Stock Market?

[BarkingMad]

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He'd be among the richest men in the world were it true

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Successful traders who have been around awhile are some of the richest people in the world. Is this news?

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Here's what some others say about Vic.


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Someone dialed a 900 number for investment picks and did'nt get rich in a few months? Hold on a sec'... there, whew... I threw my Vic books into the woodstove. Thanks for the tip.

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There are many rumours that Vic went bankrupt after a single bad trade in the late 90s.


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Rumors eh. Thank God I say. I was starting to get pissed that someone out there was doing better than I am. I knew he'd eventually lose his house trading those damn commodity futures. Good riddance. Now I can feel better about my 8-9% CAGR.

All kidding and sarcasm aside, I'm growing tired of defending trader Vic. He's not my Dad or anything, nor is he the only writer Iv'e learned somthing from, think what you want.

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it's not a loss until you sell

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Right, it's just a "paper loss" after all. I think this is a terrible way to think about losses. IMO, a healthier attitude toward risk is to regard "paper losses" as very real losses. To be honest, I used to think this way, and I have gotten badly hurt riding losers. Now I get out at a predetermined point below my entry and re-enter later if my system tells me to. Poker has helped me greatly in this regard - that is, being comfortable taking losses.

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Value investing isn't "market timing", though it often appears to offer that ability.

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Unless you plan to never sell (like Buffet), you're timing the market. Just because your hold period is long term (subjective) doesn't insulate you from being a market timer.

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Market timing is the buying or selling of securities based on the idea that you know it's price is headed lower or higher.

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This isn't true. Although there are approaches that do try to predict what price will do in the future, it is possible to design a profitable technical system that is designed to react to what price actually does. This isn't splitting hairs, it's a crucial distinction. For those who take exception to using price alone (based on the idea that you cannot predict x with x) there are many other sources of quantifiable data other than price (COT data, volume, open interest, intermarket relationships, and yes, even fundamentals) that can be used to develop successful "predictive" systems.

No matter what your trading approach, or what business you are in, you cannot escape using the past to try to produce a profitable result in the future. Why do you believe in value investing? Because it has worked in the past!

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2+2 members laugh at people who buy "pattern mappers"

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This is not a good comparison. Doing a statistical study of historical data in an attempt to profit from the idea that the future might be similar to the past is not in the same ballpark as trying to predict the sequence of cards dealt by an online poker room. The only reason 2+2ers laugh at this is because it's is currently impossible (although in my understanding this wasn't always the case - at least at one site - for a short while)

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I'm always bemused when those same rational poker players invest ignoring the true value of their investments

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'Cause your approach is the only good approach... and ... your market "heroes" are the only ones who know anything. Right.

Sniper has already provided an educated response to this...

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... there are many ways to make money in the market!


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Take care folks, I'm gonna go rub my crystal ball and draw a trendline or two.

-BM

[jively]

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He'd be among the richest men in the world were it true

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Successful traders who have been around awhile are some of the richest people in the world. Is this news?

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It's news to me. Which of the Forbes 400 made their billions of dollars trading?

-Tom

[jively]

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Remember this, it's not a loss until you sell. No-one forces you to sell your index funds at market lows.

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This is just wrong. If I bought JDS Uniphase (JDSU) on July 24, 2000 at $140.50 per share, and am still holding it (now trading around $2.98 per share), I don't have a loss. But if I decide to sell it today, I will lose 97% of my investment...

-Tom

P.S. Illustration only. I never owned JDSU. [img]/images/graemlins/crazy.gif[/img]

[BarkingMad]

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It's news to me. Which of the Forbes 400 made their billions of dollars trading?


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Wow, thanks for the nice fat pitch. You must be on my side! [img]/images/graemlins/wink.gif[/img]

Assuming that you're not just kidding around, here goes...

<u>Hedge Funds</u>
George Soros
Paul Tudor Jones
James Simons
Steve Cohen
Broce Kovner
Stanley Drucknmiller
Kenneth Griffin
David Tepper
Louis Bacon

There are numerous others on that list who are not purely traders, but make a ton of money in what I would consider trading.

Also, FWIW, Paul T. Jones, Stan Druckenmiller, Steven Cohen, and Bruce Kovner have all been intervied by Jack Schwager for one "Market Wizards" book or another.

To be fair to the value investing / buy and hold side of the house, the Sage from Omaha, Warren Buffet is very near the top of the list. Ken Fisher is another LT-investor type who is a Forbes billionaire if I remember right.

In addition, there are also many other traders who didn't make Forbes "Richer than God" list who would certainly qualify as being among "The Worlds Richest People". James Rodgers (Soros' ex Quantum fund partner), and William O'Neil are a couple of examples.

[jively]

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It's news to me. Which of the Forbes 400 made their billions of dollars trading?


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Wow, thanks for the nice fat pitch. You must be on my side! [img]/images/graemlins/wink.gif[/img]

Assuming that you're not just kidding around, here goes...

<u>Hedge Funds</u>
George Soros
Paul Tudor Jones
[...]


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Whoops. I wasn't kidding around, I was flat wrong. I stand corrected.

-Tom

[r3vbr]

Read "the intelligent investor" and "security analisys"

also, all traders, but especially people who think they can trade without looking at the value of the company, should read the book "fooled by randomness"

[DesertCat]

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Successful traders who have been around awhile are some of the richest people in the world. Is this news?



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None of them approach Buffett's level of wealth. BTW, Soros made much of his money on fundamental investments unearthed by Jim Rogers. But the main point is that Vic isn't even on the list, might that not tell you whether his returns are real or imaginary? That's the one question you ducked, does Vic make more money by selling books or trading? Were his career net returns positive or negative after his blowup?

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it's not a loss until you sell

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Right, it's just a "paper loss" after all. I think this is a terrible way to think about losses. IMO, a healthier attitude toward risk is to regard "paper losses" as very real losses. To be honest, I used to think this way, and I have gotten badly hurt riding losers. Now I get out at a predetermined point below my entry and re-enter later if my system tells me to. Poker has helped me greatly in this regard - that is, being comfortable taking losses.


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That is the way the worlds most successful investors think about losses, if it's so terrible, why are they so successful? When you only buy something when it's at a substantial discount to it's real value, why would you sell it when it just got cheaper?

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Unless you plan to never sell (like Buffet), you're timing the market. Just because your hold period is long term (subjective) doesn't insulate you from being a market timer.


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Buffett does sell occasionally. Once gain my hold period isn't long or short term, the market price vs. intrinsic value determines whether I hold or sell. You could say i never "plan" to sell, but I do always intend to some day.

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Market timing is the buying or selling of securities based on the idea that you know it's price is headed lower or higher.

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...

No matter what your trading approach, or what business you are in, you cannot escape using the past to try to produce a profitable result in the future. Why do you believe in value investing? Because it has worked in the past!

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You are mixing two concepts. History tells me the markets will fluncuate. It also tells me I'll be able to occasionally buy securities at large discounts to their intrinsic values, and occasionally be able to sell them at their intrinsic values. That means value investing will work. But history doesn't tell me if the price of any individual stock I'm buying is going to go up or down this week, this month, this year, or ever.

For a thought experiment, let's assume my favorite company announced that after tommorrows close it will halt all trading in it's stock for ten years, so that if I don't sell my shares tomorrow, I'll be stuck with them for a decade. The market opens tomorrow and it's down by 50% (to $6 from $12)in the mad rush for the exits. What would I do? Well I wouldn't sell. I would instead buy as much as my portfolio limits allow.

This is because I have a very good idea of the intrinsic value of this stock, and it's close to double what it traded at today. Not only would I be loading up at 25% of intrinsic value, but over the next ten years it's intrinsic value is highly likely to increase about 8 times (it's growing earnings about 24% per year and has few limits to growth). So I'm paying $6 for shares that will be worth about $190 in ten years. That's a 41% annualized compound return for ten years. And the company will be earning about $8 per share by then, so even a small dividend would entirely repay my cost very quickly if I didn't want to sell.

The essense of value investing is not to be a slave to the market or current prices, but to take advantage of them when they are attractive. Of course my example is simplistic, there are issues of how much you can trust management, how confident you are about your IV calculations, and the risks associated with the business. But the point is that a value investor isn't buying a stock because you necessarily think it's going up in the short run. In fact, right now I'm praying for my favorite stocks to fall so I can get more clients in at attractive prices.

As far as my favorite goes, if it falls and stays down for a couple years, I don't mind as long as the business continues to meet or exceed my expectations.

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Doing a statistical study of historical data in an attempt to profit from the idea that the future might be similar to the past is not in the same ballpark as trying to predict the sequence of cards dealt by an online poker room. The only reason 2+2ers laugh at this is because it's is currently impossible (although in my understanding this wasn't always the case - at least at one site - for a short while)

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It was possible in the poker world on one site for a short time. But it's never been possible in the stock market. The world is full of backtested "relationships" that seemed to never fail, until real money is put behind them and the future changes. Thousands of wall streeters and academics run thousands of backtesting simulations every year to try to find the "holy grail", why don't they find patterns that persist?

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I'm always bemused when those same rational poker players invest ignoring the true value of their investments

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'Cause your approach is the only good approach... and ... your market "heroes" are the only ones who know anything. Right.


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I've never said it's the only way. Certainly if you are a market maker with proprietary access to an order book, or you have "inside information", you have a good idea of the near future for some stocks. You might have a good insight into mispriced options, which is esentially another type of value investing. Or you might do convertible arbitrage, or bond price arbitrage, etc, which again can be other forms of value investing.

I'm just aping the approach of the most successful investor of all time. Buffett's written extensively about his methods, and he's feels technicals and charts are worthless. And he's tried them early in his career. And Buffett's approach has not only produced the highest long term gains in market history, but there is a long list of other value investors who've produced similar returns. Eddie Lampert, Bill Miller are two world renowned examples, but how about Joel Greenblatt, who's produced a 40% annualized return over 20 years?

And value investors don't "blow up", like Neiderhoffer (twice!), Vic, and many other renowned traders who had multi-year hot streaks from taking excess risk but finally ran into a brick wall. This is because a good value investor doesn't take excess risk or use margin because they know they can beat the market substantially without it.

Which would you prefer, an approach that averages 40% annual returns with a worst case down year of 20%, or one that averages 75% annual returns but you lose it all once every 5 years? I don't know about you, but I prefer the first.

[BarkingMad]

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None of them approach Buffett's level of wealth...the main point is that Vic isn't even on the list...does Vic make more money by selling books or trading...etc...etc...etc

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Right up until now this was a decent debate, I had a good time participating, but this is getting a little [censored] silly now. No offense intended (honestly), but I would feel foolish typing out a blow by blow rebuttal to this last post. I'm gonna sign off this thread, and by doing so I hereby relenquish any right to claim that "I won". I'm comfortable with that.

Take care.

[mrbaseball]

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also, all traders, but especially people who think they can trade without looking at the value of the company, should read the book "fooled by randomness

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Everyone should read this book. It is very insightful and it can help your outlook on the markets, poker and life in general.

[DesertCat]

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None of them approach Buffett's level of wealth...the main point is that Vic isn't even on the list...does Vic make more money by selling books or trading...etc...etc...etc

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Right up until now this was a decent debate, I had a good time participating, but this is getting a little [censored] silly now. No offense intended (honestly), but I would feel foolish typing out a blow by blow rebuttal to this last post. I'm gonna sign off this thread, and by doing so I hereby relenquish any right to claim that "I won". I'm comfortable with that.

Take care.

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I thought it was a decent debate as well, I'm at a loss for what upset you so much. When a guy like Vic touts the highest long term results of all time (or at least that I've ever heard of), isn't it reasonable to ask for evidence to back up those claims? I'm not trying to poke fun at you or pick a fight. If Vic is really this successful I'd be a fool not to try to understand how he does it. But first I want to know whether he's telling the truth.

Warren Buffett is worth $40B+ on annualized returns that probably average around 25% or so. A guy averaging 72% should be in Buffett's tax bracket, wouldn't you think?

The world is full of people selling books and systems to make you rich. They'll claim to have used these systems to become rich. But often when someone researches their backgrounds (Kiyosaki for example) it turns out they greatly exaggerated their wealth and their successes. So isn't it fair to be skeptical of anyone's uncorroborated and unaudited claims?