Re: maybe this can help...
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All that link 'establishes" is that someone else besides mises likes to theorize all kinds of things that are theoretially possible but which data from the real world shows doesn't happen.
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Are you gonna show some real data that investors have not made money in the long run beyond random luck or do we still have to stick with your word?
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The return streams of Renaissance, Bridgewater, AQR, SAC, George Soros, Warren Buffet etc.
they have all CRUSHED the markets for very long periods of time. in all these cases it is virtually indisputable that it isn't based on luck alone. the processes these managers have are solid and for every 5-10 year period of all of them they have generated information ratios (excess returns/std. deviation) of over 1.0 (i.e. for every unit of risk, they generated 1 unit of return. that is extremely impressive). markets are definitely beatable. it is ahrd to do it but it can very clearly be done. this is provable in the abstract without this data also since efficiency stems from the rationality of the participants and all participants are not rational, do not have similar time horizons, do not have similar risk aversions, and do not all do the same level of research.
some participants aren't allowed to do some things while other can do far more (i.e. some managers aren't allowed to short stocks while some only have 50% symmetric leeway (i.e. can only be long or short 50% rather than 100% vs. their benchmark)
if you can identify clear areas where there are irrational bets being made, then you can generate returns not based on luck alone.
i don't really think that much can be up for debate.
Barron
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The list (at least to the extent I recognize the names) are not passive investors, they are, as you point out managers of those businesses. I was very clear that I was talking about investors who have no informational advantage over the market. When a Warren Buffet takes over the management of a company that is the essence of an informational advantage.
Sorry Zygote, there is nothing to concede. When you find a way to increase the demand for gold or make it more scarce and take a positon of influence in the market you too could demontrate profits.
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proving passive investing earns money over the long run above (our now debatable) "risk free" rate is far easier and less controversial than proving that managers can beat the markets.
i dealt with this in length when arguing w/ zygote over the "speculation" issue in that other mammoth of a politics thread.
i can sum up the issue briefly:
capitalism is based on free choices of individuals.
individual investors (actors) have the ability to earn Y% via bank deposits or investments in "risk free" assets like Treasury bonds (assme both are the same and both equal Y% for now).
companies (and corporate issuers etc.) need to raise money via equity offerings or corp. bond issues etc. and investors have a choice whether to invest in those or risk free assets (companies can go broke, markets can change etc. there are risks to owning shares of a company or claims on their cash flows). so if investors would earn Y% + X% where X% simply compensates the investors for a decrease in their purchasing power via inflation and the proabaility of default & market changes, virtually all investors would invest in the risk free asset since in expectation, they would yield the same. (the ones who wouldn't are risk loving and realize utility from taking needless risks)
therefore, in order to get investors to give money to companies and other issuers, there needs to be an excess return (XR) above Y%+X% that compensates investors for taking additional risk.
so the Total return of stocks includes a risk premium (that excess return grouped together with X%) which is transferred to passive investors even if the markets were 100% efficient.
i.e. EMH, if true, would STILL require that excess return for the markets to exist in themselves.
this premium has proved to be persistant and robust in all studies of its existance. in fact, it has proven itself to be TOO high (risk premium puzzle). this can be explained away if investors all have short time horizons and are more risk averse than previously thought.
Barron
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