Financial Markets

roger said:
Right. So what does "What I'm saying is that you need to time the entry. if the market's going down, that's all well and good, but you don't want to buy when it's only 25% of the way down." How can anyone follow that advice?
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Ok. The current market is a great example.

You would have seen value somewhere yesterday and bought, because you saw the value. I would have looked at the market and been prepared to risk a bargain in case the market dropped another 2% today. Today, with apparent support at crucial levels, I'd be looking for those bargains you got yesterday and I'd be paying maybe a 1% premium to where you were.

This time, you win. If the market dropped for another month, I win. I guess I'm probably arguing for a conservative apperoach, even with what seems to be a bargain.

roger said:
My contention - you can't. So, like you said, look at the fundamentals. Buy a dollar for 50cents.
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Dealing with physical shares, that's right, but I've always got margins to look at and nothing grieves me more than getting closed by 3 points before a 50 point movement. I think I was probably talking my book!
 
I read somewhere that you need to be right 3/4 of the time to beat someone that just invests in regular intervals (dollar cost averaging).

Assuming that is correct, for you to "win" long term you would have to be right not just about the bottom here, but about 3/4 of all the bottoms.
 
ThunderChunky said:
I read somewhere that you need to be right 3/4 of the time to beat someone that just invests in regular intervals (dollar cost averaging).
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Not quite sure how that works, I'm afraid. You need to find the article so we can see what it actually means, because the comment doesn't tell us anything on its own.

An example would be a small investor who may lose 80% of the time, but hits gold every so often with a big enough scoop to get well in front. Anytime someone makes a hard and fast rule about investment strategies, they're open to being horribly wrong.
 
The Atheist said:
Not quite sure how that works, I'm afraid. You need to find the article so we can see what it actually means, because the comment doesn't tell us anything on its own.

An example would be a small investor who may lose 80% of the time, but hits gold every so often with a big enough scoop to get well in front. Anytime someone makes a hard and fast rule about investment strategies, they're open to being horribly wrong.
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It was a comparison of dollar cost averaging vs market timing. I can't find the article where I heard about that 3/4 rule but this seems like a decent report: www[dot]uwlax.edu/BA/fin/Research/Dollar%20Cost%20Edited.pdf
 
ThunderChunky said:
It was a comparison of dollar cost averaging vs market timing. I can't find the article where I heard about that 3/4 rule but this seems like a decent report: www[dot]uwlax.edu/BA/fin/Research/Dollar%20Cost%20Edited.pdf
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Cheers, you're right, it is an interesting read.

It actually pinpoints that a single market entry at the start will out-perform DCA most of the time, even to the extent of borrowing to invest initially.
 
I'm surprised to find this thread on a sceptical forum - I always thought of economics as having slightly less scientific credibility than astrology (being from the UK I am also sceptical about spelling 'sceptical' with a 'k').
 
Pinguey said:
I'm surprised to find this thread on a sceptical forum - I always thought of economics as having slightly less scientific credibility than astrology
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Eh? Given that global financial markets and economics affect every person on the planet, while astrology affects none, I'm not sure how you arrive at that conclusion.

Pinguey said:
(being from the UK I am also sceptical about spelling 'sceptical' with a 'k').
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Now, that's far more like it!
 
The Atheist said:
Eh? Given that global financial markets and economics affect every person on the planet, while astrology affects none, I'm not sure how you arrive at that conclusion.



Now, that's far more like it!
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The fact that astrology is bunk doesn't mean that the sun and moon have no effect on our lives, just that it does a poor job of explaining how and why this should be and invents forces and principles for which there is no scientific basis to do so. My scepticism arises not from any doubt about the importance of the world economy but from the persistent failure of economics to explain and predict its behaviour. I think it's important to remember that money was invented by people for their convenience - it has no meaning outside this context and so studying it as if it were a force of nature will always produce spurious results.
 
Pinguey said:
I think it's important to remember that money was invented by people for their convenience - it has no meaning outside this context and so studying it as if it were a force of nature will always produce spurious results.
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Does anyone do that?
 
The Atheist said:
Hello, fellow businessmen & women.

If you're in business, I imagine you'll be watching at least one of the world's financial markets and I thought I'd have a try at having a markets thread. This kind of thing works really well in sports.
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You'll imagine wrong.

I'm in business (and an investor) and I have no interest in any financial market. I see no reason why I would.
 
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roger said:
No one can predict the bottom (I assert). I can't think of anyone who makes serious money in the market (by serious I don't mean a few hundred million) that even makes the attempt. Most buy before the bottom is reached, and sell before the top is found. All that is required is to find value. Suppose I offered to sell you a dollar for 50cents. You'd buy every one you could, wouldn't you. Now suppose I offer to sell my dollars for 35 cents to the next person. While it sure would have been great to get that offer, you still made out like a bandit. Since you can't read my mind, you would have been crazy to try to predict what my next offer would have been, and refused the 50 cent offer. After all, my next offer might have been 5cents, 80cents, or 5 dollars. You have no way of knowing, but you recognize a bargain, and scoop it up.

Now, if somebody can counter my assertion that we can't time bottoms, I'd sure like to hear the emperical evidence. I haven't run across it yet.

Personally, I love the market like ths. Almost everything I've bought recently is in the red. So I just keep buying more. I'd be an idiot to complain about a sale. I don't get scared when the safeway puts milk on sale. So long as I don't need this money for the duration of a market cycle (which could be as long as 10 years or so, maybe longer if things go truly bad), I don't care. I can't predict the future, so I'm not going to act like I can.
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As usual, give that man a cigar.
 
The Atheist said:
Ok. The current market is a great example.

You would have seen value somewhere yesterday and bought, because you saw the value. I would have looked at the market and been prepared to risk a bargain in case the market dropped another 2% today. Today, with apparent support at crucial levels, I'd be looking for those bargains you got yesterday and I'd be paying maybe a 1% premium to where you were.
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Huh??? This only applies if you buy the entire "market". Who does that?
 
The Central Scrutinizer said:
You'll imagine wrong.

I'm in business (and an investor) and I have no interest in any financial market. I see no reason why I would.
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Funny you'd be in a thread about them then.

The Central Scrutinizer said:
Wrong. http://www.marketwatch.com/quotes/brk.b
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Or have opinions on them?

The Central Scrutinizer said:
Huh??? This only applies if you buy the entire "market". Who does that?
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Everyone in futures, options and other derivatives. Hardly anyone, really, only about 99% of all broking shops, I guess.
 
Still think it's just people jerking each other around - don't suppose that socialism is too popular on this forum...
 
The Central Scrutinizer said:
Just to correct those who follow them.
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That's great. As soon as you see any misconceptions, you can correct them. I find it odd that someone who claims not to follow any markets would have an opinion on them though.

If you don't know anything about the markets, how on earth would you be able to correct anything.

I confess to being a touch confused.

Maybe you could explain what you actually mean.

English/French/Maori, I don't mind.

The Central Scrutinizer said:
So which "markets" do they own?
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Ah, I see your confusion.

In the sharemarket, traders will say, or type the word "BUY", followed by a certain commodity, share, index or interest rate. When they transact that BUY, they haven't actually bought ALL of it.

If for instance, a share trader says, BUY Microsoft, he isn't bidding for Bill Gates' billions, he is buying a certain number of shares/options/etc.

In the same way, if I BUY an NZX future, I am not offering to BUY the entire NZX at some future date, I am buying a futures contract based upon whether the market as a whole goes up or down.

Cheers.
 
Pinguey said:
Still think it's just people jerking each other around - don't suppose that socialism is too popular on this forum...
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You're right, the whole market is a giant gambling arena, but with a little different odds to casinos or racetracks. Like a good poker player will beat a bad one over a prolonged time, a good trader will beat a bad one.

Socialism can't be too unpopular - there's a sort of pseudo/nouveau-communism business thread over the way which is touching on it.
 
The Atheist said:
If for instance, a share trader says, BUY Microsoft, he isn't bidding for Bill Gates' billions, he is buying a certain number of shares/options/etc.
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You seem very confused. If you're interested in buying Microsoft, why are you tracking the entire market? Odd, that.
 
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