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I read this article from a link over at FWF. I considered adding to Today is my Break Even day but opted to post as a separate topic for discussion. The current market activity perplexes me but this article from Ben Carlson provided me with an explanation even if it adds to my growing concern of where things may be heading in the next few years.

 

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The market is a crazy and dangerous place. I like Ben's points in his article (such as: The stock market doesn’t always make sense nor does it have to).

Another way to look at it is that there's a lot more going on in the stock market than we know, or can wrap our head around. For one, there are millions of players, and each has their own brain (including their own moods of fear, greed, etc). How can anyone possibly predict what millions of individual brains will do?

There are also fancy hedge funds in New York, London, and Singapore which are running insanely complex models to try and make sense of the world. They are analyzing and predicting business conditions; they are flying drones to sample various kinds of data and interpret what it means; they are using fancy computer systems to predict the outcomes of COVID-19 infection patterns, probably doing a more thorough analysis than public health agencies.

Many of them will anticipate an economic direction and trade on it, long before it ever becomes common knowledge. Some of the things they discover will take months to make it to news headlines. Some of the things will NEVER make the headlines.

On top of that we have major central banks printing trillions of $ of stimulus money. This on its own is an insanely powerful force which affects stock prices and many other things.

And then we have various government and central bank insiders with foreknowledge of stimulus actions, including the people at prime banks (like JP Morgan) who implement the central bank stimulus purchases. These people can trade on privileged information that most of the market doesn't have.

And then there's just about all of Bay Street and Wall Street, who have this device known as a Bloomberg terminal. They can easily pull up quotes which show them things like investor sentiment, predictions for next month's volatility and even predictions on interest rates.

Do YOU have a Bloomberg terminal?

My point is... there's so much going on. I just assume that I barely know what's going on. Whatever I know, or can grasp, is just the tip of the iceberg.

Which is why you can't predict stock direction, and why it's best to use passive indexing.
 

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The market is a crazy and dangerous place. I like Ben's points in his article (such as: The stock market doesn’t always make sense nor does it have to).

Another way to look at it is that there's a lot more going on in the stock market than we know, or can wrap our head around. For one, there are millions of players, and each has their own brain (including their own moods of fear, greed, etc). How can anyone possibly predict what millions of individual brains will do?

There are also fancy hedge funds in New York, London, and Singapore which are running insanely complex models to try and make sense of the world. They are analyzing and predicting business conditions; they are flying drones to sample various kinds of data and interpret what it means; they are using fancy computer systems to predict the outcomes of COVID-19 infection patterns, probably doing a more thorough analysis than public health agencies.

Many of them will anticipate an economic direction and trade on it, long before it ever becomes common knowledge. Some of the things they discover will take months to make it to news headlines. Some of the things will NEVER make the headlines.

On top of that we have major central banks printing trillions of $ of stimulus money. This on its own is an insanely powerful force which affects stock prices and many other things.

And then we have various government and central bank insiders with foreknowledge of stimulus actions, including the people at prime banks (like JP Morgan) who implement the central bank stimulus purchases. These people can trade on privileged information that most of the market doesn't have.

And then there's just about all of Bay Street and Wall Street, who have this device known as a Bloomberg terminal. They can easily pull up quotes which show them things like investor sentiment, predictions for next month's volatility and even predictions on interest rates.

Do YOU have a Bloomberg terminal?

My point is... there's so much going on. I just assume that I barely know what's going on. Whatever I know, or can grasp, is just the tip of the iceberg.

Which is why you can't predict stock direction, and why it's best to use passive indexing.
For some reason, anonymous internet discussion about investing always seem more impressive and credible than in real life. You can read someone's well thought out interpretation of a company's business activity (AltaRed's posts, for example) and think - Ya, that sounds like a thorough and correct analysis.

The exact same thing in real life though? Everything is laid bare as the ridiculous conjecture of nobodies... When have you ever had a real life conversation with someone about investing and afterwards thought "We've accomplished something great here - real deep and unique analysis". Never happens. Everyone feels silly and embarrassed after the fact because it so so obvious that nobody has any clue about anything, and it's all just gossip obtained from whatever particular amateur new sources we happen to frequent.

Further, real life conversations about investing leave me feeling a bit gross, but this doesn't seem to happen with internet conversations for some reasons. The concept of investing with the anticipation of capital gains is clearly on the spectrum of immoral behavior. You are trying to gain money by taking it from others and not working, providing nothing, coasting. You can read elaborate arguments and books about how capitalism works and the need for investment to adequately convince yourself otherwise - there is no lack of those - but listen to a man who takes it seriously actually speak about "his investments" and it becomes plain to see that it is not a noble pursuit that an upstanding citizen would engage in.
 

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The exact same thing in real life though? Everything is laid bare as the ridiculous conjecture of nobodies... When have you ever had a real life conversation with someone about investing and afterwards thought "We've accomplished something great here - real deep and unique analysis". Never happens. Everyone feels silly and embarrassed after the fact because it so so obvious that nobody has any clue about anything, and it's all just gossip obtained from whatever particular amateur new sources we happen to frequent.
My own perspective on this is that the some people really do know corporate fundamentals, and have great research, but they work on Bay Street / Wall Street or are industry insiders. They certainly don't go around sharing that proprietary information with random people.

The people at the office, or on TV, who are talking about companies are most likely clueless, or talking out of their behinds. Maybe that's what makes them look foolish?

At my office, it was just light (entertainment) talk. Sometimes at a coffee break, some guy would mention he bought a certain stock for whatever reason. It didn't really bother me.

One day at the office, I loudly announced that I went short GE. And maybe you're right; I probably came off looking slimy. I told them I didn't have any deep analysis, I just thought it would be kind of fun.

I recently filed my taxes and had a capital gain on the GE short. I don't see anything immoral about capital allocation... I just think it's best to stay humble and acknowledge when you are gambling. A lot of this stock-picking is gambling. My GE position was gambling. My recent purchases of DSG and FNV are gambling too.
 

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Further, real life conversations about investing leave me feeling a bit gross, but this doesn't seem to happen with internet conversations for some reasons. The concept of investing with the anticipation of capital gains is clearly on the spectrum of immoral behavior. You are trying to gain money by taking it from others and not working, providing nothing, coasting. You can read elaborate arguments and books about how capitalism works and the need for investment to adequately convince yourself otherwise - there is no lack of those - but listen to a man who takes it seriously actually speak about "his investments" and it becomes plain to see that it is not a noble pursuit that an upstanding citizen would engage in.
Maybe in real life you're just discussing investing with the wrong people? I generally have three types of responses to investing discussions, deer in headlights, I don't care "my people" handle that stuff for me and genuine interest. Leaving the clueless (deer) group out because they don't understand enough to have a valid opinion, I never get the sense from anyone I know that investing is remotely considered "immoral behavior" but rather just a means to an end and not something frowned upon.
 

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I never get the sense from anyone I know that investing is remotely considered "immoral behavior" but rather just a means to an end and not something frowned upon.
Same here.

I like discussing investments with friends and coworkers. I wish there were more people to discuss this with in regular life. Maybe it's just my weird idea of fun, but I really do enjoy coffee or lunch with this kind of discussion.

The boss at my previous company loved this stuff too. He actually encouraged me to set up a discussion group at work, and we had an occasional social gathering at the office... these were very interesting. In fact, attendance was so good that I had trouble booking the meetings because the room was overflowing. Kind of became too big to be casual :)
 

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And then there's just about all of Bay Street and Wall Street, who have this device known as a Bloomberg terminal. They can easily pull up quotes which show them things like investor sentiment, predictions for next month's volatility and even predictions on interest rates.

Do YOU have a Bloomberg terminal?
https://www.armstrongeconomics.com/international-news/disease/is-bloomburg-behind-the-john-hopkins-university-virus-map-that-has-scared-the-world/

I must of made a mistake in the link address. Anyways it will take you to Armstrongs site & if you do a search on the site you will find the info regarding Bloomburg
 
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