The Exceptional Wealth Accumulation Ideas and Thinking Thread

[ducati916]

Could be said of all initial investments.

How you structure investments will see either so-so return (the majority who invested in no or 1 IP) or spectacular those who have multiple holdings with low exposure and still building their portfolio.

1 short SPI contract is pretty un impressive unles you had it at 6700 and bought a couple more on the way down and sold out at 3300.

Or
50,000 FLX
It becomes exceptional if you had them at 26c and sold out at $20.

That of course is another/next topic.

tech/a

Somewhere you mentioned control as being an important component. A HF offers you plenty of control. More control than property?

The control that I mentioned above, was control over the leverage, and in point of fact the entire business, leveraging your IP.

I'm not really discussing how to generate returns. If you can't generate consistent returns in any market, then this strategy will not be of any use. It is for the exceptional thinker's who want exceptional results.

jog on
duc

 

[skyQuake]

"That shows that you know very little about the hedge funds industry"

lmao ... you don't realize how funny that sounds to me ... honestly. You crack me up buddy, big time. I applaud your macho-ness however.

Mate everyone wants to be the next cohen, paulson, soros, druckenmiller, simons, griffin et al, I hear it over and over and over again ... heck! i don't even think they charge that much after they have large AUM ... fees get reduced once large fum is realized.

But nearly all wanna-be's really end up like this:


You should honestly not delude yourself.
But since you're a dreamer, I'll let you dream on.
Yes you my friend, my macho-man, can be a hero ... "just for one day ...." HIT IT! ---> http://www.youtube.com/watch?v=zQFuNHCMF2Y

But don't let me stop you from dreaming. This is after all ... the "exceptional wealth idea" thread, whatever that means. You are EXCEPTIONAL you are the REAL rich, and you are "not your typical "industry average" poor mum and dad. Forgive me for sire ... for being a rude smart-ass.
Don't let me burst your bubble.
I say ... fight for your dreams dammit!! *Matty pounds his fist on the table* ... and don't let anybody else tell you otherwise! *Matty points a finger and hand to the sky and screams "Fight, fight ... fight"! Pumping his fists with emotion and enthusiam

I dedicate this song to you my friend:
http://www.youtube.com/watch?v=BYojs78Tf9Y

Dream on.

If you're an analyst at a respectable IB you should have been warned about looking at averages. What your graph fails to show is the skew of returns. Secondly check your source carefully if those returns are pulled down due to collapsed entities in the data sample.
While I agree with you that the majority of funds are crap, there are a fair few that do consistently outperform.
Also plenty of private funds out there open to sophisticated investors only.

 

[motorway]

motorway

So your probabilities exceed the 50/50 probability, or stated another way, random outcome?

Herein lies one problem with technicals. Their existence without a fundamental context, pretty much always boil down to random, as that is the only way you can get paid.

Value in gold is subjective which I am using in a fundamental analysis context. Thus, at these levels of $900oz, fundamentals are not providing much if any insight. The same could be argued at any price level.

However, if we add to our subjective analysis, an additional objective metric then, at certain levels, lower levels, we can start to offer some probabilities that exceed random. These would be based on the proposition that government will continue to expropriate property, and partake in general theft via inflation.

The problem then is simple. We have seen the last credit expansion collapse. It collapsed so badly, that government has embarked on immediately attempting to expand credit again.

There is no way that I am aware of in which we can subjectively, objectively measure an accurate price for gold currently. Further, it is near impossible to state that gold is either fairly valued, or, conversely overvalued.

We are left with T/A which is random.

Thus, in the context of this thread, which is the recognition [early] of new trends and the capitalization thereof to create wealth, is gold, for the newer trader, an appropriate vehicle?

jog on
duc

You need to define

random & TA

And then tell me if that the sequence of Boxes in that energy chart
is a random series by your definitions

Is there a memory process at work ?
Or a simply a drunkard with no mind stumbling around a lamp post.

Your answer will then ... define risk and reward , and value
and what a stop loss is and what for..

If there is a memory process
Then it matters how it unfolds
and entering at the right time becomes important
and the right location ( SAME THING )

Close to Value


Markets are driven by cycles in money & debt
profitable niches are always being created identified and filled
But this is a process---> else bull and bear markets would start and finish EVERY DAY instead in multi year stages


motorway

 

[ducati916]

You need to define

random & TA

And then tell me if that the sequence of Boxes in that energy chart
is a random series by your definitions

Is there a memory process at work ?
Or a simply a drunkard with no mind stumbling around a lamp post.

Your answer will then ... define risk and reward , and value
and what a stop loss is and what for..

If there is a memory process
Then it matters how it unfolds
and entering at the right time becomes important
and the right location ( SAME THING )

Close to Value


Markets are driven by cycles in money & debt
profitable niches are always being created identified and filled
But this is a process---> else bull and bear markets would start and finish EVERY DAY instead in multi year stages


motorway

motorway

Random is defined as an unknowable future, thus outcomes will be random. Or another way of stating the same thing: events are independent.

TA can be defined as charts, trendlines, oscillators, volume etc. They can be alternatively defined as dependent, or, trend forming.

Obviously the two definitions contradict one another. One may predominate over the other for greater or lesser periods. The problem is that you can never predict with consistency, nor great accuracy just when one will cease to predominate.

Value is subjective. That objective mathematical constructs try to measure and quantify value does not actually add a great deal to the picture for defining value.

Thus, value can join randomness, weighting the odds against TA, itself a value laden analysis.

jog on
duc

 

[Temjin]

"That shows that you know very little about the hedge funds industry"

lmao ... you don't realize how funny that sounds to me ... honestly. You crack me up buddy, big time. I applaud your macho-ness however.

Mate everyone wants to be the next cohen, paulson, soros, druckenmiller, simons, griffin et al, I hear it over and over and over again ... heck! i don't even think they charge that much after they have large AUM ... fees get reduced once large fum is realized.

But nearly all wanna-be's really end up like this:


You should honestly not delude yourself.
But since you're a dreamer, I'll let you dream on.
Yes you my friend, my macho-man, can be a hero ... "just for one day ...." HIT IT! ---> http://www.youtube.com/watch?v=zQFuNHCMF2Y

But don't let me stop you from dreaming. This is after all ... the "exceptional wealth idea" thread, whatever that means. You are EXCEPTIONAL you are the REAL rich, and you are "not your typical "industry average" poor mum and dad. Forgive me for sire ... for being a rude smart-ass.
Don't let me burst your bubble.
I say ... fight for your dreams dammit!! *Matty pounds his fist on the table* ... and don't let anybody else tell you otherwise! *Matty points a finger and hand to the sky and screams "Fight, fight ... fight"! Pumping his fists with emotion and enthusiam

I dedicate this song to you my friend:
http://www.youtube.com/watch?v=BYojs78Tf9Y

Dream on.

Fine, the only thing I've made a mistake in my last post is that I should not have criticised anyone for anything. So in a way, I kidna of expect that kind of reaction from you. So I will apologise on that one first.

Now let's get back to some civilised discussion.

The table you have provided simply list the benchmark performance of each specific macro strategy/index which is only based on a "SELECTED" number of funds that CREDIT SUISSE has chosen. There are plenty more benchmarks out there that would try to illustrate the same point but there is a lack of standard out there for such benchmark.

Similarly to the equity index, it is only an average of a number of selected funds out there and to BELIEVE that "managed future" would only ever provide such return would amount to saying that the only return you get from investing in the share market is the INDEX market. And ignoring the potential reward from investing individual companies (especially small caps) or a selected portfolio of it.

In reality, it's practically infeasible to produce a similar return of those individual hedge fund index because most funds would require a hefty minimum account balane (in order of millions) to open one. Not to mention that most may already been closed to new investors and that the index would ignore smaller funds that have larger drawdowns but much larger returns. (and give much much better return/risk ratio)

Like skyQuake said, the results would be "averaged" and "skewed". And I agree again that the majority of the funds are CRAP. This goes the same as most investments are CRAP, you just need to pick the right one.

I would not so simply reject "hedge funds" as an investment vehicle to create exceptional wealth. This goes the same for rejecting any other ones like properties, etc.

I would never reject one by only just looking at it from the surface. There are plenty more gems "hidden" where most people would easily overlook.


And the part of dreaming.

One of the trait of a successful wealth creator / entrepreneur is to DREAM BIG and then be committed and motivated to achieve that goal.

There is nothing WRONG about dreaming on stuff that appeals unrealistic to most people. It is only a joke if one just dream about it but take no actions toward it.

 

[Temjin]

. If you can't generate consistent returns in any market, then this strategy will not be of any use. It is for the exceptional thinker's who want exceptional results.

jog on
duc

I agree on the point that generating consistent return instead of hoping to gain big through one BIG bet, is one way of making exceptional wealth.

Of course, I'm sure there would be people who would disagree because they have done so through such BIG bets and attribute it mostly to their skill and timing. There are certainly MANY legitimate examples that people have done it this way and with limited risk.

On the other way, there are just as many examples that people have done it through compounding with consistent returns.

 

[Ageo]

Duc so are you saying a hedge fund is the only vehicle to exceptional wealth? what might seem risky to you is opportunistic to others? i know many very wealthy real estate developers and too them shares are evil (and vica versa). There is no better path, because in the end all that is left is wealthy and non wealthy (in terms of financial).

Tech/a:

I know many developers build say 10 commercial factories, sell 9 at a discount (so they sell fast) and have 1 payed off (adding carriages to your train eh?) Is this something you do?

As the reason development has interested me is because of the discounted rate you can acquire assets at. You see if you can apply that logic, then imagine doing a project 10x the size and having 10 factories paid for (and rented) and so on......... The developer who my dad works for does this with residential property and he is not short of a quid let me tell you.


But again i dont see the point in limiting the types of asset classes you use to acquire wealth (and hopefully exceptional weath) but risk minimization to acquire each asset is of great importance.

 

[tech/a]

Ageo.

Similar.
Started in 96 buying established housing and positive gearing was a given.
Kept buying as properyies were re valued.
Stopped in 2002 and sold some in 2003-2008.
Freeholded some and decreased lines of credit in others.
Now 38% geared.

New developements (Ive done 2 in that time) one 2 and another 3 have me retaining 1 of the 5 freehold.
The next will have 1:3 retained.
The whole idea is to increase holdings not liability.

Similar can be done with shares.
With the added benifit of moving a $350k buy or sell in a click of a mouse!
Next topic.

 

[nunthewiser]

dunno about you guys but from a personal experience have found subdividing one of the most profitable means of gaining wealth /assets out there

eg 1 bogan buys 14 acres riverfront block with old livable farmhouse in southern tasmania for 170k FLAT LAND no retaining

spends 70k on surveyors fees , council fees , public space donations , sewerage connections , water connections , driveways, fencing and a host of misellaneous fees that pop up

splits land into 5 titles

sells 3 for 90 k each ( what a bargain ! 2 acres of prime riverfront for 90k !!!)

keeps ole farmhouse with 3 acres as a rental returning $190/week

keeps 5 acres as a hideaway for stashing his uzi,s and gold and for a rainy day

agists same 5 acres for $ 100 / month as bountiful feed and fresh running water on block

now i bet you all gunna say " yeah bud bet ya bought years ago "

this happened in 2008 proprty purchased 2007


open ya eyes its out there

 

[brty]

I've just spent a few hours going back over this thread from the beginning. There are lots of things to agree and disagree with, however I think we should look at the beginning, "exceptional" compared to average (or below).

What does the "average" investor do that makes them "unexceptional". The average ones I know may buy some shares, may buy an investment property, they seek advice from a financial planner, invest in funds, invest in super.

They tend to have diversification to reduce risk, do what is advised, jump on the latest bandwagon in a small controlled way.

Exceptional, does/do things differently.

Concentrated investment, highly specialised in one area. Be it IT (Gates et al), specializing in a future growth area, that paid off.
Soros, taking outsized risk when warranted.
Lowry, ponying up a growth investment in one speciality.

To me, exceptional comes from doing things differently to normal investment. Taking risk in an area where few have trodden. Obviously there are many who take risks in areas that never reach fruition, so we do have the survivorship bias that TH talks about.
The trick is to take enough risk, but not too much to stay liquid enough if something does not work. This is where speciality comes into the picture. The more knowledge of an investment, be it property, business or start up share, then the less the risk. If you only know what everyone else does (ie announcements of companies via exchange) then you are not specialised, not going to be exceptional.

Hence why knowledge, as in what TechA knows about property in his 50 sq km, is going to be far superior to Duc's knowledge of XOM, and probably produce far superior results for lower risk.

brty

 

[ducati916]

Duc so are you saying a hedge fund is the only vehicle to exceptional wealth? what might seem risky to you is opportunistic to others? i know many very wealthy real estate developers and too them shares are evil (and vica versa). There is no better path, because in the end all that is left is wealthy and non wealthy (in terms of financial).

Ageo

No, of course not.

What I'm saying is that predominantly the advantage being offered to people through real estate [via bank lending] is one of high leverage. If high leverage is the key, and in addition you require control, and you have skills that are not available to Mr Average, then a vehicle [or train if you will] is an HF.

jog on
duc

 

[ducati916]

I've just spent a few hours going back over this thread from the beginning. There are lots of things to agree and disagree with, however I think we should look at the beginning, "exceptional" compared to average (or below).

What does the "average" investor do that makes them "unexceptional". The average ones I know may buy some shares, may buy an investment property, they seek advice from a financial planner, invest in funds, invest in super.

They tend to have diversification to reduce risk, do what is advised, jump on the latest bandwagon in a small controlled way.

Exceptional, does/do things differently.

Concentrated investment, highly specialised in one area. Be it IT (Gates et al), specializing in a future growth area, that paid off.
Soros, taking outsized risk when warranted.
Lowry, ponying up a growth investment in one speciality.

To me, exceptional comes from doing things differently to normal investment. Taking risk in an area where few have trodden. Obviously there are many who take risks in areas that never reach fruition, so we do have the survivorship bias that TH talks about.

The trick is to take enough risk, but not too much to stay liquid enough if something does not work. This is where speciality comes into the picture. The more knowledge of an investment, be it property, business or start up share, then the less the risk. If you only know what everyone else does (ie announcements of companies via exchange) then you are not specialised, not going to be exceptional.

Hence why knowledge, as in what TechA knows about property in his 50 sq km, is going to be far superior to Duc's knowledge of XOM, and probably produce far superior results for lower risk.

brty

brty

It would seem after all your reading, you have unfortunately reached the wrong conclusions. In summary, you seem to be asserting that knowledge is the vital differentiating component within success.

The concatenation of the market is an outcome of the activities of entrepreneurs, promoters, speculators, and of dealers in futures and arbitrage. In an economic system in which every actor is in a position to recognize correctly the market situation with the same degree of insight, the adjustment of prices to every change in the data would be achieved at one stroke.

In reality, prices do not behave in such a manner. Thus a priori we can state that perfect knowledge does not exist. If that is so, then knowledge will not be the differentiating factor in the success of a strategy that seeks to profit where market prices are a factor.

By eliminating knowledge as the differentiating factor [knowledge in the market formation of prices allowing profit] we need to actually identify the factors that are responsible.

We have identified one, viz. leverage. There are others, which I think we are slowly progressing towards.

jog on
duc

 

[ducati916]

I agree on the point that generating consistent return instead of hoping to gain big through one BIG bet, is one way of making exceptional wealth.

Of course, I'm sure there would be people who would disagree because they have done so through such BIG bets and attribute it mostly to their skill and timing. There are certainly MANY legitimate examples that people have done it this way and with limited risk.

On the other way, there are just as many examples that people have done it through compounding with consistent returns.

Temjin

Of course there are the big winners, the outliers. By definition they are rare. The point regarding HF is that you open your own HF to take advantage of the free leverage on offer.

We have [more or less] established that leverage is an important requirement, thus why not use the best form of leverage available which is far superior to real estate leverage, if, you have the necessary skills.

With regard to compounding, it works the same magic here as well.

There is a further component that is statistically speaking, a huge component of this methodology and thread. I'm just waiting to see if anyone actually identifies it and a methodology by which to harness this component.

jog on
duc

 

[Trembling Hand]

Ha same old same old game. It doesn't take long before the experts who up-chuck their condescending drivel start to contradict themselves just so they can out point each poster.

It would seem after all your reading, you have unfortunately reached the wrong conclusions. In summary, you seem to be asserting that knowledge is the vital differentiating component within success.

In reality, prices do not behave in such a manner. Thus a priori we can state that perfect knowledge does not exist. If that is so, then knowledge will not be the differentiating factor in the success of a strategy that seeks to profit where market prices are a factor.
.

We have [more or less] established that leverage is an important requirement, thus why not use the best form of leverage available which is far superior to real estate leverage, if, you have the necessary skills.

 

[Ageo]

Ha same old same old game. It doesn't take long before the experts who up-chuck their condescending drivel start to contradict themselves just so they can out point each poster.

Different type of knowledge TH :

 

[tech/a]

Different type of knowledge TH :

Necessary knowledge.
UN Necessary knowledge

 

[brty]

Duc,

You are very good at taking something and twisting it out of context. Here is what I stated...

The more knowledge of an investment, be it property, business or start up share, then the less the risk.

Please note it had nothing to do with perfect knowledge, it is in the context of risk reduction and an understanding of the probabilities of a likely outcome for whatever type of investment undertaken.

Knowledge (necessary knowledge as TechA states is what I'm referring to) plus leverage will be far more successful than just leverage alone.

With just leverage and no knowledge an investor could easily have poured money into GTP and TIM because they were both asset rich (according to published NTA) far in excess of sharemarket valuation. In fact many investors did pour large sums into these companies. Real knowledge helped save many others from doing likewise, perhaps better investors.

brty

 

[Timmy]

The more knowledge of an investment, be it property, business or start up share, then the less the risk.

Let me start by agreeing 100% with your statement. All else being equal those with better knowledge of the market in which they are dealing will be better off. This is a simple statement brty, but it is gold.

I have a huge rant I could go on but will bite my tongue, or whatever the keyboard equivalent is.

Plenty of gems on this thread thanks.

 

[It's Snake Pliskin]

Please note it had nothing to do with perfect knowledge, it is in the context of risk reduction and an understanding of the probabilities of a likely outcome for whatever type of investment undertaken.

Knowledge (necessary knowledge as TechA states is what I'm referring to) plus leverage will be far more successful than just leverage alone.

With just leverage and no knowledge an investor could easily have poured money into GTP and TIM because they were both asset rich (according to published NTA) far in excess of sharemarket valuation. In fact many investors did pour large sums into these companies. Real knowledge helped save many others from doing likewise, perhaps better investors.brty

Knowledge and information helped these people. Which could be said "Due to my knowledge I was able to find some things out and be aware of the situation. I had knowledge of the situation." (I had information to act on.)
Just regarding risk,

The more knowledge of an investment, be it property, business or start up share, then the less the risk.

Chaotic risk can be mitigated to a small degree but it is in the hands of nature. Knowledge plays no part after the mitigation, and the information on it is hindsight. One's knowledge of it may be as far as being prepared for it without any knowledge of, or information on the arrival date.

 

[ducati916]

Duc,

You are very good at taking something and twisting it out of context. Here is what I stated...



Please note it had nothing to do with perfect knowledge, it is in the context of risk reduction and an understanding of the probabilities of a likely outcome for whatever type of investment undertaken.

Knowledge (necessary knowledge as TechA states is what I'm referring to) plus leverage will be far more successful than just leverage alone.

With just leverage and no knowledge an investor could easily have poured money into GTP and TIM because they were both asset rich (according to published NTA) far in excess of sharemarket valuation. In fact many investors did pour large sums into these companies. Real knowledge helped save many others from doing likewise, perhaps better investors.

brty

Understanding the probabilities. Surely that particular canard is dead and buried. You have just witnessed one of the larger collapses into ignominy of the Gaussian distribution underlying the majority of risk models.

Mandelbrotian distributions, while correct, are yet to yield useable findings. [That's not entirely true] So when you talk about probabilities, essentially they are theoretically worthless.

Knowledge according to tech/a seems to along the lines of don't think at all, just jump in with lots of leverage.

Your hindsight analysis is undoubtably correct. So what. If you made the analysis in real time, congratulations, I'm all ears for you next analytical piece. However this thread I'm assuming was not initiated for novices, rather those already in possession of some market experience. We are looking for some big opportunities, something to make big money on.

jog on
duc