Two Portfolios - One Mechanical System - A Trend-following Diary

[howardbandy]

Greetings --

Re: "A robust un-leveraged trend-following system, will easily survive the 1929 scenario. The system will go into a draw-down, but after the draw-down it will flourish and the subsequent gains would be far more than the draw-down."

35 years to recovery. That is faith.

Best,
Howard

 

[Trendnomics]

Greetings --

Re: "A robust un-leveraged trend-following system, will easily survive the 1929 scenario. The system will go into a draw-down, but after the draw-down it will flourish and the subsequent gains would be far more than the draw-down."

35 years to recovery. That is faith.

Best,
Howard

If you purely go by the index (the Dow Jones), then yes, it took the Dow Jones ~26 years (a long period, but who's counting) to recover:



But during that time, there would've been excellent micro trends within individual equities, which could've lead to great out-performance, if you were a systematic trend-follower - your draw-down recovery period would've been less than a few years. This is similar to what we are experiencing on the XAO index, post the 2008 crash:



The XAO is still a long way from recovery (going ~8 years now) - currently in a side-ways market - yet I'm catching some fantastic trends (as my profits show).

This is similar to back-test results, from tests I have performed on the 1987 crash and the long sideways market of Japan - micro "counter" trends exist in these time-periods.

 

[howardbandy]

Greetings --

I agree that trading the post 1929 period could have been profitable. A set of rules indicating when to buy and when to sell would have been a requirement, as it is now.

Having faith (belief without supporting evidence) is not enough. Validation is a requirement for quantifiable confidence. An important aspect of the rules of any learning model is that they are testable on data that has not been used in developing them. The tests must show general learning -- recognizing a profitable and persistent signal among the noise in the data. Postulating a model or fitting a model to the data is not sufficient. Faith is not sufficient.

It is different this time in several important ways.

Many people feel that WWII was responsible for rescuing the developed world's markets from the depression. Whatever the reason for the recovery, holding through that drawdown was long (20 years or more) and painful (80% or higher). Funds were not available until recovery. If the money was needed for some other purpose, the exit was at a loss.

From WWII through about 2000, the developed world had an advantage. The US, for example, with 5% of the world's population, used / owned 25% of the world's resources. Globalization is helping the remainder of the world to increase its standard of living. For the world as a whole, that is a good thing. For the developed world, not quite. We can expect the ratio of 5%:25% to trend toward 5%:5% -- which implies a relative drop in standard of living of 80%.

The quantitative easing policies implemented by governments throughout the world from 2008 to the present have literally forced funds into real estate, stocks, and bonds. Very low and negative interest rates cannot continue indefinitely. When interest rates return to normal, many people, including me, expect 100% of the increase in prices of real estate, stocks, and bonds, to be reversed. Back to 2008 levels in all of those. If we are lucky, that will be followed by 40 years of slow adjustment. If unlucky, by 2 years of worldwide riots, then dark ages II.

Automation is replacing human labor. Tasks from welding to review of legal documents to interpretation of xrays are being done by machines. Done more accurately and less expensively. Those jobs will not return.

Global climate change. Warming, rising sea level, changes in rainfall, wild fires, ... Cities need to be relocated. Changes in natural environments are happening too fast for natural adaptation. For example, vast forests of trees die in a few years due to insect infestation due to warmer winters. Even if the insects left, reforestation takes centuries. All creatures that depended on those forests are displaced. Perhaps extinct.

Capabilities of artificial intelligence are increasing exponentially. Beware of the singularity. It will arrive at some point in the future. That will change everything.

Back to trading.

Modeling 1929 hoping to apply whatever system worked then to current markets has no value. Conditions, market rules, laws, ... are completely different. I doubt that high enough quality data is available to even try.

Financial markets are becoming more efficient. Competition is increasing. For a given level of risk (risk is the reason people stop trading), profit is lower. Holding periods are shorter.

I have a new book coming out in about two months. I show that risk-normalized profit potential of any data series can be defined as a function of two variables: trade accuracy and holding period. The sweet spot of profit potential has moved. It is more important than ever to trade accurately (65% is about the minimum) and hold a short period of time (5 days is about the maximum). Worthwhile profitable trading requires 75% accuracy and a holding period of one day -- maybe two. Outside those ranges risk of drawdown is so great that position size is so low that profit is lower than alternative use of funds. These are pretty much absolute limits determined by the data. Applying a model to create a system to generate trades cannot improve those figures, only deteriorate them. Of course, there will be periods when other techniques work. But those are outside quantitative models and are in the realm of faith.

Competition from professional traders and trading companies is much greater. Flash trades, dark pools, thousands of trading system developers with high quality education and experience, supercomputers, co-location, artificial intelligence, ....

It is different now. I am in no way criticizing anyone's success. Just warning of some of the reasons to be cautious.

Best regards,
Howard

 

[howardbandy]

Greetings --

Every profitable trade is a trend following trade for the period the position is being held. No matter how the trade is entered, we need the sell price to be higher than the buy price -- a trend.

Best,
Howard

 

[peter2]

I was astonished, flabbergasted and then stunned by those two posts. I'll recover soon.

All the best, Howard.

 

[CanOz]

Yeah....that's quite....dire Howard...

 

[Trendnomics]

Greetings --

I agree that trading the post 1929 period could have been profitable. A set of rules indicating when to buy and when to sell would have been a requirement, as it is now.

Having faith (belief without supporting evidence) is not enough. Validation is a requirement for quantifiable confidence. An important aspect of the rules of any learning model is that they are testable on data that has not been used in developing them. The tests must show general learning -- recognizing a profitable and persistent signal among the noise in the data. Postulating a model or fitting a model to the data is not sufficient. Faith is not sufficient.

It is different this time in several important ways.

Many people feel that WWII was responsible for rescuing the developed world's markets from the depression. Whatever the reason for the recovery, holding through that drawdown was long (20 years or more) and painful (80% or higher). Funds were not available until recovery. If the money was needed for some other purpose, the exit was at a loss.

From WWII through about 2000, the developed world had an advantage. The US, for example, with 5% of the world's population, used / owned 25% of the world's resources. Globalization is helping the remainder of the world to increase its standard of living. For the world as a whole, that is a good thing. For the developed world, not quite. We can expect the ratio of 5%:25% to trend toward 5%:5% -- which implies a relative drop in standard of living of 80%.

The quantitative easing policies implemented by governments throughout the world from 2008 to the present have literally forced funds into real estate, stocks, and bonds. Very low and negative interest rates cannot continue indefinitely. When interest rates return to normal, many people, including me, expect 100% of the increase in prices of real estate, stocks, and bonds, to be reversed. Back to 2008 levels in all of those. If we are lucky, that will be followed by 40 years of slow adjustment. If unlucky, by 2 years of worldwide riots, then dark ages II.

Automation is replacing human labor. Tasks from welding to review of legal documents to interpretation of xrays are being done by machines. Done more accurately and less expensively. Those jobs will not return.

Global climate change. Warming, rising sea level, changes in rainfall, wild fires, ... Cities need to be relocated. Changes in natural environments are happening too fast for natural adaptation. For example, vast forests of trees die in a few years due to insect infestation due to warmer winters. Even if the insects left, reforestation takes centuries. All creatures that depended on those forests are displaced. Perhaps extinct.

Capabilities of artificial intelligence are increasing exponentially. Beware of the singularity. It will arrive at some point in the future. That will change everything.

Back to trading.

Modeling 1929 hoping to apply whatever system worked then to current markets has no value. Conditions, market rules, laws, ... are completely different. I doubt that high enough quality data is available to even try.

Financial markets are becoming more efficient. Competition is increasing. For a given level of risk (risk is the reason people stop trading), profit is lower. Holding periods are shorter.

I have a new book coming out in about two months. I show that risk-normalized profit potential of any data series can be defined as a function of two variables: trade accuracy and holding period. The sweet spot of profit potential has moved. It is more important than ever to trade accurately (65% is about the minimum) and hold a short period of time (5 days is about the maximum). Worthwhile profitable trading requires 75% accuracy and a holding period of one day -- maybe two. Outside those ranges risk of drawdown is so great that position size is so low that profit is lower than alternative use of funds. These are pretty much absolute limits determined by the data. Applying a model to create a system to generate trades cannot improve those figures, only deteriorate them. Of course, there will be periods when other techniques work. But those are outside quantitative models and are in the realm of faith.

Competition from professional traders and trading companies is much greater. Flash trades, dark pools, thousands of trading system developers with high quality education and experience, supercomputers, co-location, artificial intelligence, ....

It is different now. I am in no way criticizing anyone's success. Just warning of some of the reasons to be cautious.

Best regards,
Howard

There are a lot of economic factors to be pessimistic about, but being an eternal-pessimist (perma-bear) does not provide sufficient investment/trading opportunities, nor does it yield above average returns (or bring retirement any closer).

I agree that great wars and government interventions have "exacerbated" the growth of the financial equity markets. But the growth we have witnessed, is only reflected in the form of equity market indexes. A far greater force is at play, when it comes to equity market index growth, and that is that an index itself is a trading-system. Equity indexes are elementary forms of trend-following (in terms of relative strength) - remove the weak, add/keep the strong (number of maintainable positions dependent on the index - i.e. top 20/50/100/200/300).

Hence, even though equity index growth has appeared constant over the last ~100 years, the constitutes (positions) have been very fluid. New growth industries replaces the old industries, which gives further rise to the index, etc. Hence, equity market indexes will continue to rise indefinitely, as there are always new industries created and old ones being destroyed. Similarly, excellent trend-following opportunities will exist indefinitely.

Automation and artificial intelligence will boost a country's GDP and create new market sectors - after all, growth in GDP can only come from a boost in productivity. People were just as concerned about rudimentary automation during the industrial revolution - look where we are today.

Current quantitative easing policies are assisting with a "beautiful deleverage" - i.e. reducing the burden of debt in the most efficient manner. Doing the opposite would result in extreme social unrest. Once the global debt burdens have been reduced, a new super debt cycle will commence (the next boom). Un-leveraged forms of investing (including trend-following), can easily survive the debt cycles - but highly leverage speculative investing (for instance: negative gearing multiple properties) can experience complete wipe-outs. For more on economic cycles please see video below:

https://www.youtube.com/watch?v=PHe0bXAIuk0

 

[tech/a]

Howards on the money--excuse the pun.

Financial security is becoming more difficult
Not impossible. But I agree those who don't
Have the education the tools and the ability
To put the two together will have to rely more
On luck than good judgement.

Fortunately there are people like Howard around to
Shine the light forward to those who are capable
Of following and implementing.

Personally as a simple builder Howards level and. My
Ability are so wide apart I don't have the time or
Ability to catch up.

But I'll heed the words and do my best.

 

[howardbandy]

Greetings --

Re:
Automation and artificial intelligence will boost a country's GDP and create new market sectors - after all, growth in GDP can only come from a boost in productivity.

The data show otherwise. There may be growth, but it may not improve the lives of people.

---------

Political candidates have been commenting about the loss of manufacturing in the US, and how if only we elect them they will return those jobs. (My comments here are about the automation aspect -- the globalization aspect is different, but equally compelling.)

One of the financial journals I subscribe to had an article some months ago describing manufacturing in the US. Complete with stats and charts, it showed that the output of manufacturing -- the dollar value of widgets produced -- has not declined. But the hours worked by people have declined. The difference is being made up by automation.

An analogy I use is a welding shop. Last year the shop had 10 employees -- a supervisor and 9 human welders. This year the shop has 1 supervisor, 1 technician, 2 human welders, and 2 robots. Six people have been replaced by 2 robots. The robot's work is higher quality and higher quantity. The shop is more profitable. From the perspective of the shop owner, replacing people with automation was the right decision. One welder got additional education and training and a promotion to technician. The six people replaced will probably not ever work as welders again.

-------

I have been associated with artificial intelligence for over 50 years. As a graduate student, I did some of the first-generation research on nearest neighbor models. AI is automation on steroids. Not just welding. But many tasks that just a few years ago were thought to be automation-proof. Interpreting x-rays, searching legal cases and writing summary of findings, managing drug interactions, handwriting recognition, facial recognition, speech recognition, self-driving cars, auto-pilot airplanes, travel arrangements, route planning, and the list goes on.

One of my graduate professors did his own PhD research with Arthur Samuels. In 1959, Dr. Samuels wrote a computer program that played checkers. It was programmed with minimal information about the rules of checkers, but nothing about strategy. It learned strategy on its own. It learned to do something it was not programmed to do. Today there is not an intellectual game where the best human can win against the best computer. Checkers, bridge, chess, backgammon, go, Jeopardy -- for all, the world champion is a computer.

I play backgammon on my computer using the GNU Backgammon program. When I set the opponent (played by GNU) to have the skill of an expert human, I win more than lose. When I set the opponent to be grandmaster, I very seldom win.

The "event" where computers are champions of everything is called "singularity." Computer capabilities are increasing at an exponential rate. We humans are not very good at understanding exponential growth or estimating its expansion. (Read Daniel Kahneman, "Thinking, Fast, and Slow")

Popular authors and commentators are extremely naive about artificial intelligence. There is a very common misconception that programs can only do what they have been programmed to do -- or that the people who program the intelligence into computers will ensure they have given the computers Asimov-like limitations. Neither is accurate.

Each additional task where a computer can perform as well as a human expert is additional evidence that the singularity is near. It will not be pretty. No civilization survives being discovered by a superior civilization -- ask the Incas about Pizarro, or any number of similar contacts.

-----------

Enough cheer for one day.

Stay safe,
Best,
Howard

 

[kid hustlr]

Wow

 

[Trendnomics]

Greetings --

Re:
Automation and artificial intelligence will boost a country's GDP and create new market sectors - after all, growth in GDP can only come from a boost in productivity.

The data show otherwise. There may be growth, but it may not improve the lives of people.

---------

Political candidates have been commenting about the loss of manufacturing in the US, and how if only we elect them they will return those jobs. (My comments here are about the automation aspect -- the globalization aspect is different, but equally compelling.)

One of the financial journals I subscribe to had an article some months ago describing manufacturing in the US. Complete with stats and charts, it showed that the output of manufacturing -- the dollar value of widgets produced -- has not declined. But the hours worked by people have declined. The difference is being made up by automation.

An analogy I use is a welding shop. Last year the shop had 10 employees -- a supervisor and 9 human welders. This year the shop has 1 supervisor, 1 technician, 2 human welders, and 2 robots. Six people have been replaced by 2 robots. The robot's work is higher quality and higher quantity. The shop is more profitable. From the perspective of the shop owner, replacing people with automation was the right decision. One welder got additional education and training and a promotion to technician. The six people replaced will probably not ever work as welders again.

-------

I have been associated with artificial intelligence for over 50 years. As a graduate student, I did some of the first-generation research on nearest neighbor models. AI is automation on steroids. Not just welding. But many tasks that just a few years ago were thought to be automation-proof. Interpreting x-rays, searching legal cases and writing summary of findings, managing drug interactions, handwriting recognition, facial recognition, speech recognition, self-driving cars, auto-pilot airplanes, travel arrangements, route planning, and the list goes on.

One of my graduate professors did his own PhD research with Arthur Samuels. In 1959, Dr. Samuels wrote a computer program that played checkers. It was programmed with minimal information about the rules of checkers, but nothing about strategy. It learned strategy on its own. It learned to do something it was not programmed to do. Today there is not an intellectual game where the best human can win against the best computer. Checkers, bridge, chess, backgammon, go, Jeopardy -- for all, the world champion is a computer.

I play backgammon on my computer using the GNU Backgammon program. When I set the opponent (played by GNU) to have the skill of an expert human, I win more than lose. When I set the opponent to be grandmaster, I very seldom win.

The "event" where computers are champions of everything is called "singularity." Computer capabilities are increasing at an exponential rate. We humans are not very good at understanding exponential growth or estimating its expansion. (Read Daniel Kahneman, "Thinking, Fast, and Slow")

Popular authors and commentators are extremely naive about artificial intelligence. There is a very common misconception that programs can only do what they have been programmed to do -- or that the people who program the intelligence into computers will ensure they have given the computers Asimov-like limitations. Neither is accurate.

Each additional task where a computer can perform as well as a human expert is additional evidence that the singularity is near. It will not be pretty. No civilization survives being discovered by a superior civilization -- ask the Incas about Pizarro, or any number of similar contacts.

-----------

Enough cheer for one day.

Stay safe,
Best,
Howard

Howard if you have any scientific data that counters my post below, then please provide.

AI/automation will eventually lead to improved productivity -> increased GDP -> new industry sectors and the destruction of old industry sectors (repeat of history). The more productive we are, the less we have to work - again a repeat of history (just look at the history of urbanisation - most of the population use to live on farms, with a 7 day working week + low living standard). Increasing our productivity is the only way forward (to continue market growth and deleverage the current super debt cycle). Also, increased productivity is what raises living standards.

Just to repeat again, automation and artificial intelligence will lead to a loss of jobs, but will boost productivity + living standards - people were just as concerned about rudimentary automation during the industrial revolution - look where we are today. Will it really help to re-employ cap screw'ers and get rid of all the machines? Also, should we get rid of computers and re-employ 3 people (each armed with a typewriter and calculator), in lieu of each computer (imagine all the jobs created!!). But why stop there? Get rid of the calculators as well, and replace them with sliding abacus' - that will create another ~10 jobs for each destroyed computer + calculator! You can apply this analogy to any modern day machine/industry - for instance: the airline industry destroyed the shipping industry (especially the passenger sector), many jobs were lost and replaced by only a few - but productivity was increased!

The new industries that will sprout from the AI/automation boom will contribute back to the economy - one man's spending (company/organisation) is another man's earnings - I really hope for the sake of Australia's prosperity we end up in the forefront of this new ever developing industry. And just like before, new equity listings will emerge with new trends - ready for the picking by the ever committed trend-followers.

Howard, from your recent posts, it can be deducted that you believe the future success of trend-following strategies could be poor/limited, due to changing market factors - i.e. the future equity market performances will not repeat the past 100 year upward trajectory. You imply that, one of these factors could be the full scale introduction of automation/AI and the consequent job-losses. Yet the past 100 year upward trajectory in the equity markets, was mainly due to the introduction of new productivity boosting industries (similar to the aforementioned). Why would it be different this time?

Howard, how has your bleak view of the future served you? Has it improved your investment returns or diminished them? Is this why you mainly focus on short term trading - to avoid prolonged exposure to the doomed future?

As an engineer (my day job), I champion/welcome artificial intelligence and automation (and any other industries that may lead to productivity growth - I hope/believe a 4 day working week will become standard in the next 10 years) - it's easy to fear progress, most people fear change, but where would we be without it?

 

[Trendnomics]

Fortunately there are people like Howard around to
Shine the light forward to those who are capable
Of following and implementing.

You sure it's light?

"An optimist may see a light where there is none, but why must the pessimist always run to blow it out?" - René Descartes.

 

[Trendnomics]

Back to trading results:

I did a quick check of each portfolio's performance for the past year (from today's date) - one year's return:

Private Portfolio: +68.77 % (Since 31-07-2015)

SMSF Portfolio: +62.93 % (Since 31-07-2015)

That's trend-following for you - two year's of pain (break-even) followed by an extraordinary year of returns. If I posted the good year's returns in isolation, then this thread would've been far more popular, with people frothing at the mouth (extrapolating the results) - similar to what I've observed on other threads. Concurrently, posting your results in $$$ and stating how you are going to spend your windfall of "dosh" (what car you are buying), seems to also invoke a great interest in a thread. Not hard to understand why spruikers have such an easy time luring in blind fish.

Keeping it real .

 

[DeepState]

Howard if you have any scientific data that counters my post below, then please provide.

Hope you don't mind if I respond.

All productivity is not equal. Giving a farmer, who reaped wheat by hand, a harvestor is a huge gain if the labour released goes into something useful like teaching farming, engineering or birth control. Being able to build two Pokemon games a year instead of one is a more questionable form of doubling productivity. Or how about pyramids built per month?

How the gains are deployed also matters. Since the GFC, and even before, you will have noticed how gains to productivity have flowed to those with capital. Those who sell time for money have generally been increasingly squeezed out, unless they are the gold collars. The (less than) 1%. There is once again a wealth aristocracy and then half the population of a place like Australia who would run out of money in two weeks if they lost their income. And that's how you get Trump and the Far Right/Left in Europe. White males, who bore the brunt of the hollowing out of the middle class in the US, are dying faster now. Drugs, alcohol, suicide....all signs of productivity gains gone awry. Productivity kept going up through all of this. Wealth is relative as well as absolute. Moving off subsistence farming is one kind of productivity and increasing vacuous consumerism is another.

The productivity gains per hour and number of hours available from the productive population from demographics don't seem to accord with the terminal assumptions in equity valuations. Check it out. Some argue that we are in a post capital world, where earnings growth happens even without capital. Perhaps, but the FinTech hubs are filled with ping pong tables, PacMan machines, bean bags....and capital-lite concepts that survive because of venture capital funding.

Having the choice to work less is great. However, there are many people who now work less than a five day week....and desperately want more. The capital invested into their skills, which supposedly increased their productivity and potential for contribution to the economy, rots by the minute. The desire to work less is quite mismatched to the opportunities to do so. Former line workers in the auto factory are strangely hard to train into C++ programmers or general practitioners. That's what you find when the Shumpeter effect closes one kind of industry and the new one created has low labour content and requires skills which bears no relation to the one on whom sunset has arrived. Labour released is not redeployed....it often sits at home on welfare.

People work because it is a means of social cohesion. Many of us work because we like to create something which is challenging. The alternative in a post-work world is to watch Big Brother all day because all we will be doing is entertaining each other to pass the time. GDP will be measured by Reality TV shows created per year and productivity calculations will track Taylor Swift Concerts per roadie hour. The rest will play cards. Will a stable society emerge? Uh, No. Just look at history of man. Kings have everything. Yet they want more. And many want to be King.

Even the super-rich are advised not to hand over too much to their kids for fear of them becoming unproductive members of society. Little is more galling than a trust fund baby who enjoys the spoils of success earned through nothing more than winning a genetic lottery, and yet acting as if it were entitled. For the sake of their kids, the rich are advised to keep them in a state of having to strive.

Work is more than production of goods and services that are estimated in GDP. Deny significant parts of the population the ability or opportunity to work in decent jobs when they want or need it and you get riots and insurrection.

If ongoing productivity gains are spent and accrued the way they have been in the last decade, more productivity of the same brand is probably not something to hope for. Quite possibly, it is better to slow it down a little and spread the gains around some more.

Productivity a good thing? Yes, if carefully achieved and when gains are distributed in a way which balances incentive and unfairness. No, if not.

 

[minwa]

Back to trading results:

I did a quick check of each portfolio's performance for the past year (from today's date) - one year's return:

Private Portfolio: +68.77 % (Since 31-07-2015)

SMSF Portfolio: +62.93 % (Since 31-07-2015)

That's trend-following for you - two year's of pain (break-even) followed by an extraordinary year of returns. If I posted the good year's returns in isolation, then this thread would've been far more popular, with people frothing at the mouth (extrapolating the results) - similar to what I've observed on other threads. Concurrently, posting your results in $$$ and stating how you are going to spend your windfall of "dosh" (what car you are buying), seems to also invoke a great interest in a thread. Not hard to understand why spruikers have such an easy time luring in blind fish.

Keeping it real .

Lol a bit salty there ? But since you indirectly called me out, let's compare. I posted my account statements for 2014 & 2015 + first half of 2016, find it in my post history. Both years were over 50% and 2016 at 46% (I traded it over 50% for the year after posting the statement before my break, but let's just use 46%.)

$100 x 50% x 50% x 46% = $328.5 = 228% return after compound over 3 years (2.5 actually but let's use 3)

Your last post on July 29 says 20.7% return pa is like 75% after compound after 3 years.

You said you have pain of 2 years of B/E. Mine was like 2 months.

So you tell me, 228% over 2.5 years of smoother return vs 75% after 3 years of 2 B/E year and 1 outlier year is more exciting to viewers since that is what you are caring about lmao.

Any real trader or investor knows $ amount is important for scalability in this game.

You are making "chump change compared to your trading" as an engineer and your system is "raining money" why have you not quit yet ? Obviously not because you love your job, as you said you are demotivated. Could it be you have no faith in your system to reproduce what it did ? If you do - why are you still working ?

Instead of crying over thread popularity why don't you go diversify over other markets less correlated to equities so you don't have to suffer through 2 year of pain B/E.

 

[craft]

Hope you don't mind if I respond.

All productivity is not equal. Giving a farmer, who reaped wheat by hand, a harvestor is a huge gain if the labour released goes into something useful like teaching farming, engineering or birth control. Being able to build two Pokemon games a year instead of one is a more questionable form of doubling productivity. Or how about pyramids built per month?

How the gains are deployed also matters. Since the GFC, and even before, you will have noticed how gains to productivity have flowed to those with capital. Those who sell time for money have generally been increasingly squeezed out, unless they are the gold collars. The (less than) 1%. There is once again a wealth aristocracy and then half the population of a place like Australia who would run out of money in two weeks if they lost their income. And that's how you get Trump and the Far Right/Left in Europe. White males, who bore the brunt of the hollowing out of the middle class in the US, are dying faster now. Drugs, alcohol, suicide....all signs of productivity gains gone awry. Productivity kept going up through all of this. Wealth is relative as well as absolute. Moving off subsistence farming is one kind of productivity and increasing vacuous consumerism is another.

The productivity gains per hour and number of hours available from the productive population from demographics don't seem to accord with the terminal assumptions in equity valuations. Check it out. Some argue that we are in a post capital world, where earnings growth happens even without capital. Perhaps, but the FinTech hubs are filled with ping pong tables, PacMan machines, bean bags....and capital-lite concepts that survive because of venture capital funding.

Having the choice to work less is great. However, there are many people who now work less than a five day week....and desperately want more. The capital invested into their skills, which supposedly increased their productivity and potential for contribution to the economy, rots by the minute. The desire to work less is quite mismatched to the opportunities to do so. Former line workers in the auto factory are strangely hard to train into C++ programmers or general practitioners. That's what you find when the Shumpeter effect closes one kind of industry and the new one created has low labour content and requires skills which bears no relation to the one on whom sunset has arrived. Labour released is not redeployed....it often sits at home on welfare.

People work because it is a means of social cohesion. Many of us work because we like to create something which is challenging. The alternative in a post-work world is to watch Big Brother all day because all we will be doing is entertaining each other to pass the time. GDP will be measured by Reality TV shows created per year and productivity calculations will track Taylor Swift Concerts per roadie hour. The rest will play cards. Will a stable society emerge? Uh, No. Just look at history of man. Kings have everything. Yet they want more. And many want to be King.

Even the super-rich are advised not to hand over too much to their kids for fear of them becoming unproductive members of society. Little is more galling than a trust fund baby who enjoys the spoils of success earned through nothing more than winning a genetic lottery, and yet acting as if it were entitled. For the sake of their kids, the rich are advised to keep them in a state of having to strive.

Work is more than production of goods and services that are estimated in GDP. Deny significant parts of the population the ability or opportunity to work in decent jobs when they want or need it and you get riots and insurrection.

If ongoing productivity gains are spent and accrued the way they have been in the last decade, more productivity of the same brand is probably not something to hope for. Quite possibly, it is better to slow it down a little and spread the gains around some more.

Productivity a good thing? Yes, if carefully achieved and when gains are distributed in a way which balances incentive and unfairness. No, if not.

Thanks for this post.

Split growth and productivity from wealth equality and you are only viewing the picture on 2D.

At least negative interest rates ease the moneatery systems imperative for growth, perhaps that will give us head room to become more decerning in the productivity we persue, but then again profit at any cost may not come from the requirement of growth in a posative interest rate money, maybe greed is just inherent in us when we see ourselves more as individuals rather than codependent on community and environment and nothing will change until..............

 

[Trendnomics]

Hope you don't mind if I respond.

All productivity is not equal. Giving a farmer, who reaped wheat by hand, a harvestor is a huge gain if the labour released goes into something useful like teaching farming, engineering or birth control. Being able to build two Pokemon games a year instead of one is a more questionable form of doubling productivity. Or how about pyramids built per month?

How the gains are deployed also matters. Since the GFC, and even before, you will have noticed how gains to productivity have flowed to those with capital. Those who sell time for money have generally been increasingly squeezed out, unless they are the gold collars. The (less than) 1%. There is once again a wealth aristocracy and then half the population of a place like Australia who would run out of money in two weeks if they lost their income. And that's how you get Trump and the Far Right/Left in Europe. White males, who bore the brunt of the hollowing out of the middle class in the US, are dying faster now. Drugs, alcohol, suicide....all signs of productivity gains gone awry. Productivity kept going up through all of this. Wealth is relative as well as absolute. Moving off subsistence farming is one kind of productivity and increasing vacuous consumerism is another.

The productivity gains per hour and number of hours available from the productive population from demographics don't seem to accord with the terminal assumptions in equity valuations. Check it out. Some argue that we are in a post capital world, where earnings growth happens even without capital. Perhaps, but the FinTech hubs are filled with ping pong tables, PacMan machines, bean bags....and capital-lite concepts that survive because of venture capital funding.

Having the choice to work less is great. However, there are many people who now work less than a five day week....and desperately want more. The capital invested into their skills, which supposedly increased their productivity and potential for contribution to the economy, rots by the minute. The desire to work less is quite mismatched to the opportunities to do so. Former line workers in the auto factory are strangely hard to train into C++ programmers or general practitioners. That's what you find when the Shumpeter effect closes one kind of industry and the new one created has low labour content and requires skills which bears no relation to the one on whom sunset has arrived. Labour released is not redeployed....it often sits at home on welfare.

People work because it is a means of social cohesion. Many of us work because we like to create something which is challenging. The alternative in a post-work world is to watch Big Brother all day because all we will be doing is entertaining each other to pass the time. GDP will be measured by Reality TV shows created per year and productivity calculations will track Taylor Swift Concerts per roadie hour. The rest will play cards. Will a stable society emerge? Uh, No. Just look at history of man. Kings have everything. Yet they want more. And many want to be King.

Even the super-rich are advised not to hand over too much to their kids for fear of them becoming unproductive members of society. Little is more galling than a trust fund baby who enjoys the spoils of success earned through nothing more than winning a genetic lottery, and yet acting as if it were entitled. For the sake of their kids, the rich are advised to keep them in a state of having to strive.

Work is more than production of goods and services that are estimated in GDP. Deny significant parts of the population the ability or opportunity to work in decent jobs when they want or need it and you get riots and insurrection.

If ongoing productivity gains are spent and accrued the way they have been in the last decade, more productivity of the same brand is probably not something to hope for. Quite possibly, it is better to slow it down a little and spread the gains around some more.

Productivity a good thing? Yes, if carefully achieved and when gains are distributed in a way which balances incentive and unfairness. No, if not.

Thank you for your contribution.

 

[Trendnomics]

Lol a bit salty there ? But since you indirectly called me out, let's compare. I posted my account statements for 2014 & 2015 + first half of 2016, find it in my post history. Both years were over 50% and 2016 at 46% (I traded it over 50% for the year after posting the statement before my break, but let's just use 46%.)

$100 x 50% x 50% x 46% = $328.5 = 228% return after compound over 3 years (2.5 actually but let's use 3)

Your last post on July 29 says 20.7% return pa is like 75% after compound after 3 years.

You said you have pain of 2 years of B/E. Mine was like 2 months.

So you tell me, 228% over 2.5 years of smoother return vs 75% after 3 years of 2 B/E year and 1 outlier year is more exciting to viewers since that is what you are caring about lmao.

Any real trader or investor knows $ amount is important for scalability in this game.

You are making "chump change compared to your trading" as an engineer and your system is "raining money" why have you not quit yet ? Obviously not because you love your job, as you said you are demotivated. Could it be you have no faith in your system to reproduce what it did ? If you do - why are you still working ?

Instead of crying over thread popularity why don't you go diversify over other markets less correlated to equities so you don't have to suffer through 2 year of pain B/E.

I was purely stating an observation.

In response, please see the following video:

https://www.youtube.com/watch?v=oYsXc3hqgEE

 

[Trendnomics]

Portfolio updates: Another solid week of gains.

The positions in mining (SAR, RRL, FMG, ORE, GXY) and associated engineering services (WOR, RCR, MND), contributing to most of the gains.

Private Portfolio: +71.03 % (Since 07-2013) ~+19.0% per year return

SMSF Portfolio: +78.19 % (Since 07-2013) ~+20.6% per year return

 

[minwa]

I was purely stating an observation.

In response, please see the following video:

https://www.youtube.com/watch?v=oYsXc3hqgEE

Ahhh yes 2 years of stuffing around break even before one year of gain is a sure crowd pleaser, no wonder this thread is massively popular.

I make a habit of calling out trading/investing BS on this forum - this is one. Up to readers to decide.