And Goldman Sachs regular profit, well, I don't think that has anything to do with 'picking the good shares'. More like manipulating the markets, insider trading and ripping off clients..
I think even Goldman Sachs had some losses last year. But if they were ripping off clients, the clients would go elsewhere. Goldman Sachs is just the scapegoat for the entire industry.
It seems we have pretty much all of the 'small band of very smart traders' on this forum.
I think Australia's market is efficient enough that no one can consistently outperform based on skill. I'm sure someone will keep winning based on luck. Just like if I get enough people to toss a coin 1 million times, someone will toss a million heads.
And Goldman Sachs regular profit, well, I don't think that has anything to do with 'picking the good shares'. More like manipulating the markets, insider trading and ripping off clients.
It's like houses. The people making the most money are real estate agents, and property spruikers. That has nothing to do with identifying the best houses to purchase for investment purposes.
I doubt we have a "small band of very good traders" on the forum. It is actually *very hard* to outperform the index.
WRT to Goldman's their daily trading wins are probably not due to market manipulation or insider trading. They are exploiting robotrade strategies which have the property that they work until they stop working. All of these strategies leave their own tracks in the price signal that others can then exploit, at which time they become ineffectve and you have to move on to the next strategy (and usually sell your old strategy on the interweb to make one last buck out of it.)
As to illegal insider trading, It is certainly there, but I don't think it is a big factor in the market. It's not hard to detect insider trading once more than one or two people are acting on the same piece of info. It will show up in strange directional bets in front-month options usually, and there are lots and lots of people watching out for that nowadays, in the hope of riding the coattails. Used to work, but less and less as time goes by. There are also funds that specifically target companies where bullish or bearish insider trading (the legal sort) occurs and they seem to add nothing but volatilty to the signal - recently they have not outperformed.
GS and the big analysts most certainly do engage in market manipulation. People I know with higher levels of market info than I do (specifically, they can see where orders are coming from) say it is quite routine to see analysts come on CNBC saying the market is a buy, or "you should buy Apple") at the very same time as they are unwinding their long positions. In TA circles it is known as the "distribution phase". Goldman Sachs came on TV saying the market was a "screaming buy" just recently, at the very same time as the Advance/Decline lines of the S&P 500, and the Russell 2000 were rolling over. The slew of analysts telling people they should buy Apple when it was recently at $644 (it is now about $529 and falling fast). represents one of the biggest examples of mass manipulation of the market I have seen recently. I was thouroughly dumped upon in early April when I posted on an Apple fanbhoi forum that I thought Apple would go to some price above $550 and then retrace to $430-$440. (it was then rising through $540) It went much higher than I expected, but my prediction is looking better by the day, possibly for the wrong reasons. Point is not so much my prediction (which may well still be wrong), but at the relentlessness of media hype that piles on once a stock gets into the distribution phase. Once everyone is talking about a stock, you know it is time to sell.
BTW: I agree that the success of the trading desks like GS is definitely not due to picking good shares. Picking good shares requires a time horizon in the years in order to work. Picking good shares entails fundamental analysis, most of the short-term movement in share prices has nothing whatsoever to do with fundamentals, and trading desks think in terms of seconds to months.
BTW2: Gold is looking better and better. The US$ market gave a clear reversal signal to the intermediate-term downtrend last Wednesday, which was confirmed on Thursday. Friday's action advises caution. You could either buy now, but be ready to exit quickly on a drop below $1500, or you could watch the next few days, buy if the signal is reconfirmed but be very attentive to what happens at $1600-$1650 range, or wait for it to break up through $1650-odd and then buy and hold. I am expecting last week's signal to be not confirmed today, but maybe later in the week.
BTW3: Another reason why the funds lose out is that they are mostly not able to apply common sense to their trading, in that if they are a stock fund they have to be fully invested - they have to buy shares when people put money into them and they have to sell shares when people redeem. The behaviour of their customers has been shown to be about as wrong as it can be over the last 40 years or so, which introduces a really bad negative tracking error that disadvantages even the customers who get it right! Even if their stock-picking was above average, they would still mostly lose.
BTW4: my arguments about the inefficiency of the market is not actually an argument in favour of stock picking. What it says is that if you just buy a low-fee total return (i.e. reinvests all dividends) passive index fund you will come out ahead of most people.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
I doubt we have a "small band of very good traders" on the forum. It is actually *very hard* to outperform the index.
WRT to Goldman's their daily trading wins are probably not due to market manipulation or insider trading. They are exploiting robotrade strategies which have the property that they work until they stop working. All of these strategies leave their own tracks in the price signal that others can then exploit, at which time they become ineffectve and you have to move on to the next strategy (and usually sell your old strategy on the interweb to make one last buck out of it.)
As to illegal insider trading, It is certainly there, but I don't think it is a big factor in the market. It's not hard to detect insider trading once more than one or two people are acting on the same piece of info. It will show up in strange directional bets in front-month options usually, and there are lots and lots of people watching out for that nowadays, in the hope of riding the coattails. Used to work, but less and less as time goes by. There are also funds that specifically target companies where bullish or bearish insider trading (the legal sort) occurs and they seem to add nothing but volatilty to the signal - recently they have not outperformed.
GS and the big analysts most certainly do engage in market manipulation. People I know with higher levels of market info than I do (specifically, they can see where orders are coming from) say it is quite routine to see analysts come on CNBC saying the market is a buy, or "you should buy Apple") at the very same time as they are unwinding their long positions. In TA circles it is known as the "distribution phase". Goldman Sachs came on TV saying the market was a "screaming buy" just recently, at the very same time as the Advance/Decline lines of the S&P 500, and the Russell 2000 were rolling over. The slew of analysts telling people they should buy Apple when it was recently at $644 (it is now about $529 and falling fast). represents one of the biggest examples of mass manipulation of the market I have seen recently. I was thouroughly dumped upon in early April when I posted on an Apple fanbhoi forum that I thought Apple would go to some price above $550 and then retrace to $430-$440. (it was then rising through $540) It went much higher than I expected, but my prediction is looking better by the day, possibly for the wrong reasons. Point is not so much my prediction (which may well still be wrong), but at the relentlessness of media hype that piles on once a stock gets into the distribution phase. Once everyone is talking about a stock, you know it is time to sell.
BTW: I agree that the success of the trading desks like GS is definitely not due to picking good shares. Picking good shares requires a time horizon in the years in order to work. Picking good shares entails fundamental analysis, most of the short-term movement in share prices has nothing whatsoever to do with fundamentals, and trading desks think in terms of seconds to months.
BTW2: Gold is looking better and better. The US$ market gave a clear reversal signal to the intermediate-term downtrend last Wednesday, which was confirmed on Thursday. Friday's action advises caution. You could either buy now, but be ready to exit quickly on a drop below $1500, or you could watch the next few days, buy if the signal is reconfirmed but be very attentive to what happens at $1600-$1650 range, or wait for it to break up through $1650-odd and then buy and hold. I am expecting last week's signal to be not confirmed today, but maybe later in the week.
BTW3: Another reason why the funds lose out is that they are mostly not able to apply common sense to their trading, in that if they are a stock fund they have to be fully invested - they have to buy shares when people put money into them and they have to sell shares when people redeem. The behaviour of their customers has been shown to be about as wrong as it can be over the last 40 years or so, which introduces a really bad negative tracking error that disadvantages even the customers who get it right! Even if their stock-picking was above average, they would still mostly lose.
BTW4: my arguments about the inefficiency of the market is not actually an argument in favour of stock picking. What it says is that if you just buy a low-fee total return (i.e. reinvests all dividends) passive index fund you will come out ahead of most people.
I was joking about the having the good traders on this forum...
Re gold....I like gold. I have a bit, but I'm accumulating silver. Just at the end of last week though I started buy the blackrock international gold fund. I think that has some real potential. Not that blackrock are great stock pickers, but I think that's the best fund to access international gold stocks and I think over the coming years, that will do very well. I think the market is pricing gold stocks based on the gold price falling, but I think it will not fall over the coming years, and eventually these stocks will get repriced to accurately reflect the higher gold price. (I do understand that this goes against my whole argument, but I'm a bit of a gambler and this is my play money)
In terms of 'good traders', I think it's very hard to beat the market for shares trading, but relatively easy when it comes to property. This is because there is so much property that doesn't stack up for investment on even superficial analysis. Also, the property market moves in slow motion compared with the stock market, so it's much easier to spot trends and movements while the information is still useful.
In terms of 'good traders', I think it's very hard to beat the market for shares trading, but relatively easy when it comes to property. This is because there is so much property that doesn't stack up for investment on even superficial analysis. Also, the property market moves in slow motion compared with the stock market, so it's much easier to spot trends and movements while the information is still useful.
Agreed.
I would also add that most property buying is not for investment. It is for consumption. To me this puts a long-term price trend under the signal that is not there for stocks. (But it is there for commodities).
But to get the best out of property, you have to make its lack of liquidity work for you, which means you actually need some liquidity elsewhere. Hence some investment in shares, bonds or commodities is a good thing.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
I would also add that most property buying is not for investment. It is for consumption. To me this puts a long-term price trend under the signal that is not there for stocks. (But it is there for commodities).
But to get the best out of property, you have to make its lack of liquidity work for you, which means you actually need some liquidity elsewhere. Hence some investment in shares, bonds or commodities is a good thing.
Liquidity is a huge issue for property. Having alternate investments (hell, have a bunch of cash) is mandatory for managing risk once you get past a couple of IPs.
Speak of the devil! I just found this... (and I wasn't even looking for it.) Confirms NotFooled's comment about Goldmans.
Quote:
May 10, 2011, 8:39 am Goldman Had Just One Losing Day Last Quarter
By SUSANNE CRAIG
Goldman Sachs lost money on just one trading day in the first quarter, according to a securities filing on Tuesday. And the firm had 32 days when it posted trading revenue of more than $100 million, the filing shows. It is not known on which day Goldman lost money, but the loss was $25 million to $50 million. After difficult markets took a bite out of profit in the fourth quarter, the first quarter was one of Goldman’s best for trading in a while.
In terms of trading days, it was the best since the first quarter of 2010, when there were no days where Goldman posted a negative trading day. In the period a year earlier, Goldman recorded 35 days when trading revenue exceeded $100 million and it had no day when trading revenue dipped below $25 million. In contrast, Morgan Stanley disclosed on Monday that it lost money on three trading days in the first quarter and posted trading revenue of more than $100 million on 10 days in the first quarter.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
This thread is prompted by a mistaken myth posted as fact by zaph here:
Appropriate data is the ASX all ords and the ABS 8 cap city index (new and old series) for March in 1987, 1992, 1997, 2002 and 2012. This will give us the 10, 15, 20 and 25 year returns.
Plugging the numbers in (data given in the note below) we get:
House price index growth
25 years = 443% or 7.0% pa 20 years = 229% or 6.1% pa 15 years = 196% or 7.5% pa 10 years = 89% or 6.6% pa
ASX All Ords growth
25 years = 161% or 3.9% pa 20 years = 170% or 5.1% pa 15 years = 77% or 3.9% pa 10 years = 27% or 2.4% pa
The difference in performance over 25, 20 15 and 10 years is huge. House prices have massively outperformed the ASX all ords over all 4 periods.
These figures suggest $100k in housing in 1987 would now be $534k and $100k in the All ords in 1987 would now be $261k - LESS THAN HALF THAT FROM HOUSING.
No cherry picking. Periods were chosen by zaph.
Dividends and rent could also be included. I'd expect that to make little difference to the message.
Of course, this says nothing about the future.
Same calculation could be done with shares and houses in other countries. UK would be interesting. The FTSE 100 is lower now than when I left the UK in 1999. UK house prices have risen 140% since then.
NOTE - Data used in the above. ASX all ords (March): 1987 - 1649.9 1992 - 1591.5 1997 - 2424.2 2002 - 3388.7 2012 - 4300
ABS 8 cap city HPI Old series (March) 1987 - 62.9 1992 - 104.2 1997 - 115.3 2002 - 180.6
ABS 8 cap city HPI New series (March) 2002 - 74.3 2012 - 140.6
Does this show how overvalued Australian housing is? When it has more than doubled compared to the wealth of the countries top 200 companies ?
Who pays the wages of the people who buy houses? If this doesn't make you question the value of houses I don't know what will. (I'm not necessarily saying I think they are 2 x over-valued, but this has got to make you think....right?)
FWIW My share portfolio has increased 30% in 3 years and returns 5% pa franked.
Does this show how overvalued Australian housing is? When it has more than doubled compared to the wealth of the countries top 200 companies ?
Who pays the wages of the people who buy houses? If this doesn't make you question the value of houses I don't know what will. (I'm not necessarily saying I think they are 2 x over-valued, but this has got to make you think....right?)
FWIW My share portfolio has increased 30% in 3 years and returns 5% pa franked.
Does this simply show how undervalued Australian housing used to be? Or how underperforming Australian shares are?
We can always compare ourselves to other countries, but every place is different, and we should be careful of oversimplifying. Bear in mind, for example, that there have been times in the last 25 years when inflation was a lot higher than it is now.
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