great site/service if you can trade in your 401k

[PCL_128]

Investing in stocks because of patterns seen on a chart has made people billionaires, too.

Nope, not really. There's a reason that there isn't a famous technical analyst billionaire like there's a famous value investor like Buffett: because technical analyst billionaires don't exist. They get paid low six figure salaries to make fools of themselves on CNBC, or they get paid big bucks if they're good enough salesman to sell picks on a website or convince investors to give them money to invest, for which they charge a huge fee (to deliver sub-par results, of course).

That's why technical analysis is alive and well today. He11, there are probably lots of people who have read a charlatan like Kiyosaki and have become millionaires buying and selling real estate and shunning the stock market like he espouses. However, just because "numerous" people have made money using any particular method (pick your favorite) doesn't automatically validate a particular method nor does it prove that one is destined to make market beating returns in the future.

You should read the same article I mentioned to RedDog earlier: "The Superinvestors of Graham-and-Doddsville." Buffett specifically addresses your argument here. The short version of the article is that if you had 200k investors all studied, and 250 of them beat the market over 30 years, then that wouldn't be statistically significant. It could easily be an aberration with those kinds of numbers. But if you found that all 250 (or even just a third of them) all went to the exactly same school and invested using the exact same methods, then suddenly it becomes very statistically significant. To the point that it's no longer possible that it's just chance. And that's exactly the case with true value investing. Buffett goes through a big list of them in the aforementioned article and shows their results. Give it a read.

According to Wikipedia (the source of all truth), there are about 14,000 mutual funds in the US today. Out of those 14,000, there are probably 1,000s of mutual funds that undertake a fundamental analysis of the companies they purchase. They DO have the time to make accurate analyses of just about any company they want. These funds hire the best and the brightest the financial services industry have to offer. They have a huge amount of computing power at their fingertips. They hire highly educated guys/gals with lots of initials after their name who work 80+ hour weeks.....yet.......

When you look at the financial performance of mutual funds (for example), especially over long periods of time, they underperform their benchmarks. Depending upon who you're reading, over a 10 year period, 70%-80% of mutual funds underperform their stated benchmarks, not even taking into consideration survivorship bias. Look back 20 years and the record is even worse.

So my question is this....if what you say is true. If all one has to do is undertake a proper fundamental analysis of company stock before making a purchase, why do mutual fund managers continually underperform? Even the ones that use fundamental analysis? Even the ones that make concentrated bets and few trades using fundamental analysis? Even the ones that make lots of bets and make lots of trades using fundamental analysis?

We're not just talking fundamental analysis here. We're talking a very specific subset of fundamental analysis: deep value investing in the vein of Graham, Dodd, Buffett, Munger, Fisher, etc. The kind of investors who don't pull the trigger on a purchase unless they see a discount to intrinsic value of 30+%.

But there's also another reason that you don't see great performance from mutual funds, even with the best and brightest: because nobody is willing to pay a management fee to a money manager who goes months between making trades. Managers feel the need to constantly be showing work. They need to be buying and selling something, otherwise they worry that investors will feel they aren't doing their job and take their money elsewhere. That's why you see even funds that Morningstar would classify as "value" funds with turnover rates over 50%. Are these really value funds? Absolutely not. They're only value funds by comparison to the growth funds, which sometimes have turnover rates of over 100%. Turnover kills profits, and no true value stock matures to its intrinsic value in less than a year.

 

[redflyer65]

Nope, not really. There's a reason that there isn't a famous technical analyst billionaire like there's a famous value investor like Buffett: because technical analyst billionaires don't exist. They get paid low six figure salaries to make fools of themselves on CNBC, or they get paid big bucks if they're good enough salesman to sell picks on a website or convince investors to give them money to invest, for which they charge a huge fee (to deliver sub-par results, of course).

That's like sticking your neck out 10 feet and saying your right about everything.

I agree that value investing is ONE way of investing, and it's worked for some. (and I agree with almost everything you've said about it), but as good as it is, it's still not the be all, end all of investing. If it works for you, then that's great. But it's just one way of doing things.

There are plenty of people that have made millions off....

Value investing.
Growth investing.
Fundamental investing.
Technical analysis.
Foreign investing.
Commodity investing.
Options trading.
Mutual fund investing.
Leverage trading.
Bond trading/investing.
Derivative trading.
Futures trading.
Currency trading.
Providing venture capital.

Some are trading.....some are investing. Big difference.

I could go on and on. You get the idea. If value investing is your deal, that's great. But don't tell others that HAVE made money in the market without it they don't know what they are doing, or that it's bunk. That's pretty naive in the investing world.

What about using Fundamentals with technical analysis?

What about fundamental/technical investing in micro cap stocks? I've made thousands of dollars there. It may not be for everyone but it's just a different way of doing things.

I say..Whatever works for you.

Don't like a newsletter or website, then leave. There's no right or wrong answer and to each their own. And I say that knowing that value investing is a valid approach, but it's one of many.

 

[vixin]

Who wants to take bets PCL128 is on the SWA senority list Jan 1st, 2015?

Or full time union stooge at ALPO?

 

[PCL_128]

There are plenty of people that have made millions off....

Value investing.
Growth investing.
Fundamental investing.
Technical analysis.
Foreign investing.
Commodity investing.
Options trading.
Mutual fund investing.
Leverage trading.
Bond trading/investing.
Derivative trading.
Futures trading.
Currency trading.
Providing venture capital.

Some are trading.....some are investing. Big difference.

I could go on and on. You get the idea. If value investing is your deal, that's great. But don't tell others that HAVE made money in the market without it they don't know what they are doing, or that it's bunk. That's pretty naive in the investing world.

The difference is statistical significance. While you can find some people who have made money with a wide variety of investing techniques, they aren't in a statistically significant group. In other words, when you find someone who has made money day trading currencies, he's just been lucky. As Buffett explained, the same is not true of the form of investing that he (and Graham's other adherents) practice.

What about using Fundamentals with technical analysis?

A waste of time. Technical analysis is akin to astrology.

 

[PCL_128]

Who wants to take bets PCL128 is on the SWA senority list Jan 1st, 2015?

Or full time union stooge at ALPO?

Nope, I'll be neither. I'm somewhat doubtful that I'll still be on the seniority list on Jan 1st, 2014.

 

[ualdriver]

Nope, not really. There's a reason that there isn't a famous technical analyst billionaire like there's a famous value investor like Buffett: because technical analyst billionaires don't exist. They get paid low six figure salaries to make fools of themselves on CNBC, or they get paid big bucks if they're good enough salesman to sell picks on a website or convince investors to give them money to invest, for which they charge a huge fee (to deliver sub-par results, of course).

James Simons
Ray Dalio
Steven Cohen
Paul Jones

There's 4 for you. I'll read your article.

 

[redflyer65]

A waste of time. Technical analysis is akin to astrology.

That's your opinion. People have made billions selecting growth companies at the correct buy point. Mostly associated with basing patterns and high volume breakouts.

Main point being....it begins with great fundamentals and then adds technical analysis after finding the right companies.

You want to call it a waste of time, you'd be wrong. Just a different style of investing. Maybe not for you, but it works more times than not.

If the companies fundamentals aren't good, then you look elsewhere.

 

[PCL_128]

James Simons

Simons falls into the second category I mentioned: getting rich off of incredibly high fees. He charges a 5% of gross assets under management fee just for the privilege of allowing him to manage your money, and then he takes 44% of profits, one of the highest rates ever recorded. In other words, he makes over a billion dollars a year just for holding the money, and he takes almost half of the profits in addition to that. It's pretty easy to rack up a $10 billion fortune when you're taking $1.4 billion annually in the equivalent of salary. By contrast, when Buffett was managing an investment partnership, he charged zero management fee and only took 25% of the profits that exceeded an 8% return.

But, it is impressive the kind of returns that Simons managed to get for the fund itself. Of course, this is one of those statistical anomalies that are bound to happen. As Buffett said in his article, if everyone in America flipped a coin repeatedly and was paid a geometrically increasing amount of money every time the coin flip turned up heads, then there would be a small handful of people who would end up making ungodly amounts of money just because mathematically, when that many people are engaging in a 50/50 probability activity, a certain tiny percentage will get incredibly lucky and hit heads over and over again. It's just the math of binomial distribution. The only time it's statistically significant is if you can come up with a decent number of people engaging in the same activity using the same investment strategy and creating the same results. With Simons, no one even knows exactly what his strategy is.

Ray Dalio

Same thing. Getting rich off of fees. He charges a 2% management fee and takes 20% of profits. Just in management fees, his firm collects $2.4 billion per year.

Steven Cohen

About to be charged with insider trading. Need I say more?

Paul Jones

Another guy getting rich off of fees. He charges a 4% management fee and takes 23% of profits. That's a half billion per year just in fees before you even start to look at profits. With those numbers, it's amazing he only has a personal fortune of $3 billion.

Buffett would have a trillion dollars in personal fortune today if he had been charging these sorts of outrageous management fees to his investors.

 

[PCL_128]

That's your opinion.

Actually, no, it's what countless peer-reviewed studies have proven.

 

[Diesel-9]

There is something for everyone but I'll stick with conservative methods. Averaged 18.3% return a year the last decade the old fashion way. Be careful out there. Best advice I got when hired? Keep your first (current) wife, and don't ever listen to airline pilots for investment advice. You know how to make a pilot a millionaire? " Give him $3 million! "

 

[ualdriver]

You told me billionaire technical analysts don't exist, and I give you 4. They made their billions as successful technical anaysts, but now you're saying that they made it through fees. How do you know that? They made much in fees likely, sure. What percentage of each person's net worth was made through fees vs. investing their own money if you are going to claim they don't count? Even if ALL of their net worth was through fees (doubtful) they WERE successful chartists (or at least to people who invest that way) and that is how they made their billions... with successful technical analysis of stock.

Cohen hasn't been convicted of anything. Innocent until proven guilty. I don't even think he has been indicted. If he is convicted, cross him off the list.

I still haven't read the article put will sometime during my trip.

 

[PCL_128]

You told me billionaire technical analysts don't exist, and I give you 4.

I think it was clear that I was talking about someone who actually got to be a billionaire by investing using technical analysis. I'm sure there are plenty of billionaires who buy into the technical analysis myth, as it's quite popular nowadays (just watch CNBC), but they didn't get their fortunes from it.

They made their billions as successful technical anaysts, but now you're saying that they made it through fees. How do you know that?

Because I can do math. Just take a look at their net worths, look at their income each year from just management fees, and look at how long they've been managing this massive amount of money at such high fees. When you do the math, it's easy to see where their money came from. Either that or they're spending hundreds of millions of dollars of investment returns a year on hookers and blow.

Even if ALL of their net worth was through fees (doubtful) they WERE successful chartists

Not sure how you draw that conclusion. There are thousands of mutual funds that have below-average performance and charge ridiculous fees for the privilege of keeping your money with them. Just because someone commands ridiculous money management fees doesn't mean that he deserves it based upon his performance. Another issue with hedge funds is that they're typically so secretive that you really don't know how they're making their money. While technical analysis may be a part of it, we really don't have any way of knowing how much of a factor it plays into the investment returns that they've made. As Bill Gross said today, most successful money managers aren't good; they're lucky. Which goes right back to Buffett's commentary on looking for statistical significance, which you find easily in the Graham-Dodd value investing community, but you don't really find elsewhere.

Cohen hasn't been convicted of anything. Innocent until proven guilty. I don't even think he has been indicted. If he is convicted, cross him off the list.

The prosecutors are slowly working their way up the corporate ladder until they get enough evidence to convict him. It's been enough so far that I think the old maxim applies: "where there's smoke, there's fire."

I still haven't read the article put will sometime during my trip.

I think you'll find it interesting.

 

[ualdriver]

Dude, I don't know what kind of relationship you and Warren have going, but it is seriously clouding some of the statements you make. First, you already have a guy convicted who hasn't even been indicted yet, if he gets indicted at all. He could be guilty. If he is guilty, cross him off my list.

Back in post #81 you imply that that there are no billionaire chartists, and I give you 4. They made their billions running hedge funds using what appears to be technical analysis from outside observation. Their skills as CHARTISTS made them billionaires. They didn't make those billions by selling lemonade or opening department stores. If you had invested $10,000 with James Simons, for example, in 1990 in his quantitative hedge fund, it would have been worth around $4M in 2007. Did he make money on fees? Yeah, sure he did. He (his hedge fund I should say) got big fees because he made big profits trading on technical analysis. You criticize guys like him for collecting big fees, but he couldn't have collected those big fees unless he had been successful. Have you heard of "2 and 20?" If you're a hedge fund and you lose money, you get 2% (in this example) If you make a profit, you get the extra 20% (in this example). Hedge fund managers make their "big" money by taking a big share of the profit from trading. If his trades hadn't been extremely profitable, he wouldn't have become a billionaire. He didn't become a billionaire collecting 2% fees from a money losing hedge fund.

Did he collect every dime that came in? Of course not. You can't do "math" and say yeah, all of his net worth is from fees. Did he have partners and staff and employees he shared that money with? He probably did if it's like any other hedge fund I have read about. One article says he had almost a 100 PHds on staff. Do you think he made a "buck or two" as a succesful CHARTIST? Invested his own money? He got to be a successful hedge fund manager BECAUSE he was a successful chartist. If he wasn't a successful chartist, he wouldn't have become a billionaire.

Just because you (and I) don't believe in that particular brand of investing doesn't mean that aren't successful people who did make millions (or billions) using those techniques with luck or skill. I'm not even debating you because I disagree with you about technical analysis. But you're making these blanket statements (like in #81 & 75) that I don't believe to be true.

BTW, now I'm going to ask you to prove that aforementioned point. You say in Post #75:

"Pretty much everyone who follows the same Graham-Dodd basic framework watches their wealth compound over the long-term at a rate far exceeding that of the overall market"

Can you give me numerous examples of "everyone?" If RedDog changes his mind, where does he find "everyone" so he can invest with them? Do they have an auditable track record and can I view it? Could you specifically quantify "far exceeding" using recent performance, and not just from the mid 1980's? I'm sure in the intervening 30 years or so that long term rate has continued, particularly with those hand picked in the article? Thanks.

 

[RedDogC130]

I am purposely staying out of this because it is with PCL. After watching his comments over the years. I have no desire 1 to argue w him 2 to justify any investing strategy. all I am trying to do is show that there is a good service out there. If u think I am trying to just make $ off people. Go register from a different computer and I don't make a penny. I could really care less. This service is more about people learning than piggy backing trades. When you learn his techniques. You can make your own trades outside his. I have many occasion where I have gotten into a trade before him and then he alerts it and u would be shocked with the inflows of $ into the security and it rockets. He has the highest rated chat room in the financial circles. I was shocked the first time i watched his alert come out and pulled up a 5 min chart and the candles and volume was amazing. His following is huge. This is not a fly by night operator. Nobody is forcing anyone to do anything. Heck his ZNGA pick was up over 14% today. The guy has made over 70k ytd. I have seen the alerts live. He is not b.s.ing the stats. He has had losers no doubt as I would expect and hope. Not much else I can say.

 

[PCL_128]

Dude, I don't know what kind of relationship you and Warren have going, but it is seriously clouding some of the statements you make.

Buffett is an investing god. Yes, I idolize the man. But no, it doesn't cloud good judgement. It creates good judgment.

Back in post #81 you imply that that there are no billionaire chartists, and I give you 4. They made their billions running hedge funds using what appears to be technical analysis from outside observation. Their skills as CHARTISTS made them billionaires. They didn't make those billions by selling lemonade or opening department stores. If you had invested $10,000 with James Simons, for example, in 1990 in his quantitative hedge fund, it would have been worth around $4M in 2007. Did he make money on fees? Yeah, sure he did. He (his hedge fund I should say) got big fees because he made big profits trading on technical analysis. You criticize guys like him for collecting big fees, but he couldn't have collected those big fees unless he had been successful. Have you heard of "2 and 20?" If you're a hedge fund and you lose money, you get 2% (in this example) If you make a profit, you get the extra 20% (in this example). Hedge fund managers make their "big" money by taking a big share of the profit from trading. If his trades hadn't been extremely profitable, he wouldn't have become a billionaire. He didn't become a billionaire collecting 2% fees from a money losing hedge fund.

Did he collect every dime that came in? Of course not. You can't do "math" and say yeah, all of his net worth is from fees. Did he have partners and staff and employees he shared that money with? He probably did if it's like any other hedge fund I have read about. One article says he had almost a 100 PHds on staff. Do you think he made a "buck or two" as a succesful CHARTIST? Invested his own money? He got to be a successful hedge fund manager BECAUSE he was a successful chartist. If he wasn't a successful chartist, he wouldn't have become a billionaire.

Just because you (and I) don't believe in that particular brand of investing doesn't mean that aren't successful people who did make millions (or billions) using those techniques with luck or skill. I'm not even debating you because I disagree with you about technical analysis. But you're making these blanket statements (like in #81 & 75) that I don't believe to be true.

I think I've sufficiently responded to all of this. They make their big money off of fees (the math is plain and simple, even for a 5th grader), and the money they make off of profits is gravy. As in any large collection of people, there will be statistically insignificant examples of people who do well on a 50/50 proposition. That's all you've provided here, in stark contrast to the statistically significant examples of Graham-Dodd.

BTW, now I'm going to ask you to prove that aforementioned point. You say in Post #75:

"Pretty much everyone who follows the same Graham-Dodd basic framework watches their wealth compound over the long-term at a rate far exceeding that of the overall market"

Can you give me numerous examples of "everyone?" If RedDog changes his mind, where does he find "everyone" so he can invest with them? Do they have an auditable track record and can I view it? Could you specifically quantify "far exceeding" using recent performance, and not just from the mid 1980's? I'm sure in the intervening 30 years or so that long term rate has continued, particularly with those hand picked in the article? Thanks.

Buffett provides "numerous examples" in his article. And they aren't "hand picked," they're the people he learned to invest with in Graham's classes in business school. They all used the same underlying principals that Graham taught, and that's how they made their fortunes. And that's why it is statistically significant. It also happens to be why, after nearly 30 years, there has still never been an article written or a study conducted that attempts to refute Buffett's points in the article. It can't be done. It is mathematically impossible for such a large sample of people who use the same investing techniques to beat the market by such wide margins simply by chance.

 

[PCL_128]

And UAL, if you think Buffett's speech is "too old," and you want something more current, take a look at a paper written in 2006 called "Graham and Dodd Revisited," which is basically a modern follow-up of Buffett's original speech/article to see if the same principals still work in the 2000s. The short answer? Yes, and in spades. Here's the article: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=878145

 

[ackattacker]

I am purposely staying out of this because it is with PCL. After watching his comments over the years. I have no desire 1 to argue w him 2 to justify any investing strategy. all I am trying to do is show that there is a good service out there. If u think I am trying to just make $ off people. Go register from a different computer and I don't make a penny. I could really care less. This service is more about people learning than piggy backing trades. When you learn his techniques. You can make your own trades outside his. I have many occasion where I have gotten into a trade before him and then he alerts it and u would be shocked with the inflows of $ into the security and it rockets. He has the highest rated chat room in the financial circles. I was shocked the first time i watched his alert come out and pulled up a 5 min chart and the candles and volume was amazing. His following is huge. This is not a fly by night operator. Nobody is forcing anyone to do anything. Heck his ZNGA pick was up over 14% today. The guy has made over 70k ytd. I have seen the alerts live. He is not b.s.ing the stats. He has had losers no doubt as I would expect and hope. Not much else I can say.

Sounds like a classic pump and dump. Great way to rig the system and make money by suckering a large number of "followers" into inflating a stock price. Then the insiders get out before the whole thing crashes and the "followers" get screwed. There is a reason his website is entirely owned by a paid stock promoter. Could not imagine a more sketchy arrangement.

 

[RedDogC130]

Sounds like a classic pump and dump. Great way to rig the system and make money by suckering a large number of "followers" into inflating a stock price. Then the insiders get out before the whole thing crashes and the "followers" get screwed. There is a reason his website is entirely owned by a paid stock promoter. Could not imagine a more sketchy arrangement.

Don't know too many pump and dumps that actually short stocks so your assumption is not correct. Pump and dumps are designed to trap the person buying. Swing trading is totally different but obviously you have no clue about that.

 

[Andy]

Don't know too many pump and dumps that actually short stocks so your assumption is not correct. Pump and dumps are designed to trap the person buying. Swing trading is totally different but obviously you have no clue about that.

Shorting penny stocks? Timmy Sykes (a famous pump and dumper) is starting to push that concept ... dump the pump. He looks at stocks that are being set up for the pump and dump and recommends shorting them when he thinks they've peaked.

TA's a valuable investment tool. Penny stocks is a negative alpha sandbox.

 

[RedDogC130]

Who is talking penny stocks?