site banner
birb_cromble  1mo ago (text post)   1672 thread views

Weekly Finance Thread

Since a lot of us here have expressed interest in not starving to death in a gutter, I figured I'd start a weekly thread to discuss financial matters.

Ground Rules

  • Remember that we're all just Internet randos. Don't bet your life savings on a hot tip from this thread.
  • Keep culture war in the culture war thread. Yes, global events may impact our personal finances, but that does not mean we have to incessantly harp on culture war aspects here. If you are going to discuss it, please stick to the practical impacts of it on an individual level.
  • Be kind. Remember that everyone here comes from different circumstances. We all have different resources available and different risk tolerances.
  • Don't let the perfect be the enemy of the good. Better is better. Celebrate people when they take a step up and work to move their finances in the right direction. Don't flame out because they haven't followed what you consider the optimal path. Everybody has to start somewhere.
7
Top Bottom Old Controversial Comments
Jump in the discussion.

No email address required.

Whatever that guy is selling is obviously false.

Should be easy to show why and score a black eye on Big Dollar Cost Averaging.

I think it’s because he’s also not selling the rip.

Timing both the peak and the trough is significantly harder than timing just the trough though.

Also noticed he doesn’t seem to pay interests to cash balances.

True, but he's looking at S&P valuation corrected for inflation so I think that's implicitly assuming that cash reserves keep their real value.

Jane St made 17b last quarter. This place is filled with those types.

I don't think even this august forum is "filled with" some of the smartest people in the country. Also note that Jane Street employees 3500 people working together to make that money rather than lone forum posters. The odds are... Not great, even if you are a genius.

Should be easy to show why and score a black eye on Big Dollar Cost Averaging.

Trivial observation: If you have perfect information, your strategy should not do worse than one that ignores it.

There are two errors he's making1: He's buying when a drop is forthcoming, and failing to buy at a price that's the lowest it will ever be. The proper strategy looks like this. Every dollar buys the most shares that it would ever be offered (e.g. your December 1999 dollars will eventually be offered the 2009 price, so don't buy the microdip in January 2000. Your 2010 dollars will never get a better deal, so don't wait for 2012ish.).

I guess I'm more powerful than God? Feels weird.

1 If he was highlighting the mistake for other people instead of making it himself, I'd think he would show more analysis of exactly why it fails, instead of the raw fact that a flawed strategy can be bad.

He's buying when a drop is forthcoming, and failing to buy at a price that's the lowest it will ever be.

This isn't true - he's buying at the bottom between every pair of ATHs.

The point isn't that this is the best you can do with perfect information - the point is that even if you time each trough perfectly you still usually lose to DCA. More complicated strategies can beat DCA, but they are even harder to get right.

This isn't true - he's buying at the bottom between every pair of ATHs.

Both things can be true. For example:

  1. He bought in January 2000
  2. There was a drop ranging from 2001-2009
  3. Therefore, he bought when a drop was coming.

and

  1. He didn't buy in 2010
  2. Prices never went down as low as they were in 2010 again
  3. Therefore, he failed to buy at a price that was the lowest it would ever be

The algorithm he followed wasn't looking for that, but it happened anyways.

The point isn't that this is the best you can do with perfect information

The blog post could've fooled me. Between the implication that DCA is generally unbeatable and his talks about market timing in general, I'd expect it to do more than shoot down an obviously-flawed strategy while covering up its flaws.

My strategy ("skip the bubbles"? idk a good name) also matches opt-out's post better than buy-the-dip does, as buy-the-dip always buys one wobble before the stock's bubble bursts.

To be clear I never proposed by the dip versus DCA. I kind of get his math. The key thing is he’s not always buying after a 14% 1 month rally. I proposed market timing which is not the same thing. MOST of the time DCA is better than buy the dip because equities usually go up, but it’s NOT always better. By claiming he had “perfect” information it implied he was doing a lot more trading. Then he threw together a backward optimized test with parameters that made his article look smarter. Obviously if you know every tick of the index you could absolutely crush basically every trading system. You turn $1k into a $1 billion in a year.

Jane St literally recruited off of this forum so I assume there are some lingerers.

The key thing is he’s not always buying after a 14% 1 month rally.

Sure. But he's buying at the trough between each ATH. "You can do better with perfect information if you trade more often" is not a rebuttal - in real life you don't have perfect information and having to make more perfect trades to beat DCA is harder than the outlined strategy.

Jane St literally recruited off of this forum so I assume there are some lingerers.

How? When?

They advertised on the origional blog before rationalism got popular. Not sure on exact dates and perhaps this is a dumber offshoot.

Unfortunately the cream of the crop of the people reading SSC in 2012 or whatever was probably sharper than the smartest people who followed our chud forum across three (?) exoduses.

Probably true. Rationalist got dumbed down a lot. It use to be just a very niche community at like a couple schools. Jane St though was not Jane St then.

What is this place?

This website is a place for people who want to move past shady thinking and test their ideas in a court of people who don't all share the same biases. Our goal is to optimize for light, not heat; this is a group effort, and all commentators are asked to do their part.

The weekly Culture War threads host the most controversial topics and are the most visible aspect of The Motte. However, many other topics are appropriate here. We encourage people to post anything related to science, politics, or philosophy; if in doubt, post!

Check out The Vault for an archive of old quality posts. You are encouraged to crosspost these elsewhere.


Why are you called The Motte?

A motte is a stone keep on a raised earthwork common in early medieval fortifications. More pertinently, it's an element in a rhetorical move called a "Motte-and-Bailey", originally identified by philosopher Nicholas Shackel. It describes the tendency in discourse for people to move from a controversial but high value claim to a defensible but less exciting one upon any resistance to the former. He likens this to the medieval fortification, where a desirable land (the bailey) is abandoned when in danger for the more easily defended motte. In Shackel's words, "The Motte represents the defensible but undesired propositions to which one retreats when hard pressed."

On The Motte, always attempt to remain inside your defensible territory, even if you are not being pressed.


New post guidelines

If you're posting something that isn't related to the culture war, we encourage you to post a thread for it. A submission statement is highly appreciated, but isn't necessary for text posts or links to largely-text posts such as blogs or news articles; if we're unsure of the value of your post, we might remove it until you add a submission statement. A submission statement is required for non-text sources (videos, podcasts, images).

Culture war posts go in the culture war thread; all links must either include a submission statement or significant commentary. Bare links without those will be removed.

If in doubt, please post it!


Rules


Recommended Posts And Communities

Recommended Realtime Chats