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hedge funds and other large money managers...
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Probably 90% of "hedge funds" are designed to be "skimming operations"...
That is... the principals know from the outset ...
That they have no chance of outperforming the market...
Except by pure luck...
But they cannot lose financially...
Because of the fee structures and the operation of multiple funds.
Losers are shut down... and the winners keep just on "skimming".
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i certainly appreciate that. i don't know the stats...but that isn't where that quote you took from me came from. i was agreeing about the problems large funds havewith investing in small cap stocks or illiquid markets.
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i'm shocked that you mistake liquidity for efficiency so readily.
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There is a very high degree of correlation...
Between liquidity and market efficiency.
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that is absolutely true, but it doesn't mean you can or should mistake the two.
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i was asked about this in some other thread. the question was, "i hear currency markets are the most liquid & thus most efficient and nobody can beat them, is that true?"
well, it most certainly is not.
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This has to be viewed differently.
Money is not "pulled from the ether".
When you make money in liquid markets...
You are TAKING IT AWAY from a Professional Traders.
As with all Zero Sum Games...
There will be about 5% winners and 95% losers.
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i don't think you read my post. alpha markets are zero sum. 100% correct. but when ONE player is a MASSIVE loser ON PURPOSE, you have an inefficient market with significant opportunities for profit.
if you have 10,000 players who have a total of $100 invested and the 10,001st player has $1,000,000 invested and is doing so without regard to profit, you can make a ton of money off that ONE person. 95% winners vs. 5% losers isn't the problem. the dollar distribution is what counts. that one big loser can feed the other winners.
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the UK IL bond market's real yields are artificially low (and thus BEI artificially high) because it is mandated by the govt that all pension fudns must match liabilities & assets to some degree or other (i forget the actual reegulations). that said, the UK IL bond market is one of the biggest available to trade (though has recently been overtaken).
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Focusing on one bad player in a game full of strong players...
Is some sort of common logical fallacy...
But I forget the specific term.
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but again, when there is one (or many) bad players in a game full of strong players and that one bad player is losing ALOT on purpose, you have a big inefficiency that can feed many of the "good" players or "pros."
now, not all markets are like currencies that are pegged and eventually will burst though a peg.
but the point is that there aren't just professionals making it impossible for you to make money in the markets. you can still make money in the most liquid markets. period.
you just have to pick your spots. day trading US 10yrs aren't a good idea. but when you find inefficiencies that even the best pros are missing, you can pounce.
back when 10yr yields were at 4.6% in the first quarter of this year, that was a massive inefficiency. one that i profited off of along w/ many others. some contributions to that imbalance were foreign central banks disproportionate desire for dollar assets (which has waned) and the majority of players thinking the fed would cut rates when rates were already artificially low.
spotting that imbalance (in that HUGELY liquid market) provided a profit. even at 5.02% i'd be short, just not as strongly.
POINT: you can make money in liquid and efficient markets. i feel you have too strict a view on the inability to beat the "professionals" since you aren't taking money from the "pros" in most profitable circumstances. there are other players in the markets (i.e. what contributes to backwardation in agriculture markets? answer: hedgers selling their product forward without regard to price to some extent. they just want to hedge their future earnings and not be at the mercy of volatile markets.)
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Barron,
As if beating efficient markets against strong opponents was not hard enough...
I'm not sure that you realize the DEGREE...
Of corruption and cheating and insider trading, etc...
In the US financial markets.
It's rampant... click on this:
http://www.google.com/search?hl=en&q...=Google+Search
I get cheated every day...
But it's just the cost of doing business.
Regards,
rm+
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ummm, ok... equity markets cheat, wonderful. since i'm not involved in equity markets for the most part i don't really care that much.
i'm sure insider trading is more rampant than just in specialist firms. think about all the options spikes we've seen before takeover announcements. and all the things we DONT see or catch.
i hope my post is clearer and you read in as i wrote it.
thanks,
Barron