Silver Stackers logo

Silver Stackers

Discussion forum for those
who love to stack precious metals

You are not logged in.

Announcement

Forum registration is open.

#51 2016-06-01 08:24:50

Bargain Hunter
Member
From: Sydney, Australia
Registered: 2010-07-11
Posts: 730
Trades :   18 

Re: Technical Analysis ...

Ben Graham has specifically stated that investors should

"have an adequate idea of stock market history, in
terms, particularly, of the major fluctuations. With this background he may be in a position to form some
worthwhile judgment of the attractiveness or dangers....of the market." That is for you Trew. Please go back and re-read the intelligent investor and security analysis.

http://www.rbcpa.com/UPDATED_Feb2010_A_ … Others.pdf

Wrcmad if you read this article in the link there is a table on page two which specifically references thoughts by leading investors on the markets valuation at the time. Lo and behold when Buffett or Graham, etc came out a wrote an article explaining that the market was very undervalued, any investor that paid attention and bought stocks in a big way would have made a massively high return over the ensuing five years, or that the market was overvalued, etc

The usefulness even for bottom up investors is that when the market is screamingly cheap e.g. 1932, 1974, 2008 then an investor should be fully invested in bargain stocks. Whereas when the market was dangerously expensive e.g. 1959 or 1999 then even a bottom up investor should keep some dry powder (i.e. cash) in anticipation of more plentiful bargains due (due to a market correction) which would allow you to buy stocks that are more of a bargain.

If you actually look at when Buffett wound up the Buffett partnership at the time he said it was because of a lack of investment opportunities. The market was so overvalued he could not find enough bargains and thus wound up the partnership at the time.

Last edited by Bargain Hunter (2016-06-01 08:30:09)


"Paper is poverty,... it is only the ghost of money, and not money itself." --Thomas Jefferson
"You only find out who is swimming naked when the tide goes out" --Warren Buffett
"These days man knows the price of everything, but the value of nothing" --Oscar Wilde

Offline

#52 2016-06-01 08:45:26

Bargain Hunter
Member
From: Sydney, Australia
Registered: 2010-07-11
Posts: 730
Trades :   18 

Re: Technical Analysis ...

As for short-term trading every academic study shows that there is a high correlation between frequent trading and poor returns on average. There have been numerous academic studies done on day traders and other short term traders showing that the majority of them produced below average net returns, and produced worse returns than the average long-term investor. Now I agree that some traders can get a high return (therefore it is possible that you get a higher return than most), however the failure rate is higher than for long-term investors due to the fact that:
-Trading costs are higher due to more paid in brokerage fees
-Potentially more paid in accounting fees depending on how you lodge your tax returns whether you use an accountant or expensive software and the fact that some acountants charge more for a high number of transactions.
-Potentially higher taxes because you pay tax when you sell (or even in some cases on unrealized gains if you register with the ATO as a trader for tax purposes) which you tend to sell more often and also you are less likely to get the capital gains tax discount that applies when you hold an asset for more than 12 months
-You are less advantaged/exposed to the long-term upward bias of the stock market. Studies have shown the longer the time period for measuring market returns the higher the likelihood of a positive return. The reason for this is simple. Over long periods of time corporate earnings are a major influence on stock prices. Corporations over the long-term reinvest a proportion of their earnings. These retained earnings generate a return over the long-term thus leading to higher earnings which in turn leads to higher stock prices.

Now they may be some exceptions but on average:
-Investors outperform traders
-People that have hundreds of millions or billions of dollars on average are more likely to have a long holding period than to quickly trade in and out of things in a short period of time. There are far more people like Warren Buffet, Carl Icahn, Alex Waslitz, etc then there are people who trade shorter term like James Simon or Steve Cohen (note his firm got a multi-billion dollar insider trading fine from the SEC)
-There are far more people getting rich from long-term investing than trading
-More people make money from fundamental analysis than from technical analysis.

Now I am not saying you are a day trader but here is an example of a study showing the poor returns the majority of day traders get by analyzing trading activity on the Taiwan securities exchange over a number of years.

http://faculty.haas.berkeley.edu/odean/ … _final.pdf

Page three of the above study has a graph showing that even though traders earned a similar gross return to those with a lower portfolio turnover the higher costs caused them to have a lower net return.

http://www.econ.yale.edu/~shiller/behfi … -odean.pdf

The study does point to some other studies that showed better results but pointed out that all of the studies had a sample size that was too small to be reliable.

Here is another link discussing poor trader performance:
https://faculty.haas.berkeley.edu/odean … 110217.pdf

Another link:
http://www.tradeciety.com/24-statistics … ose-money/

http://faculty.haas.berkeley.edu/odean/ … _final.pdf

The study above has a graph on page three showing that those with higher portfolio return earned a similar gross return but a lower net return to those with lower portfolio turnover (i.e. less trading) due to higher costs eating into their profits.

Last edited by Bargain Hunter (2016-06-01 09:02:37)


"Paper is poverty,... it is only the ghost of money, and not money itself." --Thomas Jefferson
"You only find out who is swimming naked when the tide goes out" --Warren Buffett
"These days man knows the price of everything, but the value of nothing" --Oscar Wilde

Offline

#53 2016-06-01 09:07:51

wrcmad
Silver Stacker
From: Northern NSW
Registered: 2012-01-02
Posts: 6,102
Trades :   118 

Re: Technical Analysis ...

Bargain Hunter wrote:

How many traders do you know that can compound at 50% p.a.? Within a less than 20 years they would be on the BRW 200 Rich list. Yet there largely continued and conspicuous absence shows that it rarely happens or is not scale-able or some combination of the two.

Ahh, the "benchmarking to billionaires" as a measure of success argument again. wink
Although it has been addressed already in this thread, I'll give you my take on that:

Of the 50-odd billionaires in Australia, maybe 1 or 2 have got there through investing like you or me. And of those, they are now at the thin end of their life anyway. So that benchmark is irrelevant.

Now, let's address the mentality of measured success, which incidentally, in my view, is a total misconception to most, especially in recent years.

To most - especially (in my experience) property investors, the measure of success is net worth. They (in my experience) will measure their own self-worth by comparing it to their own vs others book value, or accumulation of assets.
I know some who fall into this category who live very frugally, by default forcing their families to live by the same frugal means, to grow that book value, and compound it, and scrimp, and save, and grow it more, year after year after year. It is a life driven by net-worth, at all costs, and in many cases a life wasted that could otherwise have enjoyed the fruits of their success. It is a mentality of "the one who dies with the highest score wins".
There are, of course, exceptions to this rule. However, in my experience, they are much less common.

Then there are those who can yield >50% of their investment..... year after year after year. These people do not need to compound, and to do so would soon become unmanageable anyway. They can live it up, live a good and fulfilling life, live where they want to, how they want to, and enjoy life, and have their family do the same, year after year, knowing they can do it again next year, and not need to make a spectacle of themselves whilst doing so. They do not need to hit the once-in-a-lifetime to da' moon jackpot, or worry about what the market is doing next year, or where next-year's yields are coming from. They enjoy their life - to the maximum extent that their returns sensibly allow them to, and know that a life lived is worth shyteloads more than a life scrimped and dedicated to book value.

Guess which one is the successful trader?

Last edited by wrcmad (2016-06-01 09:09:38)


Anything is possible, but not everything is probable.  wink

Manipulation..... If you want to continually subscribe to this idea then get out of precious metals. Only a fool would play a game that is completely rigged. As you still are in the game, I would say that you are not completely convinced of the manipulation ...

Offline

#54 2016-06-01 09:09:57

Bargain Hunter
Member
From: Sydney, Australia
Registered: 2010-07-11
Posts: 730
Trades :   18 

Re: Technical Analysis ...

Wrcmad my argument to you is this:
-On average more people make money from fundamental analysis than technical analysis or other types of short-term trading.
-A higher percentage of long-term fundamental investors are profitable than short-term traders.
-A far higher proportion of people with net worths in the hundreds of millions or billions are fundamental based investors rather than traders and have a longer holding period on average than a trader
-Its generally easier to make money as a long-term fundamental investor because lower transaction costs, lower taxes and rising earnings are tailwinds on your side.
-Most people would do better as a long-term investor than a trader
-Most traders earn poor returns and only a very small percentage are actually good at it.
-Trading is usually not as easily scale-able due to liquidity restraints (hence why there are not many billionaire traders). Hence you may see many traders with a few million getting a 30-50% return who can't do the same thing if you gave them $100 million dollars hence why they never get that rich.


"Paper is poverty,... it is only the ghost of money, and not money itself." --Thomas Jefferson
"You only find out who is swimming naked when the tide goes out" --Warren Buffett
"These days man knows the price of everything, but the value of nothing" --Oscar Wilde

Offline

#55 2016-06-01 09:20:26

wrcmad
Silver Stacker
From: Northern NSW
Registered: 2012-01-02
Posts: 6,102
Trades :   118 

Re: Technical Analysis ...

Bargain Hunter wrote:

As for short-term trading every academic study shows that there is a high correlation between frequent trading and poor returns on average. There have been numerous academic studies done on day traders and other short term traders showing that the majority of them produced below average net returns, and produced worse returns than the average long-term investor. Now I agree that some traders can get a high return (therefore it is possible that you get a higher return than most), however the failure rate is higher than for long-term investors due to the fact that:
-Trading costs are higher due to more paid in brokerage fees
-Potentially more paid in accounting fees depending on how you lodge your tax returns whether you use an accountant or expensive software and the fact that some acountants charge more for a high number of transactions.
-Potentially higher taxes because you pay tax when you sell (or even in some cases on unrealized gains if you register with the ATO as a trader for tax purposes) which you tend to sell more often and also you are less likely to get the capital gains tax discount that applies when you hold an asset for more than 12 months
-You are less advantaged/exposed to the long-term upward bias of the stock market. Studies have shown the longer the time period for measuring market returns the higher the likelihood of a positive return. The reason for this is simple. Over long periods of time corporate earnings are a major influence on stock prices. Corporations over the long-term reinvest a proportion of their earnings. These retained earnings generate a return over the long-term thus leading to higher earnings which in turn leads to higher stock prices.

Now they may be some exceptions but on average:
-Investors outperform traders
-People that have hundreds of millions or billions of dollars on average are more likely to have a long holding period than to quickly trade in and out of things in a short period of time. There are far more people like Warren Buffet, Carl Icahn, Alex Waslitz, etc then there are people who trade shorter term like James Simon or Steve Cohen (note his firm got a multi-billion dollar insider trading fine from the SEC)
-There are far more people getting rich from long-term investing than trading
-More people make money from fundamental analysis than from technical analysis.

You are right.
Heaps of wannabe traders blow themselves up, and fail. Because they don't approach it correctly.
They don't understand the underlying principles of trading successfully.
They then resort to the simpleton approach of buy-and-hold (or fundamental analysis). To resort to fundamental analysis as an easier way out just confirms it is the unsophisticated way IMO, which also confirms it as  a waste of time studying.
However, higher trading costs, higher accounting fees, higher taxes, and long-term longs are a fallacy of the uneducated.
I have outlined my approach here on the forum.


Anything is possible, but not everything is probable.  wink

Manipulation..... If you want to continually subscribe to this idea then get out of precious metals. Only a fool would play a game that is completely rigged. As you still are in the game, I would say that you are not completely convinced of the manipulation ...

Offline

#56 2016-06-01 09:28:35

Bargain Hunter
Member
From: Sydney, Australia
Registered: 2010-07-11
Posts: 730
Trades :   18 

Re: Technical Analysis ...

By the way here is an article which quotes Shiller written in late 2005. It quotes him warning about the U.S. housing market being a bubble.

http://www.nytimes.com/2005/08/21/busin … again.html

Also as I pointed out before in one of my previous posts here is an article http://www.rbcpa.com/UPDATED_Feb2010_A_ … Others.pdf which has a table on the second page showing when Buffett, Graham and others presciently pointed out buying or selling opportunities with articles stating the market was overvalued or undervalued. On a 5 year time horizon they were always shown to be very timely and wise analyses. So much for fundamental analysis being useless in predicting future returns.

Like I said before fundamental analysis is useful and I will make the following predictions:
-Over the next 10 years U.S. stocks are likely to post a very very low CPI adjusted return (probably less than 3%)
-Over the next 10 years the Russian stock market is likely to above average real rate of return (even measured in CPI adjusted U.S. dollars) and is likely to outperform (again in CPI adjusted U.S. dollars) the U.S. stock-market
-Over the next ten years the Australian stock market is likely to outperform the U.S. stock-market

Those above predictions are based on long-term valuation indicators. I re-iterate that I have no predictive ability about overall markets, the future could be vastly different than the past. Its just a probability based observation and hence the use of the phrase is likely to denote outcomes that are most likely but far from certain to occur.

Last edited by Bargain Hunter (2016-06-01 09:57:01)


"Paper is poverty,... it is only the ghost of money, and not money itself." --Thomas Jefferson
"You only find out who is swimming naked when the tide goes out" --Warren Buffett
"These days man knows the price of everything, but the value of nothing" --Oscar Wilde

Offline

#57 2016-06-01 09:33:48

aleks
Silver Stacker
From: Karl-Marx-Allee
Registered: 2010-10-14
Posts: 2,392
Trades :   27 

Re: Technical Analysis ...

Not all trading has difficulty scaling I was using an extreme example of day traders in a prop firm in the futures market. Its abit silly comparison to be making, the whole financial system is tilted to buy and hold investing and you miss the whole point...

The single thing that matters is this:

Do what works for you. Personality type and psychological make up matter, and this needs to be aligned with the person pulling the trigger and the type of trading or investing they are doing.

Last edited by aleks (2016-06-01 10:38:02)


Only you have your best financial interest at heart, be your own guru

Offline

The following 2 users say thank you for this post: wrcmad, trew

#58 2016-06-01 09:41:18

Bargain Hunter
Member
From: Sydney, Australia
Registered: 2010-07-11
Posts: 730
Trades :   18 

Re: Technical Analysis ...

Fundamental analysis is not a waste of time studying. There are heaps of outperforming fundamental/value based stock pickers/inveestors. Ben Graham, John Maynard Keynes in his later years (after he failed at momentum/trading strategies), Charles Munger before Berkshire when he had the investment partnership, Tweedy Browne, Walter Schloss, Waren Buffett, John Templeton, Phillip Fisher, T. Rowe price, Joel Greenblatt, Peter Lynch, etc

On a more personal level, I manage money for myself and my parents. Three portfolios in total. My own personal portfolio, my parents self managed super fund and my mum's personal share portfolio. All three portfolio have significantly outperformed their respective benchmarks (average super fund, All Ords Accumulation index and All ords accumulation index) respectively. 

Just go to Aussiestockforums and look at posters like ROE, Craft, Ves, Value Snatcher, Mclovin who are all smashing the market using value investing. Especially Craft who buys has a concentrated portfolio of quality companies with a typically long holding period. He has gotten compounded net returns well north of 30% p.a. for a period of more than 13 years.

Last edited by Bargain Hunter (2016-06-01 09:55:59)


"Paper is poverty,... it is only the ghost of money, and not money itself." --Thomas Jefferson
"You only find out who is swimming naked when the tide goes out" --Warren Buffett
"These days man knows the price of everything, but the value of nothing" --Oscar Wilde

Offline

#59 2016-06-01 09:43:07

Bargain Hunter
Member
From: Sydney, Australia
Registered: 2010-07-11
Posts: 730
Trades :   18 

Re: Technical Analysis ...

wrcmad wrote:

To resort to fundamental analysis as an easier way out just confirms it is the unsophisticated way IMO, which also confirms it as  a waste of time studying.
However, higher trading costs, higher accounting fees, higher taxes, and long-term longs are a fallacy of the uneducated.
I have outlined my approach here on the forum.

My post above clearly refutes this.


"Paper is poverty,... it is only the ghost of money, and not money itself." --Thomas Jefferson
"You only find out who is swimming naked when the tide goes out" --Warren Buffett
"These days man knows the price of everything, but the value of nothing" --Oscar Wilde

Offline

#60 2016-06-01 09:46:47

Bargain Hunter
Member
From: Sydney, Australia
Registered: 2010-07-11
Posts: 730
Trades :   18 

Re: Technical Analysis ...

This link http://forums.silverstackers.com/topic- … p-ccp.html is an example of me successfully performing bottom up fundamental/value analysis on a stock which clearly shows my reasoning and at what prices I added to my position. You will see since then I have collected good dividends and the share price has strongly outperformed the market.

Note that my contributions on that thread just showed a glimpse/sample of the much more comprehensive research I did on the company. I did not want to bog down the thread with pages upon pages of detailed information/notes I kept about a company so I kept to the main points.

I am surprised more value investors/fundamental guys aren't on this thread defending our methodology and how it is superior to technical analysis. Come on Big A.D., Bullion Baron, etc get on here and defend us against the technical guys tongue

Last edited by Bargain Hunter (2016-06-01 10:20:47)


"Paper is poverty,... it is only the ghost of money, and not money itself." --Thomas Jefferson
"You only find out who is swimming naked when the tide goes out" --Warren Buffett
"These days man knows the price of everything, but the value of nothing" --Oscar Wilde

Offline

#61 2016-06-01 09:58:19

Bargain Hunter
Member
From: Sydney, Australia
Registered: 2010-07-11
Posts: 730
Trades :   18 

Re: Technical Analysis ...

wrcmad wrote:

I have outlined my approach here on the forum.

p.s. Where exactly did you outline your approach? I am curious to see it.


"Paper is poverty,... it is only the ghost of money, and not money itself." --Thomas Jefferson
"You only find out who is swimming naked when the tide goes out" --Warren Buffett
"These days man knows the price of everything, but the value of nothing" --Oscar Wilde

Offline

#62 2016-06-01 10:03:56

wrcmad
Silver Stacker
From: Northern NSW
Registered: 2012-01-02
Posts: 6,102
Trades :   118 

Re: Technical Analysis ...

Bargain Hunter wrote:
wrcmad wrote:

I have outlined my approach here on the forum.

p.s. Where exactly did you outline your approach? I am curious to see it.

http://forums.silverstackers.com/messag … ml#p314887


Anything is possible, but not everything is probable.  wink

Manipulation..... If you want to continually subscribe to this idea then get out of precious metals. Only a fool would play a game that is completely rigged. As you still are in the game, I would say that you are not completely convinced of the manipulation ...

Offline

The following user says thank you for this post: trew

#63 2016-06-01 10:09:29

Bargain Hunter
Member
From: Sydney, Australia
Registered: 2010-07-11
Posts: 730
Trades :   18 

Re: Technical Analysis ...

By the way its been good to have a robust yet respectful debate with you, even though debate wise I've been killing you tongue

Last edited by Bargain Hunter (2016-06-01 10:09:50)


"Paper is poverty,... it is only the ghost of money, and not money itself." --Thomas Jefferson
"You only find out who is swimming naked when the tide goes out" --Warren Buffett
"These days man knows the price of everything, but the value of nothing" --Oscar Wilde

Offline

The following user says thank you for this post: wrcmad

#64 2016-06-01 10:31:34

Bargain Hunter
Member
From: Sydney, Australia
Registered: 2010-07-11
Posts: 730
Trades :   18 

Re: Technical Analysis ...

I am curious if any newbie who was sitting on the fence has read this thread and after seeing me and wrcmad battle is leaning towards one or the other of us being right.

By the way chartists actually perform a useful service to value investors like me. By buying and selling without reference to intrinsic value they help push stocks to irrational bargain or overvalued territories providing me with opportunities to buy and sell and profit. So by all means keep doing what you are doing wrcmad ;-)

Last edited by Bargain Hunter (2016-06-01 10:37:41)


"Paper is poverty,... it is only the ghost of money, and not money itself." --Thomas Jefferson
"You only find out who is swimming naked when the tide goes out" --Warren Buffett
"These days man knows the price of everything, but the value of nothing" --Oscar Wilde

Offline

#65 2016-06-01 16:41:12

wrcmad
Silver Stacker
From: Northern NSW
Registered: 2012-01-02
Posts: 6,102
Trades :   118 

Re: Technical Analysis ...

Bargain Hunter wrote:

By the way chartists actually perform a useful service to value investors like me. By buying and selling without reference to intrinsic value they help push stocks to irrational bargain or overvalued territories providing me with opportunities to buy and sell and profit. So by all means keep doing what you are doing wrcmad ;-)

Respectfully, that statement shows a lack of understanding of what drives the markets and price.
It also flies in the face of your own fundamental valuation of gold and silver. tongue


Anything is possible, but not everything is probable.  wink

Manipulation..... If you want to continually subscribe to this idea then get out of precious metals. Only a fool would play a game that is completely rigged. As you still are in the game, I would say that you are not completely convinced of the manipulation ...

Offline

#66 2016-06-01 16:45:57

wrcmad
Silver Stacker
From: Northern NSW
Registered: 2012-01-02
Posts: 6,102
Trades :   118 

Re: Technical Analysis ...

Bargain Hunter wrote:

By the way its been good to have a robust yet respectful debate with you, even though debate wise I've been killing you tongue

Long posts and lots of links constitute a killing?.... Not.
The debate was done and dusted at post #38. wink


Anything is possible, but not everything is probable.  wink

Manipulation..... If you want to continually subscribe to this idea then get out of precious metals. Only a fool would play a game that is completely rigged. As you still are in the game, I would say that you are not completely convinced of the manipulation ...

Offline

Board footer

Powered by FluxBB