Next Door neighbour - Worst trader ever?

[donaldduke]

Basically here's her situation, her dad was wealthy and passed away around 20 years ago and left her with millions of shares in many sectors. Over the years she has done her own thing without any advice, just sells when she thinks its a good idea and buys when she feels its right. We often have a chat and when i found out she also has an interest in the Stockmarket we got chatting about her portfolio... and over her 20 years of having control of it, instead of profiting she is down to about 2% of the original portfolio :-0


Whats your views on this?

How did she do in the first 10 years, between 1990 and 2000 when the markets went up like 300% during that time..

 

[arabianights]

How did she do in the first 10 years, between 1990 and 2000 when the markets went up like 300% during that time..

I read somewhere that if you panicked and sold the slow in the top 10 worst days of the stock market and were out of it for the 10 best days between 1980 and 2000 you would have made a net loss...

(of course often best days come with worst days due to added vol but it an excellent justification for never, ever, market timing investments)

(as opposed to trading, which you don't have to market time as the extra leverage means you don't care about missing moves)

 

[Doomberg]

How did she do in the first 10 years, between 1990 and 2000 when the markets went up like 300% during that time..

Well i don't know what in depth without asking mate, but from what i gather her main fault was not spreading the risk, she moved the majority of her money in to the Irish Banks, and its probably the worst thing she could of done tbh... but you know what, she's not upset, she said she isn't bothered so long as there is enough for her daughter which there will be no matter what happens

I suppose her being born with money like that would mean she has a totally different perspective on it, she rarely even spends any money on her self or goes out as she is not interested in spending money... and there is us all chasing pipe dreams ha

 

[HAL 9000]

As the saying goes, "a fool and his money are soon parted."

... and in most cases it's a bloody miracle they got together in the first place!

 

[cr6196]

Yeh i wasn't quite saying don't buy gold but the conclusion is just the same. basically, my view is people are gonna say whatever they want to justify the price move they see (i.e the stuff about inflation hedge and QE which is bull**** for the most part). price moves don't mean ****, gold can go up a 1000%, i wouldn't buy cos it still isn't going to be worth anything.

However, this commodities cycle business is pretty interesting nonetheless. its really hard to tell when these things are gonna pop but i would say we are past halfway due to the rise in inflation. inflation will squeeze the demand out the system. something like the us current account would be worth watching. i would say waiting to hear about gold day traders or whatever is a pretty bad idea. in hindsight, bubbles are easy to spot...all i know is that in terms of actual value, gold is worthless so whatever the price is, it isn't worth it.

 

[megamuel]

Interesting views here. I guess it ties in with the Greater Fool Theory, buying something with the hope of selling it at a higher price to a greater fool! Imagine being the greatest fool and buying at the exact high!

cr6196, do you extend your view of gold being worthless to all other precious metals or do some have more intrinsic value than others? I'm starting to wish I sold my palladium a few weeks ago!!!

Sam.

 

[arabianights]

That's the thing... whatever palladium and so on do at least there's a use for them.... in principle you could even work out a fair value (it wouldn't be that useful due to the uncertainities but you could do it).... gold is actually fairly unique amongst the commodities I can think of off the top of my head that it's mostly valuable because it's valuable.

P.S. Did you know in the 16th century the spanish dumped all their platinum reserves in the ocean cause people were using it to mix with gold for forgery purposes?

 

[megamuel]

No, I didn't know that... Very interesting. I wonder if its still there?! Yeah I believe silver and palladium have many more industrial uses than gold. Did you know that palladium can absorb up to 900 times its own volume of hydrogen? That has to be useful for something right?!

 

[donaldduke]

That's the thing... whatever palladium and so on do at least there's a use for them.... in principle you could even work out a fair value (it wouldn't be that useful due to the uncertainities but you could do it).... gold is actually fairly unique amongst the commodities I can think of off the top of my head that it's mostly valuable because it's valuable.

Gold is pretty and shiny and yellow, probably reminded people of the shining sun in the olden days. Combined with the fact it is very rare makes it even more amazing.

 

[cr6196]

yeh i don't know much about metals generally (reading Hot Commodities by Jim Rogers is as far as i go) but its clearly possible to trade them based on some fundamental value i.e looking at production capactiy/uses. it also pretty clear that commodities markets can get seriously out of whack sometimes if there are confusing supply/demand issues, i.e lead or sugar, for example. i don't follow them but almost everything has a price where it is worth buying...even gold...maybe.

 

[mauzj]

Your neighbour isn't too bad.

I know a professional who loses about 200k a year on his own book. And loses about another 200k a year from his colleagues' books due to execution errors. He's been going strong for about 8 years. And is so good at talking that anyone who doesn't know his true track record thinks he's a genius.

 

[Jason101]

This blinkered attitude towards investment is summed up by a former boss of mine, a Chartered Surveyor, apparently very successful. Said there were only two things he knew about the stock market - buy when shares are going up, sell when they're going down. Alright, this approach isn't entirely mad, but it is bound to underperform.

It does seem that many people look at the stock market and wonder if it is a good investment, 'like property'. As if property is the best investment you can make. And by good, they mean guaranteed not to lose. Amazing how many very smart people can use such poor thought processes.

:-0

Completely disagree.

Do not confuse the market value of a property with the rental income produced.
The current market value of a property has no negative bearing on the income generated by the property. In fact it usually has an inverse relationship. Anyone who is reliant on the market value at any fixed time is not an investor but a speculator and to speculate on such a leveraged illiquid market is pretty nuts.

What I am saying is if you are buying property as an investment, look at the rental income first, with a view to hold for life (or at least mortgage term). If the value increases, great, think about pyramiding or taking profits. Again if pyramiding look at your next property as rental income for life, unless price increases to give you other opportunities.

 

[JRP2891]

Yeh i wasn't quite saying don't buy gold but the conclusion is just the same. basically, my view is people are gonna say whatever they want to justify the price move they see (i.e the stuff about inflation hedge and QE which is bull**** for the most part). price moves don't mean ****, gold can go up a 1000%, i wouldn't buy cos it still isn't going to be worth anything.

.

It's going up because of a loss of confidence in fiat currencies, and the ever growing government debt bubbles which will have to pop at some stage (US debt = $3.7 trillion, where is the US going to find that to repay? Answer = no where).

Price moves mean sh1t was it? So you wouldn't buy it speculatively to make money? You sound like one of the "rather be right than make money gang"....

Good luck!

 

[barryb]

Well i don't know what in depth without asking mate, but from what i gather her main fault was not spreading the risk, she moved the majority of her money in to the Irish Banks, and its probably the worst thing she could of done tbh... but you know what, she's not upset, she said she isn't bothered so long as there is enough for her daughter which there will be no matter what happens

I suppose her being born with money like that would mean she has a totally different perspective on it, she rarely even spends any money on her self or goes out as she is not interested in spending money... and there is us all chasing pipe dreams ha

Therein lies why she now only has 2% left.

If you're already loaded with the old silver spoon, don't take up trading or portfolio investment!

 

[barryb]

yeh i don't know much about metals generally (reading Hot Commodities by Jim Rogers is as far as i go) but its clearly possible to trade them based on some fundamental value i.e looking at production capactiy/uses. it also pretty clear that commodities markets can get seriously out of whack sometimes if there are confusing supply/demand issues, i.e lead or sugar, for example. i don't follow them but almost everything has a price where it is worth buying...even gold...maybe.

You don't say!

You might want to focus on some basic lessons from the Weimar republic, John Law and the Missisippi scheme, and Argentina more recently. As the saying goes, "those who refuse to remember the past are condemned to repeat it". And stop banging on CR and Arabian about gold having no value, history disagrees...and it doesn't bloody matter if the trend is up!

 

[donaldduke]

"I know of a few multimillionaires who started trading with inherited wealth. In each case, they lost it all because they didn't feel the pain when they were losing. In those formative first few years of trading, they felt they could afford to lose. You're much better off going into the market on a shoestring, feeling that you can't afford to lose. I'd rather bet on somebody starting out with a few thousand dollars than on somebody who came in with millions." - William Eckhardt

 

[Doomberg]

Your neighbour isn't too bad.

I know a professional who loses about 200k a year on his own book. And loses about another 200k a year from his colleagues' books due to execution errors. He's been going strong for about 8 years. And is so good at talking that anyone who doesn't know his true track record thinks he's a genius.

Lol the guy your describing sounds like a top knob ha... personally i don't know how its possible to lose that amount unless you trade with complete speculation or day trade with no system... Personally if i had that type of money i'd be very very careful!

 

[Atilla]

i'll complete the line of logic...if you wouldn't buy it again at double or triple or whatever the price then your buying because you have some idea of "fair value" in mind which it must be currently must be below. however, gold doesn't produce any cash flows so any calculation of value is achieved by hoping someone else will pay more for it. how do you know gold is below fair value now?
i mean its just an object, i could sell you a lamp for £1000, it doesn't mean thats what its worth.

(i'm just paraphrasing a Howard Marks arguement that I think makes sense btw)

Your logic is flawed.

Consider why else people may wish to have gold in their portfolio?

 

[Atilla]

The analysts are right. No one is saying don't buy gold... all they're saying is you have to be an idiot to invest in it, and they're right.

(Buying it in hope of price appreciation due to idiots is NOT the same thing)

The stuff has absolutely no use whatsoever. There's shed loads around for jewellery and the few industrial applications..

It has many uses. Key one being store of value. Also universal (earthly) acceptance.

Look back couple of thousand years or more and you'll know what gold is about.


Another perspective is that it is having the same breathing space it did along $640-700, $900-1000, $1200 and now $1400-1450. I suspect given the geopolitical uncertainties and governments responses we are just finding a new level in response. I have it as gold testing $1550-1600 next. Cusp of a new era and all that...

At $1380 levels buy and at $1450s sell. Until that is it breaks out of this range. Anything below $1380 is a sell.


Look at it another way... Who would sell gold until it goes back to $250-500 levels? Is this conceivable?

Who would buy gold at $2250-2500 levels? Is this conceivable?

Which of the two options do you feel is more likely to happen for what ever reason you can imagine?

 

[barryb]

It has many uses. Key one being store of value. Also universal (earthly) acceptance.

Look back couple of thousand years or more and you'll know what gold is about.

Good points.

I'm never ceased to be amazed by people's ignorance of history. :smart: