Is a profit of 100% per year good enough?

[NickF]

ROE, don't laugh please! I read it in a book, so it must be true!

I decided to check if what I read applied to the Australian stocks, so I loaded All Ordinaries from 1984 (earliest it could be downloaded from Yahoo Finance).

Found out the following: the market lost money in 1987, 1990, 1992, 1994, ended flat in 2000, lost money in 2002, 2008, 2010, 2011. So far, for the last three decades never made money in a year ending in zero
So far, 2014 appears to be a pretty slow year...

Nick

 

[DeepState]

I decided to check if what I read applied to the Australian stocks, so I loaded All Ordinaries from 1984 (earliest it could be downloaded from Yahoo Finance).

Found out the following: the market lost money in 1987, 1990, 1992, 1994, ended flat in 2000, lost money in 2002, 2008, 2010, 2011. So far, for the last three decades never made money in a year ending in zero
So far, 2014 appears to be a pretty slow year...

Nick

Crikey...I thought you were kidding.

So, let me get this straight. You look at a length of time in the past. Each year ends in a number 0-9. These are classified in terms of returns. Amazingly, the returns to each year end are different. And, as a result, some do better than average and some do worse. And then...there is a stock picking system based on that which assumes the past outcome can be extrapolated? That years ending in 5 will produce better returns than those ending in 0 or 7? BTW, I've checked the stats from S&P500 from 1954 to present day and can tell you that there is absolutely nothing meaningful in it. It's just another form of combat training the NASA monkeys do.

By the way, I thought I'd hide the identity of the author and the winning book by giving them fictitious characterisations. But your raising the 5,0 and 7 year observation (which is factually correct in terms of actual outcomes, as one NASA monkey won the tournament and a bunch got wiped out in the first round of the tournament) means that you have probably read the book. To your credit, it was in an advanced chapter.

Neiderhoffer has probably forgotten more than most of us will ever know. It is admirable that you are prepared to look at failure and learn from it. Yes, he did throw 9 heads and his tail got blown off into the 12th dimension with the next throw. If you think there is skill in creating a situation where you can engineer this type of outcome....well, you probably need to read his book again.

As for Value Line, they were definitely on to something in the early years. But eventually the market figures it out. Their charts don't show anything for transactions costs for a process which rebalances weekly for a process that targets 6 monthly outcomes. Such a process would churn the portfolio like a kitchen cake mixer. Nor does it allow for the frictions of tax. In any case, the efficacy of the key strategy - Timeliness, which can be seen by subtracting the top group return from the bottom group return has turned meaningfully negative since 2000. That's a time period of 14 complete years. Given the strategy commenced from the late 1960s, that's a fare sample that has not shown promise and is consistent with strategy erosion. That's the most recent third of the data set. Any comparison to the S&P500 should be aware that the construction universe is much larger and thus contains a massive small capitalistation bias and is a big driver.

Overall, welcome to the market. Whilst some the people on the thread and I may disagree with your conclusions/assertions you are definitely prepared to put yourself out there and see what happens, probably learning a little at a time. Good on you. I hope it works out.

 

[luutzu]

I decided to check if what I read applied to the Australian stocks, so I loaded All Ordinaries from 1984 (earliest it could be downloaded from Yahoo Finance).

Found out the following: the market lost money in 1987, 1990, 1992, 1994, ended flat in 2000, lost money in 2002, 2008, 2010, 2011. So far, for the last three decades never made money in a year ending in zero
So far, 2014 appears to be a pretty slow year...

Nick

Nick, are you pulling our legs man.

Even if those were true, it's the general market that's rising, not any particular stock you are going to pick.

So if you believe that system, then buy the index, not any dozens of stocks... and if a couple dozen trades, you will need to hold onto them for at least the entire year.

 

[NickF]

Nick, are you pulling our legs man.

Even if those were true, it's the general market that's rising, not any particular stock you are going to pick.

So if you believe that system, then buy the index, not any dozens of stocks... and if a couple dozen trades, you will need to hold onto them for at least the entire year.

I wouldn't say I am pulling your legs. I consider this rather to be food for thought. Some people in the past published studies based on the last digit of the year and its statistical significance to the outcome in the market. At that time, it probably appeared to have some statistical significance. I don't know if anybody tried to take advantage of this and if they made any money in case they did.
If you ask me if I'd rather start (long) trading in a good year or a bad year, I would prefer (especially for my moral) a good year. Probably the real answer would be "start trading as soon as possible, it's about the time in the market, not the timing in the market", provided one has a strategy they are pretty confident with - well, as confident as you can be with the stock market.
And I read somewhere in this forum a saying, that a high tide is raising both small boats and big boats - even if you only pick a few shares out of the lot, you probably have better of making more (or losing less) in a good year, compared to a bad year. Just look at 2007-2008 - no matter what you bought in a bad year, you probably ended up losing quite a lot. And even a small statistically significant improvement in a chance should not to be dismissed - I would rather make a profit of 0.1% instead of losing 0.1%.
There are also more studies, based with what happens when a stock drops x weeks, than raises, etc. Even if they are not (anymore) correct, I think this method of questioning if something gives good results is correct.

Nick

 

[NickF]

Crikey...I thought you were kidding.

Overall, welcome to the market. Whilst some the people on the thread and I may disagree with your conclusions/assertions you are definitely prepared to put yourself out there and see what happens, probably learning a little at a time. Good on you. I hope it works out.

Thank you DeepState for the comments, they are sensible.

I am in the knowledge accumulation phase - I try to learn and sometimes I make a splash in the forums, while having some fun.
On a serious note - I was most impressed with two of the books of Nick Radge - one was a free e-book, the other one I purchased the e-version. I open wide eyes when I saw that his mechanical strategy of picking stocks actually does show a profit for my chosen portfolio and other portfolios that I picked at random from USA.
I didn't read the books, I just browsed through them - however, I plan to read them carefully, because they are dealing with matters that I'm interested in in a manner that is to my way of thinking.
I am also interested in the turtle traders - system also praised by Nick Radge. Havent got the book yet. I understand Dennis Richard in the end lost heaps of money - so apparently he either deviated from his method, or the market got smarter (after many years).
I read about the theory that the market gets smart quick enough and if a method makes money, it won't make money for too long. I expect this to happen more frequently in the future, with all the smart people and the exponential increase in computing power - but there is probably some hope left for the small fish in the sea. After all, when a perfect system will be invented, there won't be any ripples in the share market - but I think I am quite safe to say that will never happen.

Just a question - is your nickname a statement or an aspiration?

Nick

 

[pinkboy]

As 'Retired' is past tense, I'd say 'DeepState' is a statement.

pinkboy

 

[NickF]

As 'Retired' is past tense, I'd say 'DeepState' is a statement.

pinkboy

Are you chasing me, pinkboy?
If he indeed managed to retire young, I will listen more carefully to what he has to say.
If I follow his advice, maybe I will have the chance to retire, some day...

 

[pinkboy]

Don't flatter yourself. Actually I'm holding back being relatively new to the forum because your posts would be easy to troll!


I press the 'New Post' icon and reply to whatever is up at the time.

RY has some good posts recently. I have been following those who give good, structured and evidence backed 'advice'.

Your best bet to retiring is to have an end goal, and work backwards from there. Simply saying 'I want to retire' is far too vague. Retire on what income? Retire but working/volunteering part time? Retiring travelling the world on a permanent holiday? With the end gold in place , work back X years I need this much income and X years I need this much Unencumbered assets etc. Put your strategy in place, and work at it. You might need to be flexible at times, but you will know as you go along whats working and what not.

Happy investing.

pinkboy

 

[NickF]

Don't flatter yourself. Actually I'm holding back being relatively new to the forum because your posts would be easy to troll!

I press the 'New Post' icon and reply to whatever is up at the time.

RY has some good posts recently. I have been following those who give good, structured and evidence backed 'advice'.

Your best bet to retiring is to have an end goal, and work backwards from there. Simply saying 'I want to retire' is far too vague. Retire on what income? Retire but working/volunteering part time? Retiring travelling the world on a permanent holiday? With the end gold in place , work back X years I need this much income and X years I need this much Unencumbered assets etc. Put your strategy in place, and work at it. You might need to be flexible at times, but you will know as you go along whats working and what not.

Happy investing.

pinkboy

I want to retire and travel the world. Some wise people say that most of us dream small and we reach our goal. Better dream really big and even if we only get half way through our goal, we'll still be better off than in the first place

Who is RY? Looked up in the forum list for somebody named RY and could not find one. Could you please point me to him? I also want to learn.

Nick

 

[pinkboy]

Might want to work on a few IQ points before getting into pips and ticks.....

pinkboy

 

[NickF]

Might want to work on a few IQ points before getting into pips and ticks.....

pinkboy

But Warren Buffet told me I don't need any more IQ points than I already have in order to be a successful trader. Do you imply he lied to me?

Nick

 

[NickF]

Might want to work on a few IQ points before getting into pips and ticks.....

pinkboy

Ugh, I finally got it! RY is DeepState Who said there is no hope for the less bright of us?

Some extremely rich guy was giving the following test to check the people who wanted to work for him:

OTTFW

and was asking them to tell what follows next. If those guys gave the right answer too soon, he would not hire them, because they were too smart. If they took too long to answer or were giving the wrong answer, he wasn't hiring them, because they were too stupid to work for him

Nick

 

[DeepState]

But Warren Buffet told me I don't need any more IQ points than I already have in order to be a successful trader. Do you imply he lied to me?

Nick

He lied, or you have a faulty recollection. It could be both. Buffett said you don't need more than 130 IQ points to invest successfully. Beyond that, trade it in for temperament.

 

[DeepState]

Are you chasing me, pinkboy?
If he indeed managed to retire young, I will listen more carefully to what he has to say.
If I follow his advice, maybe I will have the chance to retire, some day...

I dinged the bell shortly after my 40th birthday. In line with my BS plan at 21 yrs when we were sitting around daydreaming about what the future would bring for us.

Everybody has a chance to retire (well). It's a question of probability. At the moment, I'd back the NASA monkeys will produce superior results relative to the stuff you are posting up. I'm actually not kidding.

You might benefit from just taking a course on introductory investments. It will give structure to your thinking. You can ultimately discard everything that was taught, but the process of arguing against the prevailing orthodoxy will kick the daylights out of learning from a hotch-potch collection of books and dumping snippets from supposed oracles or surfing the net. No-one here is saying you need a PhD. Ultimately you'll need to enter the market to learn and hone your beliefs.

Take the time to at least get some basics. You are asking to be killed at the moment. Personally, I don't know you and, like others, would be very pleased to relieve you of some money legally via the market....if you want to step in. But don't do it until you are fit - or you'll just be one of those fodder WWF wrestlers they used to send in to match up against Randy "Macho Man" Savage and just get pile driven into the canvas whilst he waltzes off with Elizabeth. Damn he was good. RIP.

 

[burglar]

How harsh do you need to be to prevent newbies losing money?

 

[pinkboy]

How harsh do you need to be to prevent newbies losing money?

It depends. If they are willing to accept some harsh criticisms then you can shoot straight. Problem is some newbies are a little bit precious and get scared away from the forum and the whole game due to being what they feel 'degraded'. Gotta find that balance. Everyone's psychy is different, and add the extra emotion attached to 'money', and you have a plethora of personality types to cater for.

pinkboy

 

[NickF]

He lied, or you have a faulty recollection. It could be both. Buffett said you don't need more than 130 IQ points to invest successfully. Beyond that, trade it in for temperament.

"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ."

So, I understand that my IQ of 70 is good enough to beat at the market the guy with IQ of 160 if I apply well my knowledge in the market.

 

[NickF]

Damn RY, you are eroding my hopes of starting a hedge fund with my relatives and friends money...
I don't know how you figured me out so well, so soon, it's true my mind is quite random most of the times. I think it's my high IQ, which sees too many opportunities... Luckily my memory is poor, so they compensate each other...
Thanks for the advice.

Nick

I dinged the bell shortly after my 40th birthday. In line with my BS plan at 21 yrs when we were sitting around daydreaming about what the future would bring for us.

Everybody has a chance to retire (well). It's a question of probability. At the moment, I'd back the NASA monkeys will produce superior results relative to the stuff you are posting up. I'm actually not kidding.

You might benefit from just taking a course on introductory investments. It will give structure to your thinking. You can ultimately discard everything that was taught, but the process of arguing against the prevailing orthodoxy will kick the daylights out of learning from a hotch-potch collection of books and dumping snippets from supposed oracles or surfing the net. No-one here is saying you need a PhD. Ultimately you'll need to enter the market to learn and hone your beliefs.

Take the time to at least get some basics. You are asking to be killed at the moment. Personally, I don't know you and, like others, would be very pleased to relieve you of some money legally via the market....if you want to step in. But don't do it until you are fit - or you'll just be one of those fodder WWF wrestlers they used to send in to match up against Randy "Macho Man" Savage and just get pile driven into the canvas whilst he waltzes off with Elizabeth. Damn he was good. RIP.

 

[pinkboy]

I dinged the bell shortly after my 40th birthday. In line with my BS plan at 21 yrs when we were sitting around daydreaming about what the future would bring for us.

Everybody has a chance to retire (well). It's a question of probability. At the moment, I'd back the NASA monkeys will produce superior results relative to the stuff you are posting up. I'm actually not kidding.

Pretty sage advice here. I'm not sure how old you are NickF, but it's never too early to start daydreaming about retiring, but you have to look to more conventional ways to get there balancing cash flow and growth.

I was 21 as well BS dreaming about getting to my end goal of retiring. At 22 I started my current business and it has served me very well. I'm 31, and I'm nearly ready to ring the bell as well. And I can assure you, my IQ is not high (I'm a thinner-sniffing spray painter), and I've probably lost a few points along the way with my life/business/family demands over that period. I'm just glad I still have all the hair on my head.

So maybe look not to think outside the box with your investing until you can afford to lose that cash. That way there's no problem if you lose it, but if it pays off all good and well.

pinkboy

 

[NickF]

Give it to me, all what you can, I can handle much more than that
My skin is tough, like a Rhinoceros'. As long as I lean something along the way.
I advance the quickest in my learning from kicks in the ass

Nick

It depends. If they are willing to accept some harsh criticisms then you can shoot straight. Problem is some newbies are a little bit precious and get scared away from the forum and the whole game due to being what they feel 'degraded'. Gotta find that balance. Everyone's psychy is different, and add the extra emotion attached to 'money', and you have a plethora of personality types to cater for.

pinkboy