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Mercenary Trader

 
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  • The Alibaba Debut Bears Uncanny Similarity To A Year 2007 Top Event [View article]
    High yield and corporates are in a danger zone as risk appetite threatens to contract, but government bonds are tricky for the reasons you suggest. The potential for safe-haven bids to cancel out interest rate selling is significant. Elevated volatility ahead.
    Sep 23 05:35 PM | 2 Likes Like |Link to Comment
  • Not Even Wrong: Why Data-Mined Market Predictions Are Worse Than Useless [View article]
    We do not at all disagree that a confluence of inputs, which means various interpretations of data, can be useful in making smart investing or trading decisions. But this is a different kettle of fish than predicting an outcome off a single variable. It is less like competing theories of science and more like good science vs bad science. Mathematical relationships considered with robust testing, multi-variable analysis and logical explanatory backdrop, used to determine attractive odds-based opportunities, are akin to what Dalio and Bridgewater do, and a process we would have no quarrel with. But again that is miles apart from pulling a single marble out of a bag when the puller does not even seem to understand the bag.
    Sep 15 01:25 PM | Likes Like |Link to Comment
  • Not Even Wrong: Why Data-Mined Market Predictions Are Worse Than Useless [View article]
    Cute, but you didn't even bother to make a real case.

    Mimicking your syntax, someone could say: "As a retail investor, I feel the need to watch CNBC... Squawk Box is too short term... from my point of view Cramer's Mad Money is more useful... I've made some correct decisions using Cramer's calls, augmented with simple lines on a chart... I've found that listening to a television commentator serves as a good thought tool" etc etc.

    We aren't thin-skinned, but generally prefer blunt statements of criticism to come with substance...
    Sep 14 03:20 AM | Likes Like |Link to Comment
  • Not Even Wrong: Why Data-Mined Market Predictions Are Worse Than Useless [View article]
    That which you call semantics relates to a key thrust of the piece -- people make absurdly precise market predictions on a constant basis...
    Sep 14 03:11 AM | 1 Like Like |Link to Comment
  • Not Even Wrong: Why Data-Mined Market Predictions Are Worse Than Useless [View article]
    No, you are either deliberately being obtuse or completely missing the basics of probablity.

    You can go onto CNBC on any given day and hear predictions of where the S&P will be in six months -- information transmitted in the basic format of "within X time frame, X will happen."

    A money manager who says "I believe the S&P will be at X level by year's end" and a money manager who says "I don't predict the future but I know good things happen to cheap stocks and the intrinsic valuation of my holdings are very favorable" are worlds apart.

    Similarly, a poker player uses odds and probabilities on a constant basis with no means of future prediction at all -- it is literally impossible to know in advance what a turn or river card will be without some elaborate form of cheating, yet decisions on a probabilistic basis can produce consistent profit over a cycle.
    Sep 14 03:06 AM | Likes Like |Link to Comment
  • Not Even Wrong: Why Data-Mined Market Predictions Are Worse Than Useless [View article]
    You are using semantics to play devil's advocate in a manner that blurs a useful distinction. There are many phenomena that appear similar on the surface, yet are qualitatively different on dimensions that are useful to understand -- for someone to come along and say "I don't see the difference," or to willfully deny the difference, adds no value.

    Probabilistic thinking and predicting the future are simply not the same. They are related but different. Failing to understand this perhaps reflects a lack of philosophical familiarity with probability itself. If you understand the divide we are talking about but still reject the difference as immaterial, that is on you.
    Sep 14 03:01 AM | 1 Like Like |Link to Comment
  • The Euro's Pain Is Just Beginning, And Passive Indexers Are Asking For A Punch In The Face [View article]
    Not that simple. First, Buffett himself has said that corporate profits to GDP is one of the best valuation gauges of the market, and by that ratio markets are incredibly overvalued. Second, Buffett has a strong incentive to keep the masses as involved in markets as possible, and uses his bully pulpit to do so. Third, those who follow a passive indexing philosophy often recommend thinking in multi-decade time horizons, which means gritting their teeth beforehand at the prospect of 30 to 50% declines and simply enduring them -- if that's you're cup of tea, good luck with that. Fourth, Buffett is openly hypocritical in saying macro forecasts have no value while strongly and openly making a long-term bullish macro call on the economic trajectory of the United States via US equity markets.

    I think Charlie Munger is the most honest about it. The way Munger puts it, more or less, most Americans are too incapable or irrational (i.e. dumb and panicky) to make wise investments and should just buy index funds because it's the best option they have. It is advice for sheep, and not just any sheep, but sheep with a stoic willingness to be sheared for incredibly large amounts and long periods from time to time. If you want to roll that way, there are trillions that already agree -- takes all kinds to make a market.
    Sep 13 05:08 PM | Likes Like |Link to Comment
  • Not Even Wrong: Why Data-Mined Market Predictions Are Worse Than Useless [View article]
    Haha, I know the feeling. But don't worry, the forces of dumb are all-powerful and overwhelming (or so it seems at times).
    Sep 13 04:59 PM | Likes Like |Link to Comment
  • Not Even Wrong: Why Data-Mined Market Predictions Are Worse Than Useless [View article]
    "This article is wrong."

    It is striking how many SA contributors are flat-out rude and poorly versed in the basics of debate etiquette. That is an incredibly ham-fisted statement, and nothing you say that follows shows why it is "wrong." Nor do we deny that single-variable models can be "good thought tools" or elicit useful comment and discussion. One of the multiple points made is that you don't hang your hat on a single output.
    Sep 13 04:58 PM | Likes Like |Link to Comment
  • Not Even Wrong: Why Data-Mined Market Predictions Are Worse Than Useless [View article]
    You miss the point entirely, befitting your willingness to call someone "ignorant" without understanding what they are saying. It is possible to make a trade based on trends in the numbers and their probabilistic implications -- this is, in fact, something good traders often do. But a logical bet is different than a certain outcome.
    Sep 13 04:52 PM | Likes Like |Link to Comment
  • Not Even Wrong: Why Data-Mined Market Predictions Are Worse Than Useless [View article]
    Well, glad to see you're so open-minded. This guy has declared the discussion closed, everyone go home...

    There is a clear difference between taking advantage of clearly favorable odds and predicting the future. When, say, Howard Marks or Seth Klarman buy large amounts of distressed debt at a major discount to intrinsic value, they aren't making a call as to what will happen next week or next month. They just recognize that, probabilistically speaking, the situation is very favorable given knowledge of fundamentals, past cycles and how markets work. If you don't see the distinction between this and a crystal ball, it's your loss.
    Sep 13 04:50 PM | Likes Like |Link to Comment
  • Not Even Wrong: Why Data-Mined Market Predictions Are Worse Than Useless [View article]
    The difference is that probabilistic decision making relies wholly on information available in the present, while prediction requires guessing as to what will happen next. You don't have to know the future, or even guess at it, if you know the odds are consistently in your favor.

    Say, for example, you are given the opportunity to flip a fair coin where if heads you win 55 cents and if tails you lose 45 cents. It would make sense to take as many flips as possible, because each flip has positive expectation. The more flips you were allowed to take beyond a certain minimal threshold, the more money you would make, without having to know the future of any given flip series or attempting to predict it.
    Sep 13 04:46 PM | Likes Like |Link to Comment
  • The Euro's Pain Is Just Beginning, And Passive Indexers Are Asking For A Punch In The Face [View article]
    Thanks! The euro is certainly likely to stick around a while as a currency - the process of breakup is far too painful for any party to approach it lightly. Until things get truly horrible and some raving demagogue gets one of the periphery countries to take a cue from Scotland, that is.
    Sep 12 10:01 AM | Likes Like |Link to Comment
  • Large-Cap Breakout Failure Is Ominous For Bulls [View article]
    Just to clarify the article formatting, all of the below was 05/13 commentary:

    ~~~~~~~~
    Markets saw a "risk on" surge on Monday, with risk assets rising across the board. Everything from transports to small caps to steel and coal stocks got lifted. We're not buying it.

    We lifted potential long orders for DIA and IYT - and sold off a number of remaining holdings - after digging deeper over the weekend and realizing how unappealing the fundamental internals of this market truly are. Dissonance on the fundamental side increases the odds the breakout is false, or will otherwise turn to slop.

    Small caps are broken, the large cap picture is deteriorating beneath the surface (masked by the biggest names), and the noise to signal ratio feels very high. This ain't the time and place to be surging ahead boldly. As such we are cutting back on exposure and do not want to chase.
    ~~~~~~~~

    What follows was today's piece (05/14)
    May 15 11:48 AM | Likes Like |Link to Comment
  • Your Favorite Beloved Tech Stock Was Just A Giant Macro Bet [View article]
    KING plummeted to new life-of-trading lows today. Emotion and investing should not mix. As we told the other guy, best of luck in your averaging down.
    May 13 06:23 PM | Likes Like |Link to Comment
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