Stock market is a "fully-fledged epic bubble" and will burst

[bmwmike]

ooid said:

I geniunely wonder if any retail investors here doing deep research before engaging in stock market activities? I mean beyond fundamental metrics but serious analog and analytical research on specific equities because many of the comments here seem quite generic "market sentiments" IMHO.

That's why funds and index trackers exist isn't it

[Derek Chevalier]

bmwmike said:

ooid said:

I geniunely wonder if any retail investors here doing deep research before engaging in stock market activities? I mean beyond fundamental metrics but serious analog and analytical research on specific equities because many of the comments here seem quite generic "market sentiments" IMHO.

That's why funds and index trackers exist isn't it

I'd argue that index trackers are used by those the have done the deep research.

[dmahu]

Mr Whippy said:

So you’re saying everyone can be made whole in a heavy selling event?

Isn’t the issue the leverage of collateral that itself can be leveraged?

Isn’t this why thing like Archegos show the potential risks because the exposures across the system either aren’t fully documented, or known at all?

Imagine you have an option on $100 million of bonds.

The seller will be forced to post a small amount of margin as the bond price moves up and down, but the $100 million notional is kind of meaningless.

There’s of course always risk, but adding up the notional value of derivative markets doesn’t tell us much. The vast majority is based on margin and/or collateralised and/or hedged.

Edited by dmahu on Thursday 15th September 07:34

[dmahu]

Derek Chevalier said:

I'd argue that index trackers are used by those the have done the deep research.

Indeed. Diversification and lack of ability to time the market are lessons which most retail traders learn in short order. The people picking individual stocks are the mug punters.

[number2]

dmahu said:

Derek Chevalier said:

I'd argue that index trackers are used by those the have done the deep research.

Indeed. Diversification and lack of ability to time the market are lessons which most retail traders learn in short order. The people picking individual stocks are the mug punters.

Not far from the truth. Thinking one has an edge.

Put a large number of mug punters in a room and some will get lucky, and some will be lucky a long time. That's not an edge, that's probability.

[DonkeyApple]

Derek Chevalier said:

bmwmike said:

ooid said:

I geniunely wonder if any retail investors here doing deep research before engaging in stock market activities? I mean beyond fundamental metrics but serious analog and analytical research on specific equities because many of the comments here seem quite generic "market sentiments" IMHO.

That's why funds and index trackers exist isn't it

I'd argue that index trackers are used by those the have done the deep research.

My in-depth market research, years ago, revealed to me that I had absolutely no interest in doing any in-depth market research and that if only considering blue chip stuff it gave no discernible edge.

For small cap stuff, the best in-depth market research is to try an establish how fraudulent the Board are, whether the authorities are closing in on them and how good their track record of deceptive RNS are. . Bit even that can be short cited by just looking at the liquidity v level of retail punter ramping on bulletin boards.

[DonkeyApple]

dmahu said:

Indeed. Diversification and lack of ability to time the market are lessons which most retail traders learn in short order. The people picking individual stocks are the mug punters.

I think individual stocks come into play alongside a boring basket if you have a view on a sector. The recent example would have been going long an oil and gas producer last year.

[Mr Whippy]

This old chestnut again.

Doesn’t it all depend what you’re wanting to do?


By buying a bit of everything you’re just averaging out on probabilities but remove the option of choice.


I’d like to see tracking/WTF products where you can easily Boolean mixes.

Ie, I like S&P but don’t want energy for the next 6 months.

[Derek Chevalier]

Mr Whippy said:

Doesn’t it all depend what you’re wanting to do?

For many, it's achieving their objectives - e.g. finish work in the next five years while taking as litle risk as possible.

EDITED TO ADD: There's an argument for putting a small amount of money to one side as the "fun pot" - but this should be kept seperate from the overall pot.

Mr Whippy said:

Ie, I like S&P but don’t want energy for the next 6 months.

Unless you know something the market doesn't, I don't see the benefit reducing diversification by excluding certain sectors on a tactical basis.

I've yet to see evidence of someone successfully using tactical asset allocation - you can see how well the professionals do vs a no brainer portfolio

"The result of our latest study is as heart-wrenching as previous years; the overwhelming majority of multi-asset fund managers don’t add any value through their asset allocation and fund selection. In fact, they detract from value."

https://finalytiq.co.uk/expensive-multi-asset-fund...

[Panamax]

This idea that you can't "win" so should settle for "average" is IMO nonsense trotted out by people who have a vested interest in trotting it out.

[DonkeyApple]

Panamax said:

This idea that you can't "win" so should settle for "average" is IMO nonsense trotted out by people who have a vested interest in trotting it out.

Or, it's a view from market professionals who have watched hundreds of thousands of retail 'investors' lose over the last 25 years.

It's not that you can't win it's just the the majority of people chose to lose.

[dmahu]

Panamax said:

This idea that you can't "win" so should settle for "average" is IMO nonsense trotted out by people who have a vested interest in trotting it out.

Index investing is kryptonite to the entire wealth management industry. It’s totally against vested interests.

[Burwood]

Panamax said:

This idea that you can't "win" so should settle for "average" is IMO nonsense trotted out by people who have a vested interest in trotting it out.

Quite
There are plenty of asset managers that have beaten the S&P by 4-5% (annualised) over 20 years+

From a previous post 'client who want to take as little risk as possible'. Then what do they need an IFA for? The fee hurdle rate will almost guarantee zero growth. Trackers are not predominantly invested in by people who have carried out deep research. There is nothing wrong with low cost trackers. Nearly all asset managers i know of, use them as a tool.

[Mr Whippy]

Derek Chevalier said:

Mr Whippy said:

Doesn’t it all depend what you’re wanting to do?

For many, it's achieving their objectives - e.g. finish work in the next five years while taking as litle risk as possible.

EDITED TO ADD: There's an argument for putting a small amount of money to one side as the "fun pot" - but this should be kept seperate from the overall pot.

Mr Whippy said:

Ie, I like S&P but don’t want energy for the next 6 months.

Unless you know something the market doesn't, I don't see the benefit reducing diversification by excluding certain sectors on a tactical basis.

I've yet to see evidence of someone successfully using tactical asset allocation - you can see how well the professionals do vs a no brainer portfolio

"The result of our latest study is as heart-wrenching as previous years; the overwhelming majority of multi-asset fund managers don’t add any value through their asset allocation and fund selection. In fact, they detract from value."

https://finalytiq.co.uk/expensive-multi-asset-fund...

So why has there been the usual cycle end rotations between tech, growth, cyclical, staples, energy, value, blah blah?

You can’t ‘rotate’ out of value to growth and vice versa, while in a tracker which just rides the waves.


You can also avoid what I’d call complete dumbass bubble stocks.
Ie, Tesla.

Yes you might miss out on the tiny gains in exposure, but you also avoid the losses and stupidly expensive money wasted on units at ATH valuations when it all comes back down again… which it will while you’re holding these trackers for possibly decades on end.

[Derek Chevalier]

Panamax said:

This idea that you can't "win" so should settle for "average" is IMO nonsense trotted out by people who have a vested interest in trotting it out.

There are certainly people with a vested interest who will be only to sell you something that will be a "winner" (and are only too happy to take your money) - as the phrase goes, "It Is difficult to get a man to understand something when his salary depends upon his not understanding it", but if you undertake some rudimentary performance analysis on these offerings, the "outperformance" is usually due to something like inappropriate benchmarking, not comparing apples with apples, hindsight bias etc.

In terms of the DIY investor, Morningstar have produced research which shows investor vs investment returns, the gap increasing as you deviate away from the diversified portfolio. Not sure where their vested interest is, nor that the research is nonsense.

https://www.morningstar.com/articles/1056151/why-f...

[Burwood]

Derek Chevalier said:

Panamax said:

This idea that you can't "win" so should settle for "average" is IMO nonsense trotted out by people who have a vested interest in trotting it out.

There are certainly people with a vested interest who will be only to sell you something that will be a "winner" (and are only too happy to take your money) - as the phrase goes, "It Is difficult to get a man to understand something when his salary depends upon his not understanding it", but if you undertake some rudimentary performance analysis on these offerings, the "outperformance" is usually due to something like inappropriate benchmarking, not comparing apples with apples, hindsight bias etc.

In terms of the DIY investor, Morningstar have produced research which shows investor vs investment returns, the gap increasing as you deviate away from the diversified portfolio. Not sure where their vested interest is, nor that the research is nonsense.

https://www.morningstar.com/articles/1056151/why-f...

That article suggests there is some hoodwinking going on when the divergence is simple maths. Shocking that a Fund can return 15% in a year but my entry, say in the last quarter is down 10%. The article is utter nonsense and word salad-again all promulgated to suit an agenda

[Derek Chevalier]

dmahu said:

Panamax said:

This idea that you can't "win" so should settle for "average" is IMO nonsense trotted out by people who have a vested interest in trotting it out.

Index investing is kryptonite to the entire wealth management industry. It’s totally against vested interests.

Yep, but it's very easy to put forward some "evidence" regarding how index investing is easily beatable that will hoodwink many, many people.

[number2]

Burwood said:

That article suggests there is some hoodwinking going on when the divergence is simple maths. Shocking that a Fund can return 15% in a year but my entry, say in the last quarter is down 10%. The article is utter nonsense and word salad-again all promulgated to suit an agenda

I'm not the only one that thought that then.

Clearly, someone just needed to put some words on a page.

[Derek Chevalier]

Mr Whippy said:

Derek Chevalier said:

Mr Whippy said:

Doesn’t it all depend what you’re wanting to do?

For many, it's achieving their objectives - e.g. finish work in the next five years while taking as litle risk as possible.

EDITED TO ADD: There's an argument for putting a small amount of money to one side as the "fun pot" - but this should be kept seperate from the overall pot.

Mr Whippy said:

Ie, I like S&P but don’t want energy for the next 6 months.

Unless you know something the market doesn't, I don't see the benefit reducing diversification by excluding certain sectors on a tactical basis.

I've yet to see evidence of someone successfully using tactical asset allocation - you can see how well the professionals do vs a no brainer portfolio

"The result of our latest study is as heart-wrenching as previous years; the overwhelming majority of multi-asset fund managers don’t add any value through their asset allocation and fund selection. In fact, they detract from value."

https://finalytiq.co.uk/expensive-multi-asset-fund...

So why has there been the usual cycle end rotations between tech, growth, cyclical, staples, energy, value, blah blah?

You can’t ‘rotate’ out of value to growth and vice versa, while in a tracker which just rides the waves.


You can also avoid what I’d call complete dumbass bubble stocks.
Ie, Tesla.

Yes you might miss out on the tiny gains in exposure, but you also avoid the losses and stupidly expensive money wasted on units at ATH valuations when it all comes back down again… which it will while you’re holding these trackers for possibly decades on end.

In an ideal world it would no doubt be great to be able to time factors/sectors and exclude crap stocks.

However, given that the full time professionals struggle with it, what specific edge does the private investor have that the professionals don't?

I take DA's point about the small caps, where there's not much coverage, liquidity etc meaning the big boys tend to stay away.

Perhaps the private investor has the luxury of having long timescales and can accept long periods of relative underperformance, although how many are genuinely prepared to stick with such an approach?

[Burwood]

number2 said:

Burwood said:

That article suggests there is some hoodwinking going on when the divergence is simple maths. Shocking that a Fund can return 15% in a year but my entry, say in the last quarter is down 10%. The article is utter nonsense and word salad-again all promulgated to suit an agenda

I'm not the only one that thought that then.

Clearly, someone just needed to put some words on a page.

It's like 'Apple 1 Jan $100, 31 Dec $200. Huh I bought Apple and lost $5.

For the record asset managers can only report 'Fund/Portfolio' model returns from point A to B. They do not take into account any rebuts at higher or lower prices. Investors returns will vary-obviously.