This correction-type thingy...

badger09

atush wrote: »

Sorry, but back reading other posts of a member isn't my style. I comment on the post at hand.

I think you may have missed the point I was trying to make.

Context is important.

I didn't need to read back over Damage's posts as I had quite a lot of interaction when he/she first started posting. At that time I cautioned against making hasty decisions to invest and then even hastier ones to change platform, sell etc.

atush wrote: »

Lots here like to research what other people say, to castigate them, make fun of them or debunk them. I dont have that much free time to devote to it?

I am not one of them

grey_gym_sock

Damage wrote: »

A typical 'buy and hold' period can look no different from a day trade in graphical representation, if you ignore the scale of the chart. Wouldn't you agree?

masonic has mentioned 1 difference: that the probability of being in profit is higher for longer periods.

another difference is costs. this is perhaps the main reason why most day-traders lose money. in the average day, an average share might rise by about 0.03% . the costs of buying and selling again are a lot more than that, so the average day trader will lose money. but with holding periods of years, the average profit might be 5-10% per year (not allowing for inflation), and it is easy to keep your costs down to much less than that.

it's also easy for traders to think that costs aren't so important, because even a relatively steady share can easily be up 1% one day, down 1% another day. on most days, the share price movement is bigger than trading costs, so either the trading costs don't wipe out your profit, or you were making a loss anyway. but in the long term, you need to have a massive edge - ability to pick shares that (on average) beat the market - in order to come out ahead after costs.

grey_gym_sock

Glen_Clark wrote: »

That was before they had printed another £375bn.
My biggest worry with 100% cash would be holding it all in Sterling.
Most countries have their own idiocy-of-choice. Ours is that high house prices are a good thing. One aspect of this is that inflated housing equity makes people more relaxed about taking on more consumer credit – and current official projections assume (and require) a big surge in household borrowing which is already at alarming levels. Housing is a capital sink tying up - uselessly - vast sums that could otherwise have been invested profitably to bring down the current account deficit.

a plausible explanation, which i've been reading in a few places recently, is that money printing doesn't cause inflation; it's aggregate demand which exceeds the capacity of the economy that causes inflation. only in limited circumstances would that come to the same thing - i.e. if the economy is already running at full capacity, and then the government prints additional money and spends it.

currently the economy is running far below full capacity - i.e. there is lots of unemployment + underemployment + disguised employment. so actually the government could print additional money and spend it without causing inflation - this is what so-called "people's quantitive easing" would do. that would be a great idea, IMHO. much better than traditional QE, the main effect of which is just to pump up asset prices, as you say.

this is 1 of a number of policies which have favoured financial speculation instead of productive investment. financial deregulation has had a huge, negative effect. a lot of that should be reversed.

it would be very dangerous to base a stronger recovery on growing consumer debt, when outstanding consumer debt is already so high. (and that is what osborne's optimistic projections assume.) i suspect it won't happen, because few households have sufficient confidence to take on more debt now.

TrustyOven

So in the news it's reported that China will allow pension funds to invest in the domestic stock market. Apparently this is to try to stop the share prices falling, or something.

This seems like a bad idea? Does this mean they are going to make the correction even bigger if their plans fail to materialise and they've now invested up to 30% of the pension into the market that is falling down?

I've probably misunderstood it all though.

digannio

Nobody seems to have told China's 90 million retail investors that the markets can go down as well as up... or at least they haven't listened when they have been told. And most of them seem to have borrowed shedloads of money to take advantage of the "free" bonanza offered by the markets. The house of cards is tumbling.

le_loup

digannio wrote: »

Nobody seems to have told China's 90 million retail investors that the markets can go down as well as up... or at least they haven't listened when they have been told. And most of them seem to have borrowed shedloads of money to take advantage of the "free" bonanza offered by the markets. The house of cards is tumbling.

Just like 2000 in the UK!

Damage

masonic wrote: »

What you seem to be missing is that over the short term, price movements are essentially random, but over the long term they are not. Invest for less than a year and your odds of losing money are not much better than evens, but invest over 20 years or more and the odds of a loss are considerably less than 1 in 10. So you can't just ignore the time scale on the chart and claim investing short term is in any way equivalent to doing so long term. One is a matter of luck and the other is a near certainty.

I'm not missing anything. You edited out one paragraph from my post that was crucial to the point being made. This:

I think that what is the better approach depends on the individual, but that's a different argument from the one that claims the other doesn't exist. Despite aspects of technical analysis (and related methods) sometimes appearing to be mumbo-jumbo (at least in its interpretation and usage), it seems beyond doubt that it is valid, based upon the evidence. I get the impression that things get dismissed on the basis of agency (or at least where it plays a big part), as that isn't readily explained by the scientific method.

The notion of an ability to beat the market is dismissed regularly by those who claim market-beating is down to luck, and instead they champion the buy and hold approach, which 'works' nearly all the time for nearly everyone (but notably, not always). Well, some people can beat the market, and they do it on a regular basis - beyond the point that can be explained simply by luck or chance. It is clearly a well-documented fact. This in itself presents a robust argument against hypotheses that claim price movements to be insurmountably random.

The market being entered and exited by traders and investors in any timescale from the shortest day-trade to the longest investment is the very same market. What people make of it depends on their abilities. What is 'essentially random' to the vast majority of us isn't necessarily 'essentially random' to those with the ability to read price movements within the market with much greater focus than the rest of us. If it was random then no one would be able to beat it consistently, and this clearly isn't the case.

So, my paragraph (that you removed when you quoted me) qualified my point: 'I think that what is the better approach depends on the individual'. Thus, some individuals are able to beat the market regularly, and for them it works better than buy and hold because they can take advantage of the fluctuations within a buy and hold period, at a higher level of focus (timewise) than most of us are able to. If they bought and held then they would do worse than if they used their abilities to time the market over the same period.

As I have already established, my point concerned the argument that has buy and hold at one extreme, and market-beating short-term trading at the other. My observation that the market (price movements) looks the same for any period if you remove the timescale was to illustrate that the level of randomness (or non-randomness if one prefers) exists throughout, and it is there for participants of whatever level of ability to make of it what they will by participating according to their preferred timescale. I was not making that observation to support a general statement (as you implied in your repsonse above) that short term is the same as long term.

The qualitative relationship between short-term and long-term trading/investing isn't determined by the timescale but by the individual participant. To dismiss my point by using a generalized example (buy and hold investing) that essentially dismisses or at least excludes the existence of the very subject of my point (market-beating short-term traders) is in itself missing the point.

Damage

grey_gym_sock wrote: »

masonic has mentioned 1 difference: that the probability of being in profit is higher for longer periods.

another difference is costs. this is perhaps the main reason why most day-traders lose money. in the average day, an average share might rise by about 0.03% . the costs of buying and selling again are a lot more than that, so the average day trader will lose money. but with holding periods of years, the average profit might be 5-10% per year (not allowing for inflation), and it is easy to keep your costs down to much less than that.

it's also easy for traders to think that costs aren't so important, because even a relatively steady share can easily be up 1% one day, down 1% another day. on most days, the share price movement is bigger than trading costs, so either the trading costs don't wipe out your profit, or you were making a loss anyway. but in the long term, you need to have a massive edge - ability to pick shares that (on average) beat the market - in order to come out ahead after costs.

Yes, I understand what you are saying. Regarding my point, those factors would be accounted for by the abilities (or otherwise) of the participants who can (or can't) beat the market.

Damage

talexuser wrote: »

Yes, and an apple can be exactly the same as a pear if you ignore the fact it is an apple.

You received five 'thank yous' on your post for completely missing my point. Well done!

Thrugelmir

Damage wrote: »

What is 'essentially random' to the vast majority of us isn't necessarily 'essentially random' to those with the ability to read price movements within the market with much greater focus than the rest of us. If it was random then no one would be able to beat it consistently, and this clearly isn't the case.

Unless you've a crystal ball or have access to inside information (pre release) then "reading" price movements is random. As you've no idea what might happen (not least while you are asleep). Simply too many variables. Volatility is part and parcel of any marketplace.