with 3 digit percentile gains in the past.
Other than that, unless you figure out pump and dumps before everyone else (or you are the influencer doing the pump and dump), I don't see how it's a stock picker's market.
There's also sentiment trading. It seems with massive amount of retail FOMO-ing to 'meme stocks' nowadays, those who get in early and get out quick can make money (basically timing the pump and dump before millions of other retails joins in). And I wouldn't be surprised if some of them are good at doing such.
If you are just a regular American, then oh well. Unfortunately, I just have to accept the truth that I am neither a member of Congress nor an influencer who can create pump and dumps.
Plus, it's always more entertaining to hear 'you can win big!' than 'just accept wealth is built slowly'.
That said, with so much retail creating pump and dumps (especially in the 'crypto' markets), I do believe high end trading firms are having outsized returns this year. Just comes to show markets are not efficient. High end trading firms are enjoying this wave of teenagers throwing money at random stuffs and profiting off the spreads.
Markets are only as efficient as the competence of active pickers. With many retail who have no understanding of markets throwing money everywhere, it is a stock picker's market for top professionals in high frequency trading.
Re: “It’s GOING TO BE a stock pickers market”
It's going to be a stock pickers market because you will need to pick well if you want to get a positive absolute return. There is still the risk of underperforming the index, but if the index is returning less, might your willingness to reach for returns increase?
Let's say stock indices start moving sideways or downwards with high volatility for a few years. Don't you think we'd see some investors - even people here - reach for absolute returns via active management of various kinds?
Think about all the posts here and on FIRE boards assuming stock returns will be within historical norms.....
Think all those folks are going to be 'just fine' with significantly lower returns?
Let's say stock indices start moving sideways or downwards with high volatility for a few years. Don't you think we'd see some investors - even people here - reach for absolute returns via active management of various kinds?
Think about all the posts here and on FIRE boards assuming stock returns will be within historical norms.....
Think all those folks are going to be 'just fine' with significantly lower returns?
Re: “It’s GOING TO BE a stock pickers market”
sadly, you are probably right. People should know better by now.....000 wrote: ↑Sat Oct 23, 2021 10:17 pm It's going to be a stock pickers market because you will need to pick well if you want to get a positive absolute return. There is still the risk of underperforming the index, but if the index is returning less, might your willingness to reach for returns increase?
Let's say stock indices start moving sideways or downwards with high volatility for a few years. Don't you think we'd see some investors - even people here - reach for absolute returns via active management of various kinds?
Think about all the posts here and on FIRE boards assuming stock returns will be within historical norms.....
Think all those folks are going to be 'just fine' with significantly lower returns?
- William Million
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Re: “It’s GOING TO BE a stock pickers market”
It's always a stock pickers market. Only thing we don't know is which stock pickers.
Re: “It’s GOING TO BE a stock pickers market”
There seems to be a strong pull towards absolute return seeking behavior (as opposed to risk-adjusted return) which tragically leads some investors to increase risk when expected returns are lowest, in other words at the worst possible time.
Examples include even fairly tame activity like investing in an individual corporate bond. How many bogleheads would do that if CDs were returning 5%?
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Re: “It’s GOING TO BE a stock pickers market”
arcticpineapplecorp. wrote: ↑Sat Oct 23, 2021 9:14 pmIf they didn't convince you why keep watching cnbc? If they didn't explain it's either because they don't really know or want you to buy their services. Either way you're better off turning the tv off.Lucky2Invest wrote: ↑Sat Oct 23, 2021 9:03 pm I have heard this at least a dozen times on CNBC over the last two weeks. Guests coming on and saying the usual “buy the indexes” won’t work for the coming new inflationary world. None of them ever explain why but it got me questioning why it would be any different. Any guesses besides just trying to sell their services?
The Sensible Steward
Re: “It’s GOING TO BE a stock pickers market”
It is going to be a pick the stock pickers market.
A fool and his money are good for business.
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Re: “It’s GOING TO BE a stock pickers market”
You have to be careful to distinguish information vs. disinformation. That includes "hanging out" at a media site, a social media site, a television channel, a group of co-workers, a group of friends, etc... . If you continue to hear a steady flow of the same types of information or the same types of disinformation, it can influence you. There certainly is no shortage of focus on "picking stocks" on CNBC to put it mildly. Is that the correct information for you, or is it misinformation when you consider building a portfolio to last and meet all of your family's goals?Lucky2Invest wrote: ↑Sat Oct 23, 2021 9:03 pm I have heard this at least a dozen times on CNBC over the last two weeks. Guests coming on and saying the usual “buy the indexes” won’t work for the coming new inflationary world. None of them ever explain why but it got me questioning why it would be any different. Any guesses besides just trying to sell their services?
Since you brought up CNBC, let's take a look at what one of that network's reporters has to say about John Bogle and index investing. Bob Pisani, who is an index fund investor and Bogle disciple himself and has been so since the early 1990's, wrote this article for CNBC in 2019 a few days after Bogle passed away:
Why Jack Bogle mattered so much to the investing world
https://www.cnbc.com/2019/01/17/why-jac ... world.html
In particular watch the 2nd video where Bogle was interviewed by Tyler Mathisen and Bill Griffith. When asked about "stock pickers market" at about the 2:16 minute mark of that video, Bogle talks about there being no such thing as a "stock pickers market"...
https://www.cnbc.com/video/2019/01/17/t ... years.html
CyclingDuo
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Re: “It’s GOING TO BE a stock pickers market”
Last I checked, reasonable inflation increases are favorable for companies because they borrow and can adjust prices for inflation. Indexes do work because most companies do this.Lucky2Invest wrote: ↑Sat Oct 23, 2021 9:03 pm I have heard this at least a dozen times on CNBC over the last two weeks. Guests coming on and saying the usual “buy the indexes” won’t work for the coming new inflationary world. None of them ever explain why but it got me questioning why it would be any different. Any guesses besides just trying to sell their services?
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
Re: “It’s GOING TO BE a stock pickers market”
I would suggest that you not watch CNBC.Lucky2Invest wrote: ↑Sat Oct 23, 2021 9:03 pm I have heard this at least a dozen times on CNBC over the last two weeks. Guests coming on and saying the usual “buy the indexes” won’t work for the coming new inflationary world. None of them ever explain why but it got me questioning why it would be any different. Any guesses besides just trying to sell their services?
Re: “It’s GOING TO BE a stock pickers market”
They succeeded...
This isn't just my wallet. It's an organizer, a memory and an old friend.
Re: “It’s GOING TO BE a stock pickers market”
You won't get much support for individual stocks other than as a diversion with a very small proportion of assets. We do invest, most here would call it speculation, on a few here and there. We are in RMD stage, have a portfolio pretty much on automatic but get bored, so to "invest" small amounts is an antidote for the urge to make more significant moves for unsustainable reasons.
Tim
Tim
Re: “It’s GOING TO BE a stock pickers market”
News porn.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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Re: “It’s GOING TO BE a stock pickers market”
Getting your financial advice from CNBC is like getting your news from MSNBC: You're bound to be woefully misinformed.
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Re: “It’s GOING TO BE a stock pickers market”
No, it doesn't actually mean anything at all.
It's just something that sounds plausible.
There is no sound financial theory about "stock pickers' markets" versus "not stock pickers' markets."
There are no proven rules about when to index and when to be active.
"It's going to be a stock pickers' market" probably means "we've actually been underperforming, so here is a pseudo-reason we can give for believing we are going to start outperforming any day now."
It's sometimes asserted that active management can provide downside protection in bear markets, and people who pick stocks for clients like to point out (correctly but misleadingly) that when the stock market is going down you can always find individual stocks within it that have gone up. It's a myth that's been debunked many times, e.g. here.
The slogan around here is "tune out the noise," and really it's one of the most important things you can do.
By the way, pay attention to pithy bits of advice and wisdom and you will soon discover that there are a score of sayings that sound wise that are mutually contradictory.
If the market is up and the advice is to sell:
"Buy low, sell high."
"Nobody ever went broke taking a profit."
"Mean reversion."
"What goes up must come down."
If the market is up and the advice is to buy:
"The trend is your friend."
"Cut your losses and let your profits run."
"Momentum."
"You're playing with house money now."
If the market is down and the advice is to sell:
"Don't try to catch a falling knife.
"Cut your losses and let your profits run."
"Never fight the dominant trend of the market."
If the market is down and the advice is to buy:
"Buy low, sell high."
"Mean reversion."
"Stocks are on sale."
"Valuations are favorable."
It's just something that sounds plausible.
There is no sound financial theory about "stock pickers' markets" versus "not stock pickers' markets."
There are no proven rules about when to index and when to be active.
"It's going to be a stock pickers' market" probably means "we've actually been underperforming, so here is a pseudo-reason we can give for believing we are going to start outperforming any day now."
It's sometimes asserted that active management can provide downside protection in bear markets, and people who pick stocks for clients like to point out (correctly but misleadingly) that when the stock market is going down you can always find individual stocks within it that have gone up. It's a myth that's been debunked many times, e.g. here.
The slogan around here is "tune out the noise," and really it's one of the most important things you can do.
By the way, pay attention to pithy bits of advice and wisdom and you will soon discover that there are a score of sayings that sound wise that are mutually contradictory.
If the market is up and the advice is to sell:
"Buy low, sell high."
"Nobody ever went broke taking a profit."
"Mean reversion."
"What goes up must come down."
If the market is up and the advice is to buy:
"The trend is your friend."
"Cut your losses and let your profits run."
"Momentum."
"You're playing with house money now."
If the market is down and the advice is to sell:
"Don't try to catch a falling knife.
"Cut your losses and let your profits run."
"Never fight the dominant trend of the market."
If the market is down and the advice is to buy:
"Buy low, sell high."
"Mean reversion."
"Stocks are on sale."
"Valuations are favorable."
Last edited by nisiprius on Sun Oct 24, 2021 12:13 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: “It’s GOING TO BE a stock pickers market”
If index funds start returning 3% a year, then 75% of active funds will probably return 2% a year or less (But, don't worry, the fund managers will still get paid).000 wrote: ↑Sat Oct 23, 2021 10:17 pm It's going to be a stock pickers market because you will need to pick well if you want to get a positive absolute return. There is still the risk of underperforming the index, but if the index is returning less, might your willingness to reach for returns increase?
Let's say stock indices start moving sideways or downwards with high volatility for a few years. Don't you think we'd see some investors - even people here - reach for absolute returns via active management of various kinds?
Think about all the posts here and on FIRE boards assuming stock returns will be within historical norms.....
Think all those folks are going to be 'just fine' with significantly lower returns?
Going active, so far, doesn't work, not in bull markets and not in bear markets.
Last edited by HomerJ on Sun Oct 24, 2021 12:21 pm, edited 2 times in total.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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Re: “It’s GOING TO BE a stock pickers market”
That's why I continue to index, except for my 10% play money !William Million wrote: ↑Sat Oct 23, 2021 10:31 pm It's always a stock pickers market. Only thing we don't know is which stock pickers.
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Re: “It’s GOING TO BE a stock pickers market”
The financial press is financed largely by advertisers most of which profit from the uninformed and encourage people to trade in and out of the market and maybe buy their financial products.nisiprius wrote: ↑Sun Oct 24, 2021 12:09 pm No, it doesn't actually mean anything at all.
It's just something that sounds plausible.
There is no sound financial theory about "stock pickers' markets" versus "not stock pickers' markets."
There are no proven rules about when to index and when to be active.
"It's going to be a stock pickers' market" probably means "we've actually been underperforming, so here is a pseudo-reason we can give for believing we are going to start outperforming any day now."
It's sometimes asserted that active management can provide downside protection in bear markets, and people who pick stocks for clients like to point out (correctly but misleadingly) that when the stock market is going down you can always find individual stocks within it that have gone up. It's a myth that's been debunked many times, e.g. here.
The slogan around here is "tune out the noise," and really it's one of the most important things you can do.
By the way, pay attention to pithy bits of advice and wisdom and you will soon discover that there are a score of sayings that sound wise that are mutually contradictory.
If the market is up and the advice is to sell:
"Buy low, sell high."
"Nobody ever went broke taking a profit."
"Mean reversion."
"What goes up must come down."
If the market is up and the advice is to buy:
"The trend is your friend."
"Cut your losses and let your profits run."
"Momentum."
"You're playing with house money now."
If the market is down and the advice is to sell:
"Don't try to catch a falling knife.
"Cut your losses and let your profits run."
"Never fight the dominant trend of the market."
If the market is down and the advice is to buy:
"Buy low, sell high."
"Mean reversion."
"Stocks are on sale."
"Valuations are favorable."
The key is to buy low cost broad based index funds and hold for the long term, but that doesn't generate a whole lot of profits for active fund managers...
Re: “It’s GOING TO BE a stock pickers market”
"None of them ever explain why"Lucky2Invest wrote: ↑Sat Oct 23, 2021 9:03 pm I have heard this at least a dozen times on CNBC over the last two weeks. Guests coming on and saying the usual “buy the indexes” won’t work for the coming new inflationary world. None of them ever explain why but it got me questioning why it would be any different. Any guesses besides just trying to sell their services?
This is the big red flag! When someone cannot explain why or how regarding the statement they said, you should not take their advice.
Law of Logical Argument: "Anything is possible if you don't know what you are talking about."
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Re: “It’s GOING TO BE a stock pickers market”
Not necessarily true.
If more and more retail participate in the stock market, we should expect more active funds to outperform.
Look at China.
70% of active fund managers in Chinese A share market in China outperformed the index benchmark there over a ten year period because of heavy retail participation in certain time frames.
Fortunately, US Markets are nowhere near that inefficient. But with such heavy retail participation especially from teenagers and some twenty year olds due to Robinhood, WeBull, Tiktok, Facebook, r/wallstreetbets, etc., top end professionals should be enjoying outsized returns currently.
The top end like Ren Tech, HRT, Jane Street, Optiver, Citadel, etc. should all be enjoying this 'stock pickers market'.
(those firms aren't "mutual fund managers" but those institutions should be very good profiting off pump and dumps from retails)
Unfortunately for us, we are just lambs in the market for the top end firms to reap profits off of.
But do understand the more retail participates in the markets, the easier top end professionals will have beating the market.
Anyways, latest SPIVA numbers seems to imply this too: https://www.spglobal.com/spdji/en/docum ... r-2021.pdf
First of all, the best and brightest of Wall Street don't work at mutual funds anymore. Instead, the best work at high frequency trading firms which is very good at profiting off retail pump and dumps unlike traditional mutual funds. I would argue mediocre talent in Wall Street goes off to the mutual fund space so I am surprised with the numbers.
Even in the mutual fund space, the percentages for the 1 and 3 year mark of 'equity funds underperforming their benchmarks' is quite abnormal (relative to the past).
Last edited by fwellimort on Sun Oct 24, 2021 12:39 pm, edited 4 times in total.
Re: “It’s GOING TO BE a stock pickers market”
Lies and propaganda have always existed throughout history, but the level and constant bombardment in today's age is unprecedented.
Just yesterday the founder of Twitter, sends out a tweet claiming the US is about to experience "hyperinflation". That's classified as 50%/ month for those who care about the definition of words.
Just yesterday the founder of Twitter, sends out a tweet claiming the US is about to experience "hyperinflation". That's classified as 50%/ month for those who care about the definition of words.
Re: “It’s GOING TO BE a stock pickers market”
You are 100% correct. And I’m indexing as well.
It’s just that CNBC wouldn’t showcase or strongly encourage that advice from WB.
Re: “It’s GOING TO BE a stock pickers market”
A friend of mine has run a hedge fund since the 80's. I can't tell you how many times a year I hear "It is stock pickers market" from him.
Dave
Dave
"Reality always wins, your only job is to get in touch with it." Wilfred Bion
Re: “It’s GOING TO BE a stock pickers market”
Absolutely true (well, I'm not sure if 75% is the EXACT number).
But, note the "so far". I was talking about the past.
Sure, maybe somehow the future will be different.
But the reason we invest in index funds is because active funds, in the past, in BOTH bear and bull markets, in high inflation years and low inflation years, did not, on average, beat the market.
Fees are a big part of that of course. And I don't see fees going away. Those guys and gals don't become billionaires investing their OWN money.
And like you said, the smart ones in Wall Street go to the HFT firms. And we don't get to invest in those. THOSE guys actually do make their millions investing their own money.
Last edited by HomerJ on Sun Oct 24, 2021 1:50 pm, edited 1 time in total.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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Re: “It’s GOING TO BE a stock pickers market”
What those so-called experts mean is that stock prices are a bit high, and so you have to be more selective in picking your investments. Unless you’re a whiz at picking stocks, these pronouncements are irrelevant to most retail investors. They said that at the end of 2020 too, but the S and P index is still up 21% for 2021. Good enough for me.
Re: “It’s GOING TO BE a stock pickers market”
So none of these unidentified guests, over a two-week period, ever explained why they thought indexes won't work in an inflationary world or why it's going to be a stock pickers' market, and CNBC interviewers never asked them for their reasons?Lucky2Invest wrote: ↑Sat Oct 23, 2021 9:03 pm I have heard this at least a dozen times on CNBC over the last two weeks. Guests coming on and saying the usual “buy the indexes” won’t work for the coming new inflationary world. None of them ever explain why but it got me questioning why it would be any different. Any guesses besides just trying to sell their services?
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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Re: “It’s GOING TO BE a stock pickers market”
Really, the root problem is understanding that investor have different goals and risk situations.nisiprius wrote: ↑Sun Oct 24, 2021 12:09 pm No, it doesn't actually mean anything at all.
It's just something that sounds plausible.
There is no sound financial theory about "stock pickers' markets" versus "not stock pickers' markets."
There are no proven rules about when to index and when to be active.
"It's going to be a stock pickers' market" probably means "we've actually been underperforming, so here is a pseudo-reason we can give for believing we are going to start outperforming any day now."
It's sometimes asserted that active management can provide downside protection in bear markets, and people who pick stocks for clients like to point out (correctly but misleadingly) that when the stock market is going down you can always find individual stocks within it that have gone up. It's a myth that's been debunked many times, e.g. here.
The slogan around here is "tune out the noise," and really it's one of the most important things you can do.
By the way, pay attention to pithy bits of advice and wisdom and you will soon discover that there are a score of sayings that sound wise that are mutually contradictory.
If the market is up and the advice is to sell:
"Buy low, sell high."
"Nobody ever went broke taking a profit."
"Mean reversion."
"What goes up must come down."
If the market is up and the advice is to buy:
"The trend is your friend."
"Cut your losses and let your profits run."
"Momentum."
"You're playing with house money now."
If the market is down and the advice is to sell:
"Don't try to catch a falling knife.
"Cut your losses and let your profits run."
"Never fight the dominant trend of the market."
If the market is down and the advice is to buy:
"Buy low, sell high."
"Mean reversion."
"Stocks are on sale."
"Valuations are favorable."
As a note, doing both first and third is the same as taking less risk, second and fourth for more risk, first and fourth for concavity, and second and third for convexity.
If the market is a proxy of one's job results, then it can be reasonable to stay below average with risk as their pay is often higher but dependent on the markets. Those who want to take more risk usually adhere to momentum (second and third sets) because their job is more stable as the market is doing well (hence more risk can be afforded) and not stable when it is doing poorly (and less risk can be afforded). The hope is taking the risk to be far ahead of schedule since it pairs up with their job; after all, they are hoping for wealth taking risk in their job and stocks. However, the last thing to do is "buy low" when their job is in a dire situation and they lack the stuffing to handle major losses and a drop in income (as that could place them far behind schedule). This is one reason that such individuals elect for generous baselines of fixed income rather than pulling from these reserves to buy stock or rebalance, since the job is not a buffer of their finances.
The truly risky investors are those carrying really high stock allocations and a market driven job; they will be rich or broke.
If one's job is very stable, then it is reasonable to stay above average with risk; those with stable jobs are often not getting paid as much however. Those who want to take a little less risk usually adhere to mean reversion (first and fourth sets). To meet goals, it very often requires that they take more risk at the point of a major dip (since the lesser but stable income and portfolio size puts them a little behind schedule during bad times, and catching up is optimal). During good times is the only point where taking less risk is affordable to their goals (since good times are placing them ahead of schedule). Such investor's have their job as a buffer and only hold fixed income as needed to manage risk to their liking.
The truly conservative investors carry low stock allocations and a very stable job; they will never be rich but not dirt poor (hopefully).
Regardless, it has to be dependent on realism of the portfolio and personal situations; and not the news.
In short, goals drive which advice to take.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
Re: “It’s GOING TO BE a stock pickers market”
I think you missed my point....HomerJ wrote: ↑Sun Oct 24, 2021 12:13 pmIf index funds start returning 3% a year, then 75% of active funds will probably return 2% a year or less (But, don't worry, the fund managers will still get paid).000 wrote: ↑Sat Oct 23, 2021 10:17 pm It's going to be a stock pickers market because you will need to pick well if you want to get a positive absolute return. There is still the risk of underperforming the index, but if the index is returning less, might your willingness to reach for returns increase?
Let's say stock indices start moving sideways or downwards with high volatility for a few years. Don't you think we'd see some investors - even people here - reach for absolute returns via active management of various kinds?
Think about all the posts here and on FIRE boards assuming stock returns will be within historical norms.....
Think all those folks are going to be 'just fine' with significantly lower returns?
Going active, so far, doesn't work, not in bull markets and not in bear markets.
If index funds start returning -1% a year some investors will increase risk to have the chance of a positive return. The worse the average returns get, the higher the proportion of investors increasing risk will become. Do you think the people on this forum predicting the continuation of robust historic returns ad infinitum are going to just sit back and watch a sideways market?
There's even one poster here who said if indices stopped returning so much he'd move on to whatever the hot asset class was.
Re: “It’s GOING TO BE a stock pickers market”
Notice how they left out that little tibbit.
Re: “It’s GOING TO BE a stock pickers market”
Some stock pickers probably will beat the market. But by definition the traders on the other side of those trades won't beat the market. The fact that financial talking heads keep repeating this logical fallacy is a testament to how worthless the advice most of the industry gives.
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Re: “It’s GOING TO BE a stock pickers market”
You are talking about taking positive risk skew. Yes, the longer the disappointing returns are (and further behind schedule the goal is), the more optimal it can be to take positive risk skew (supposing that some minimal goal is still on track). Increasing volatility considerably while a minimal goal is being met (but not obtained) is the wrong thing to do since you might not make either the lesser or higher goal.000 wrote: ↑Sun Oct 24, 2021 2:45 pmI think you missed my point....HomerJ wrote: ↑Sun Oct 24, 2021 12:13 pmIf index funds start returning 3% a year, then 75% of active funds will probably return 2% a year or less (But, don't worry, the fund managers will still get paid).000 wrote: ↑Sat Oct 23, 2021 10:17 pm It's going to be a stock pickers market because you will need to pick well if you want to get a positive absolute return. There is still the risk of underperforming the index, but if the index is returning less, might your willingness to reach for returns increase?
Let's say stock indices start moving sideways or downwards with high volatility for a few years. Don't you think we'd see some investors - even people here - reach for absolute returns via active management of various kinds?
Think about all the posts here and on FIRE boards assuming stock returns will be within historical norms.....
Think all those folks are going to be 'just fine' with significantly lower returns?
Going active, so far, doesn't work, not in bull markets and not in bear markets.
If index funds start returning -1% a year some investors will increase risk to have the chance of a positive return. The worse the average returns get, the higher the proportion of investors increasing risk will become. Do you think the people on this forum predicting the continuation of robust historic returns ad infinitum are going to just sit back and watch a sideways market?
There's even one poster here who said if indices stopped returning so much he'd move on to whatever the hot asset class was.
Those who are in the "do or fail" state have to take the long shot (both skew and volatility) and acknowledge they will likely have to take government support unless they get lucky. In the extreme, the broke person living on the street might take a dollar off the street to buy a lottery ticket; expected returns are negative, but a dollar is not going to save them from homelessness -- the hundreds of thousands will (not that I endorse gambling, but hopefully the point makes sense).
It has nothing to do with indexes but with portfolio optimization that forces one outside of traditional allocations.
Last edited by secondopinion on Sun Oct 24, 2021 3:23 pm, edited 5 times in total.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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Re: “It’s GOING TO BE a stock pickers market”
They are trying to be stand up comedians.Lucky2Invest wrote: ↑Sat Oct 23, 2021 9:03 pm I have heard this at least a dozen times on CNBC over the last two weeks. Guests coming on and saying the usual “buy the indexes” won’t work for the coming new inflationary world. None of them ever explain why but it got me questioning why it would be any different. Any guesses besides just trying to sell their services?
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett
Re: “It’s GOING TO BE a stock pickers market”
Guess we're talking about two different things.000 wrote: ↑Sun Oct 24, 2021 2:45 pmI think you missed my point....HomerJ wrote: ↑Sun Oct 24, 2021 12:13 pmIf index funds start returning 3% a year, then 75% of active funds will probably return 2% a year or less (But, don't worry, the fund managers will still get paid).000 wrote: ↑Sat Oct 23, 2021 10:17 pm It's going to be a stock pickers market because you will need to pick well if you want to get a positive absolute return. There is still the risk of underperforming the index, but if the index is returning less, might your willingness to reach for returns increase?
Let's say stock indices start moving sideways or downwards with high volatility for a few years. Don't you think we'd see some investors - even people here - reach for absolute returns via active management of various kinds?
Think about all the posts here and on FIRE boards assuming stock returns will be within historical norms.....
Think all those folks are going to be 'just fine' with significantly lower returns?
Going active, so far, doesn't work, not in bull markets and not in bear markets.
If index funds start returning -1% a year some investors will increase risk to have the chance of a positive return. The worse the average returns get, the higher the proportion of investors increasing risk will become. Do you think the people on this forum predicting the continuation of robust historic returns ad infinitum are going to just sit back and watch a sideways market?
There's even one poster here who said if indices stopped returning so much he'd move on to whatever the hot asset class was.
I interpret the term "stock picker's market" as a market where stock pickers will do better than the index.
I don't believe such a market exists.
You interpret the term "stock picker's market" as a market where more people (even some Bogleheads) will turn to stock pickers.
Sure that's likely. Most people are ignorant (as in unaware). Those that turn to stock pickers will, on average, make even less than the poorly performing index funds. But yeah, more people may go that way in a down market.
I think we're both right.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: “It’s GOING TO BE a stock pickers market”
Yep, except that the main motivation for taking positive skew will be greed not need.secondopinion wrote: ↑Sun Oct 24, 2021 3:17 pm You are talking about taking positive risk skew. Yes, the longer the disappointing returns are (and further behind schedule the goal is), the more optimal it can be to take positive risk skew (supposing that some minimal goal is still on track). Increasing volatility considerably while a minimal goal is being met (but not obtained) is the wrong thing to do since you might not make either the lesser or higher goal.
Those who are in the "do or fail" state have to take the long shot (both skew and volatility) and acknowledge they will likely have to take government support unless they get lucky. In the extreme, the broke person living on the street might take a dollar off the street to buy a lottery ticket; expected returns are negative, but a dollar is not going to save them from homelessness -- the hundreds of thousands will (not that I endorse gambling, but hopefully the point makes sense).
It has nothing to do with indexes but with portfolio optimization that forces one outside of traditional allocations.
Re: “It’s GOING TO BE a stock pickers market”
Nisiprius waxes poetic. Not quite Shakespeare but not bad.nisiprius wrote: ↑Sun Oct 24, 2021 12:09 pm
If the market is up and the advice is to sell:
"Buy low, sell high."
"Nobody ever went broke taking a profit."
"Mean reversion."
"What goes up must come down."
If the market is up and the advice is to buy:
"The trend is your friend."
"Cut your losses and let your profits run."
"Momentum."
"You're playing with house money now."
If the market is down and the advice is to sell:
"Don't try to catch a falling knife.
"Cut your losses and let your profits run."
"Never fight the dominant trend of the market."
If the market is down and the advice is to buy:
"Buy low, sell high."
"Mean reversion."
"Stocks are on sale."
"Valuations are favorable."
A fool and his money are good for business.
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Re: “It’s GOING TO BE a stock pickers market”
+1
I also like "it's going to be a pump and dump market."
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
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Re: “It’s GOING TO BE a stock pickers market”
I can't help but wonder just what it is about higher inflation that might make stock pickers more omniscient than they are in lower-inflation times.
There is only one success - to be able to spend your life in your own way. (Christopher Morley)
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Re: “It’s GOING TO BE a stock pickers market”
This man gets it.skierincolorado wrote: ↑Sat Oct 23, 2021 9:32 pm Logically flawed thinking. If markets have flat to low return, index investing won't give profits, so we have to do something else right? Stock picking! By picking stocks, we can avoid the low returns plaguing indexes!
Except the same problem with picking stocks in bull markets is equally true in flat markets. Nobody has ever shown consistent skill at beating the market. If markets are flat, stock picking will be flat too - but with a lot more risk. Diversification eliminates this risk and the standard deviation of outcomes is reduced.
Re: “It’s GOING TO BE a stock pickers market”
It's a load of bumpf
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Re: “It’s GOING TO BE a stock pickers market”
Hi Dave (I mean boss) -
You say that to Jim and I everyday at our morning meeting! Then we go out and trade! You never let us eat lunch saying “lunch is for whimps”!
Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: “It’s GOING TO BE a stock pickers market”
Do we take a negative skew and not be greedy? Market risk is negatively skewed (stronger infrequent bears than frequent bulls). Option writing is definitely negatively skewed with returns. The negative skew is not overly convincing either of being absent of greed. However, if one wanted to have no skew, they actually have to buy a small amount of individual stocks or options (since bonds themselves are negatively skewed as well).000 wrote: ↑Sun Oct 24, 2021 3:37 pmYep, except that the main motivation for taking positive skew will be greed not need.secondopinion wrote: ↑Sun Oct 24, 2021 3:17 pm You are talking about taking positive risk skew. Yes, the longer the disappointing returns are (and further behind schedule the goal is), the more optimal it can be to take positive risk skew (supposing that some minimal goal is still on track). Increasing volatility considerably while a minimal goal is being met (but not obtained) is the wrong thing to do since you might not make either the lesser or higher goal.
Those who are in the "do or fail" state have to take the long shot (both skew and volatility) and acknowledge they will likely have to take government support unless they get lucky. In the extreme, the broke person living on the street might take a dollar off the street to buy a lottery ticket; expected returns are negative, but a dollar is not going to save them from homelessness -- the hundreds of thousands will (not that I endorse gambling, but hopefully the point makes sense).
It has nothing to do with indexes but with portfolio optimization that forces one outside of traditional allocations.
That is why we must be really clear as to our goals; otherwise, it is greed that drive it rather than need.
Last edited by secondopinion on Sun Oct 24, 2021 5:28 pm, edited 2 times in total.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.