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0 pointsbenreesman1y ago0 comments

There are a lot of different forms of Fama EMH, but even under very weak versions of it an uninformed speculator has the uniform geometric Brownian motion of holding an equity pretty much pegged at 0.5, expected value is par in the absence of an arbitrage opportunity. This is eliding fees and other friction, and eliding the market microstructure in a stand price-time precedence setting.

People (uninformed speculators) routinely think they have alpha by virtue of knowledge that was priced into a Citadel regression days, weeks, or months before they obtained it.

Uninformed speculators are almost by definition gamblers, and it’s pretty much a set cover between gamblers and arbitrageurs.

I wasn’t making fun of arbitrageurs.

P.S. Equities on Island and ARCA are decimalized on the consolidated tape, lit venues can’t have a spread less than one penny.

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7 comments · 3 top-level

greyw1y ago· 2 in thread

Anyone holding NVDA or any tech stock for more than 10 years would have had massively beat the market.

I assume by speculators short term holders and traders. Sure these people wont have alpha over entities that take it seriously.

Anyway I don't think EMH holds at most a very very weak version of it. It's quite obvious that smallcaps, micro- and nanocaps are from time to time mispriced. The big traders are also not around to mess with those.

kqr1y ago

> Anyone holding NVDA or any tech stock for more than 10 years would have had massively beat the market.

Right, so anyone with a time machine can beat the market? That's not how this works.

Can you confidently point to a stock today that will have out-earned the market by next decade? That is the question facing investors and it's a much harder one.

greyw1y ago

A single stock no (usually 1 in 3 perform disappointingly) but a collection of stocks sure. They are all companies you never heard of and has worked out just fine for me.

Usually opportunities come from time to time. For example us met coal mines during covid. ESG boomed and funds dropping them, banks stopped giving new loans, supply chain messed up, priced for bankruptcy. Plenty of people treated met coal the same as thermal coal. Clearly steel is was not going away so a couple hand picked west virginian and alabama met coal mines did wonders. I spend a lot of time researching calling emailing companies there is no free lunch. Its fun and makes me very good money.

Anyway Im not going to peddle my small caps here. Indexing is still the best strategy in general.

kqr1y ago· 1 in thread

I'm surprised you're getting downvoted. You're absolutely right -- the expectation less fees from holding a stock a short period is equal to the risk-free interest rate.

Over longer horizons it gets more complicated because compounding, but it's not obviously in favour of the speculator, even though it has historically turned out that way.

benreesmanOP1y ago

I’ve been told that I tend to “TED Talk” / lecture, and on re-reading I can see why someone might get that vibe.

It isn’t my intention to condescend, I know a bit about this stuff and try to make informative comments when the opportunity arises.

Thank you for having my back on the substantial accuracy of the comment.

benreesmanOP1y ago· 1 in thread

Post/post script.

It is in fact a time when HODL the Magnificent Seven has been a great trade for years: it hasn’t been this easy to turn money into more money since the 1920s.

But that’s a combination of sanctioned monopoly fraud and wild levels of stimulus: in the last decade we basically transferred half of all wealth from working people to Boomer 401ks, and the New Wall St guys got a pretty hefty cut.

NVIDIA has some very smart people, but they don’t fab EUV wafers and they don’t do whatever it is where it’s ok for a dorky guy in a leather jacket to sign a girl’s breasts.

The price of the stock is “supported”.

greyw1y ago

> NVIDIA has some very smart people, but they don’t fab EUV wafers and they don’t do whatever it is where it’s ok for a dorky guy in a leather jacket to sign a girl’s breasts.

Why does it matter whether NVDA fabricates wafers or not? It's not their business model.

The dorky guy sells something all of the mag7 and more want desperately.

> The price of the stock is “supported”.

Supported by gigantic growing cashflows. Did you ever valuate/analyze a business? You know people don't put random numbers on the stock price (looking at longer timewindows obviously).

j / k navigate · click thread line to collapse

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7 comments · 3 top-level

greyw1y ago· 2 in thread

Anyone holding NVDA or any tech stock for more than 10 years would have had massively beat the market.

I assume by speculators short term holders and traders. Sure these people wont have alpha over entities that take it seriously.

kqr1y ago

> Anyone holding NVDA or any tech stock for more than 10 years would have had massively beat the market.

Right, so anyone with a time machine can beat the market? That's not how this works.

Can you confidently point to a stock today that will have out-earned the market by next decade? That is the question facing investors and it's a much harder one.

greyw1y ago

A single stock no (usually 1 in 3 perform disappointingly) but a collection of stocks sure. They are all companies you never heard of and has worked out just fine for me.

Anyway Im not going to peddle my small caps here. Indexing is still the best strategy in general.

kqr1y ago· 1 in thread

I'm surprised you're getting downvoted. You're absolutely right -- the expectation less fees from holding a stock a short period is equal to the risk-free interest rate.

Over longer horizons it gets more complicated because compounding, but it's not obviously in favour of the speculator, even though it has historically turned out that way.

benreesmanOP1y ago

I’ve been told that I tend to “TED Talk” / lecture, and on re-reading I can see why someone might get that vibe.

It isn’t my intention to condescend, I know a bit about this stuff and try to make informative comments when the opportunity arises.

Thank you for having my back on the substantial accuracy of the comment.

benreesmanOP1y ago· 1 in thread

Post/post script.

It is in fact a time when HODL the Magnificent Seven has been a great trade for years: it hasn’t been this easy to turn money into more money since the 1920s.

NVIDIA has some very smart people, but they don’t fab EUV wafers and they don’t do whatever it is where it’s ok for a dorky guy in a leather jacket to sign a girl’s breasts.

The price of the stock is “supported”.

greyw1y ago

> NVIDIA has some very smart people, but they don’t fab EUV wafers and they don’t do whatever it is where it’s ok for a dorky guy in a leather jacket to sign a girl’s breasts.

Why does it matter whether NVDA fabricates wafers or not? It's not their business model.

The dorky guy sells something all of the mag7 and more want desperately.

> The price of the stock is “supported”.

Supported by gigantic growing cashflows. Did you ever valuate/analyze a business? You know people don't put random numbers on the stock price (looking at longer timewindows obviously).

j / k navigate · click thread line to collapse