During discussion about things where you had strong opinions and then changed your mind, someone mentioned EMH. Do you believe in EMH and if so is it strong or weak version?
I used to believe EMH but not strongly. The pandemic changed my view because I managed to invest some money when the stock market dived and was clearly influenced by overly pessimistic view of the impact of covid. Some might argue that the market reacted to the irrational government measures, so it is not that the case that the market was mistaken. I still think that investors were equally irrationally pessimistic. I reject the view that this is a hindsight and I was merely lucky. I am not big expert and I did not possess any proprietary information. I had the same information as everybody else, I just didn't let my emotions take over me. This is further confirmed that even today when all the events have passed exactly as predicted, majority of people still maintain their mistaken views that covid was very dangerous to young and non-risk population.
It is the only time when I saw the rest of the society to be so wrong in their views and clearly this was my once-a-lifetime chance. I haven't see any other opportunities for easy money so far but I think that people who are experts in their fields and investors might have been able to find more opportunities.
One of them was found by Michael Burry who definitely saw that the 2008 financial crisis was coming. He wasn't just lucky because he had read and analysed all the documents and had to create special investment instruments to profit for it. In this way, it wasn't easily accessible by laypersons like me who have no time or understanding about investment. Again, most professionals were blinded by collective frenzy.
What is your opinion about EMH?
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Notes -
You reasoning is largely faulty:
"I beat the market once, so the market is inefficient" is pretty obviously faulty. You might as well say "I beat the world champion poker player in three hands, so I'm obviously better."
Pointing to one investor who thought he saw the 2008 crisis coming is also not a knock-down argument. Even if you ignore luck in the sense of randomly getting an investment decision correct, it is still entirely possible that specific investors can see something coming while the market as a whole is efficient in the sense that it's not generally worth trying to beat it (even for the investor who beat it in this particular situation). [ As a toy example, suppose there are 1,000 factors to think about. Suppose if you thought of the correct 3, you could have seen the 2008 crisis coming. If you chose 10 random factors to think about. Your odds of seeing the crisis coming would be 1,384,725-to-1 and it is therefore not worth you spending the time to think about it.]
Broadly speaking, the EMH is largely correct within conventional liquid asset classes over short time horizons during stable economic conditions. It is frequently incorrect between illiquid asset classes over long time horizons in unstable economic conditions. There is a continuum between these two investment scenarios.
Concretely, if you're day-trading stocks during a boom, you're probably playing a losing game. If you're deciding between buying long-term stocks, bonds, or housing during a financial crisis, it is quite plausible that you can find significant relative alpha.
Pragmatically, the most valuable investment questions are typically related to avoiding taxes and choosing appropriate degrees of leverage given your age, life plans, risk tolerance, and interest rates. You can achieve several extra percentage points in risk-adjusted returns by carefully considering those questions.
When I learned that US embassy workers were having unexplained brain damage, many people ascribed that to “sonic weapons” from unknown attackers. The most likely explanation however was that it is probably coincidence and more likely it was mass psychogenic illness. This Havana syndrome is still unresolved but if there was a way to bet on this, the correct way would be to bet against sonic weapons.
Now, if the governments in many countries would wrongly become convinced that it was sonic weapon, it would seem that you lose the bet. But eventually the truth comes out and the bet against sonic weapons has much higher chance to be right.
Covid was something similar to this. When due to human nature collectively we have markets going into wrong direction, you may or may not be able to profit from it but in any case you need to take stance and try to correct the delusion that is harming all of us. If you can it directly by placing winning bets, that's preferrable because it might help other people to realize sooner that their thinking is faulty. Granted such cases are rare, or non-existent for most people.
I assumed that the "unexplained brain damage" was caused, not by "weapons", but by surveillance devices. Enemy countries tend not to be concerned about health when they need to do some spying and the process has them sending out radio waves at windows, or reflectors, or hidden bugs.
And the government probably isn't going to publicize it if they discover it, either.
I don't think that the government knows what caused the brain damage. Was it even “caused” apart from natural progression of certain disorders?
Here is very important thing – people hate uncertainty. That's why they are more likely to believe far-fetched theory about sonic weapons than reject this theory and be left with no explanation.
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