Sluggish Market & Ant Theory

[RUDEBOY]

Good morning chump! Go for it, matey.

 

[charliechan]

Lion

ok - since we've agreed that exit strategies (won't use the emotive sl word ) do share the same characteristics albeit from a different basecamp, I wonder if we could go one step further and that is that I wonder if the gulf between the two camps is primarily set by timescale?

Further back, rudeboy asked what use was FA in daytrading. Not a great deal I would suggest, other than on results days when the fundamentalist could be expecting results that wildly outstrip market expectations. I could ask what use is TA in long term investing. Not a great deal I would suggest, other than in broad entry timing ( I am assuming not even a fundamentalist would enter blind in a raging bear market as soon as the "undervalued" bell rings).

So isn't there a transitional crossover between short term and long term in relation to the relative merits of FA and TA?

Short term TA fa through to Long term FAta

Alternatively it could be argued that the debate that has raged has really been investing vs trading but that's a different story .

good trading (or investing)

jon

investing is concerned with collecting yield, rather than owning an asset for its (fluctuating) market price.

so, if you invest in shares of xyz, you do so for the dividend payment, more than the price of the shares may be worth 50% in x years.

some even go as far as to say that stocks are not investment grade (recently) due to the low yield compared with other asset classes. i cant comment on that as its not my field of expertise.

speculation/trading is only concerned with the fluctuating price of the asset.

so, it could be said for example that people dont invest in property, only speculate - as property does not give any payback - unless it is rented out of course.

 

[charliechan]

mark

.....


Arbitrage is riskfree.............100% guaranteed why would you have a stoploss?



charliechan



And herein lies the fundamental difference. As a Fundamental trader, the market holds no fear for me, it's daily quotations are merely an invitation to buy or sell at my convenience.
It does not dictate what I should or shouldn't do.
I take my calculation of a securities value from the facts..........not from an emotional, hyper-active such as the market is.

Hence, technical traders, who are however not trading on a valuation, but on momentum, must see things differently.

Have you never wondered why some support level held, while another support level, identical in all respects failed?

The reason is that one support level represented value, and was supported by value hounds, the other was merely a technical support, and hence meaningless.



And there are many ways of discovering the ruses that are used.That lies within the skill of the analyst. A bad analyst will get caught, a good one will not. With an example like Enron, there were many analysts calling it a dog all the way in it's run up. Principally the people that got hurt the most were Enron employees.

The fundamentals signalled Enron as a dog far in advance because there were just so many anomalies within the cashflows, that it never looked like a real business. This to any analyst worth his salt, is enough to stay well away.



Price in a vacuum however tells you nothing.
To trade momentum, however, I agree it is not necessary to know anything of the value, you are seeking to profit from short-term fluctuations.



And here is your bias coming out.
FA is not about rumours. It is about collecting the facts, and through an analysis, seeing if the business is healthy and profitable............if it is at what price can you buy it?

If I offered you a brand new Porshe for $1000...........would you buy it?
You would think........con.
You'd inspect it.
If after all your checks, not stolen, etc...........would you buy it?

That is value investing.

barjon



There are a number of ways.
One very quick example is in Chap11 the Judge will tell you.

You have all got hung up on a single way of making money.............that is buy a stock long and hang on.............this is a long way from reality.



While time can be a component, and is very important, it is not the foundation of managing the risk.

cheers d998

i can guarantee 2 things:
1/arbitrage is NOT risk free. how could it be? NO market transaction EVER is.
2/ you still dont know what arbitrage is - despite my correct description in the other thread.

support -

every moment in the market is unique. how could 2 levels (or the same level touched twice which is what i expect you actually mean) be identical. support failing or holding has nothing to do with value at all. it has everything to do with order flow.


momentum - doesnt this theory contradict your earlier thoughts of support and why some stand and others fail?


maybe i am slightly biased against fa. this is because we all know what bs the media pumps out. information is easier to manipulate than the markets. shoot - our figures dont look so cool this qtr boss!! shall we put them through another accounting model and see if we get anything better??

dismissing enron now for example is easy - thats hindsight.

governments lie. period. corporate lie. period.

your porsche example has nothing to do with investing and everything to do with speculation. i am surprised that a market wizard like your good self has realised the difference yet!!

good luck.

 

[ducati998]

chump

You have complained in the past about other posters not sticking to a factual argument..so why not take your own medicine and refrain from the non subtle attacks "show me the money"..all this tells me is you just got up and downed too much caffeine..it's not adding to the discussion in other words...

Lets just get the nasty stuff out of the way first, and then we can get back on topic.
dbp likes to pop up here and there, and just pass opinion, with little or no substance.

As he hosts his own "Private board" t2w have imbued him with "authority". Psychologically we understand that inexperienced traders will be "influenced" by said "authority"

If he wishes to post his opinion, with a rational argument, more power, I welcome rational argument, and logical reasoning.

The simple and short way to get rid of posters who like to pontificate a great deal, and offer nothing, is simply to invite them to back up their talk with some walk...."show me the money"

Anyone can provide 100% hindsite analysis

you suggest we are mostly focussing on the long term nature of FA etc...true but this is for the most part because of the way you have dripfed this discussion and on certain issues you have not explained clearly your approach and in fact you're still not doing that...

This is true, but partly because the thread goes off topic, and barring a handful of posters contributing to the thread, can get a bit unwieldy.

The other reason, is that it is pointless to get really "technical" with how I do it when no-one else really ( excepting LION ) utilises the approach.

Therefore the approach has been more "generalised" examining more some of the theoretical underpinnings of the different methodologies. By this way, some may think, hang on, I'm not happy with my results from technical analysis, but this way looks worth investigating.

Now let's talk about those ants again within the framework established above... let's look at those piles of food and lets think of the ants in terms of moneyflow..

What I think you are suggesting is that your methodology of 'fair value' (and it's stop loss ) are based upon fundamental triggers that go off when your system identifies that the moneyflow is inefficient..if this is the case you will be out of the market when the moneyflow is efficient ?..and this brings us to ....subjectivity and time

Spot on.

Calculating 'fair value' is already admitted to be a subjective excercise that we might think of as being the 'artful' part of your trading system....how's this doing so far ? but like any art it is not perfect ...it can go wrong which brings us to time and ....the following point...

This is where we diverge.
I would argue to you that "chart reading" is a subjective exercise.
I would argue that the assets of a business are much more accurate, than a chart............
That the Liabilities of the business are very accurate, and of great value in calculating a "fair value"

As to going "wrong" I would say that it can and will change..............you expect it to change, if it didn't change, that would be a concern.

coming again to the point raised by DBP focussing on essentially 'opportunity cost' of money and time...you are not concerned about these for reasons I have already stated ,but I will recap.....

No disagreement at all.
People however marginalise to a certain extent the "opportunities" available to holders of common stock. One example............the writing of covered calls, will if done correctly provide a very low risk return, thus offsetting the holding period to an extent.

If you do this "if" your holding is under-water, this is potentially activating a "stoploss"
Dividend return, sneered at by many, is return, your "opportunity" cost is further reduced.
Only in regards to Capital appreciation is there a true opportunity cost.

Now at this point I would like to ask you this question..what makes you think that inefficient moneyflow can only be detected via fundamental data ? and please in answering that question give a full and factually based answer that we can refer to on a statistical basis...

Wow, does anyone else get asked to reference an answer on these boards?
Ok, lets give it a try, I will have to come back on you with the studies and references.

Lets assume for the moment that Fundamental analysis can detect said inefficiencies.

The "Quants" will also "detect" inefficiencies. They do so however in a different way. They argue that the market fluctuates between "efficient, and therefore random" and between "inefficient, and therefore predictable" via the measurement of standard deviation, and the return to a Gaussian curve.

So two out of three.

Technical analysis. How does technical analysis "measure" efficiency, or inefficiency?
This is the crux. Technical analysis, attempts via "overbought, and oversold" These come in a variety of flavours.

Their mathematical construct determines how accurate or inaccurate they may be. However, there is a wrinkle, and that is with taking a different indicator this time...........$TICK Now this directly measures selling & buying pressure, in and out of the market as a whole.
Useful for the market as a whole, pretty useless for an individual stock.

It is an arithematical construct, and therefore should by definition not be measuring inefficiency
However, it is used that way, positions placed contrary to the indicated flows.

Can we argue that this measures market inefficiency, or efficiency.
It comes down to timeframes.
In very short timeframes, intra-day, yes it will measure inefficiency...........most of the time.
In a longer timeframe, it does not work very well, daily and above.

So in summation, all three disciplines acknowledge in some shape or form the requirement to measure inefficiency, but do it in rather different ways and timeframes.

Timeframes obviously becomes the next area for discussion.
Is there a timeframe that optimises reward, while minimising risk..........assuming a market inefficiency can be identified?

won't accept a quote that 90% of traders etc fail because they use TA or charts etc..that's nonsense ...while I might accept that 90% of traders fail I would have to counterargue that they are made up of all sorts of different proponents from FA ,TA and Quants etc ..in other words they are simply players who failed not because of their methodology ,but because of their lack of a plan that incorporated a winning system...

To accurately answer this, we really need to know the % of "traders" using the different methodologies.

Here on t2w we have a35,000 odd participants.
If a survey was conducted, and everybody participated honestly, it would be interesting to see the result.

No, I think you would have to show me some stats that says your FA system has a performance return that exceeds any other winning system that is TA or Quant based ... if you can do that then we have to accept that FA based 'fair value' is the 'best' methodology for identifying inefficient moneyflow..however this still would not answer my question would it ? ..because I did not ask which was the 'best' methodology...I asked you to show me that it was the "only" methodology that could do this ...so I now look forward to seeing your statistically based answer

As I said let me come back to you on this. I do have some stats, but I need to check that they are actually answering your question.

Good post. Nice to see someone thinking, and disagreeing in a logical manner.
Cheers d998

 

[charliechan]

Kindly tell us what points you may be reffering to because we cannot see any.

Why do you feel that traders have to combine different methods in order to trade the markets? Why must they use multiple time frames? More importantly, do you really feel that because you employ more than one method and trade different time frames that that makes you a judge of other traders and places you in a position to classify others as "immature trader"? Are we really expected to take this jibe from a man who had to tell us he was off to the cinema and then returned to tell us he was watching a really mature film? Hello.......

why do you use 'we' when you mean 'i'???

my english is not perfect, i know - but i do find this peculiar! do you suffer from dual personalities - could explain your earlier contradictions when you said how you see money mgt as important, yet insist on never using a stop loss!!!

only kidding.

as to answer the point, it is important when dealing with the market to keep an open mind. you (all of you perhaps in your cases )need to put the fa information into context - how the market is reacting to this information. timing is important for most of us.

i think you could do with a copy of justin mamis - all of you should read this lion.

but there again - perhaps not as you have already stated you dont mind holding something for long periods if what you are hoping for fails to materialise - which of course is your prerogative and i respect that (if i dont agree with it - but hey, its your bunce)

 

[ducati998]

charliechan

Arbitrage is 100% risk free..........end of story
Your description in your previous post was correct.
You however seem unable to connect the dots.

Silver was I believe your example.
Priced differently in two separate markets.

If you buy the cheaper, and sell the more expensive, your profit is the spread, 100% risk free.
The reason I dismissed your example out of hand, is that in todays markets the spread would either be non-existent, or so small that the amount of money required to make it worthwhile in $ terms would be enormous.

every moment in the market is unique. how could 2 levels (or the same level touched twice which is what i expect you actually mean) be identical. support failing or holding has nothing to do with value at all. it has everything to do with order flow.

Come back to me when you actually understand what I posted. I am going to stop answering complete novice questions.

dismissing enron now for example is easy - thats hindsight.

Indeed. However, it was an example that was brought up.

your porsche example has nothing to do with investing and everything to do with speculation. i am surprised that a market wizard like your good self has realised the difference yet!!

Oh dear.

 

[charliechan]

charliechan

Arbitrage is 100% risk free..........end of story
Your description in your previous post was correct.
You however seem unable to connect the dots.

Silver was I believe your example.
Priced differently in two separate markets.

If you buy the cheaper, and sell the more expensive, your profit is the spread, 100% risk free.
The reason I dismissed your example out of hand, is that in todays markets the spread would either be non-existent, or so small that the amount of money required to make it worthwhile in $ terms would be enormous.

....


Oh dear.

oh dear indeed.

so what happens if you get into the arb too early and the pricing anomaly continues? oh dear!

so if these arb opportunities are so small or non existent, why does almost every hedge fund & most banks have automated trading systems trading anomalies between the dow & spoo? oh dear!

if arb opportunities are non existent in todays 'efficient' markets (cough cough splutter splutter!), why does t2w have a whole section devoted to the trading of commodity spreads - which are usually held over a period of months? OH DEAR!!

back to the drawing board i guess!!

while you are there, i believe chump and the others are still waiting for some explanations from you.

all the best

 

[SOCRATES]

oh dear indeed.

so what happens if you get into the arb too early and the pricing anomaly continues? oh dear!

so if these arb opportunities are so small or non existent, why does almost every hedge fund & most banks have automated trading systems trading anomalies between the dow & spoo? oh dear!

if arb opportunities are non existent in todays 'efficient' markets (cough cough splutter splutter!), why does t2w have a whole section devoted to the trading of commodity spreads - which are usually held over a period of months? OH DEAR!!

back to the drawing board i guess!!

while you are there, i believe chump and the others are still waiting for some explanations from you.

all the best

Not me, charliechan, I hold the view you have spilled enough beans here already.
I am not adding to it. I consider it neither wise nor prudent.

Kind Regards.

 

[ducati998]

charliechan

so what happens if you get into the arb too early and the pricing anomaly continues? oh dear!

Lets go really slowly.

1......You buy the cheaper silver long.
2......You sell the more expensive silver short
3......Your long and short positions cancel each other out.
4......Your profit is the bit in the middle............the spread.

so if these arb opportunities are so small or non existent, why does almost every hedge fund & most banks have automated trading systems trading anomalies between the dow & spoo? oh dear!

Because they have lots of money, nothing better to do, why don't you go ask them really, come on engage brain cell.

if arb opportunities are non existent in todays 'efficient' markets (cough cough splutter splutter!), why does t2w have a whole section devoted to the trading of commodity spreads - which are usually held over a period of months? OH DEAR!!

I guess because,
1......Thats not arbitrage
2......It is a valid form of speculation.

 

[pb]

do you suffer from dual personalities

Don't know if I should laugh or cry. Dual personality? Lion63?

Give it a rest Albert. The whole world knows that socrates and charliechan are the same person. Honestly, what do you take us for? Just because it's you, you are not getting banned. If it was someone else, you'd have been history by now.

'nuff said.

 

[ducati998]

As a postscript,

There are many arbitrage opportunities in todays markets.
I usually find at least one a month.

 

[ducati998]

SOCCY.................................

You're not playing games are you?
After our happy ending?

 

[SOCRATES]

Don't know if I should laugh or cry. Dual personality? Lion63?

Give it a rest Albert. The whole world knows that socrates and charliechan are the same person. Honestly, what do you take us for? Just because it's you, you are not getting banned. If it was someone else, you'd have been history by now.

'nuff said.

Ah, really ? Are you willing to bet on it as well ? Go on with you !

 

[ducati998]

Ok,
The pressure for the evidence, not complete, well what do you expect after 15mins?

Walter J Schloss
28.5 year compounded gain............6,678.8%
S&P 28.5 year compounded gain........887.2%

Tweedy Browne Inc.
15.75 years compounded gain...........1,661.2%
S&P 15.75 years.....................................238.5%

Pacific Partners 19yrs............................5,530.2%
S&P 19yrs.................................................316.4%

Perlmeter Investments 20yrs.............4277.2%
S&P 20yrs..............................................1,225%

Washington Post Pension Fund 9yrs........17.1% per annum
S&P 9yrs..........................................................11.3%

There are others, the big daddy.......Buffett, etc.
But overall very satisfactory

cheers d998

 

[SOCRATES]

SOCCY.................................

You're not playing games are you?
After our happy ending?

No, I am only excluding myself from the group awaiting an explanation, as I do not need any.

I consider enough have beans have been spilled about arbitrage than would be prudent in a public forum, that's all.

 

[pb]

Soc,
When you invent another nick next time, try to cover you trail well:
1. Never have a conversation with yourself, particularly in a thread which is already heated enough. It's a deadly giveaway. It attracts attention.
2. Make sure both your nicks are using the invisible mode, not one.
3. Try to change your writing style. I know this is the most difficult one, but I'm sure someone as talented as you shouldn't have too much trouble with this.

There are a few other ways of spotting multiple nicks, but let's keep them for the next occasion, okay?

 

[frugi]

No offence, pratbh, but I'm pretty sure you're barking up the wrong tree.

 

[SOCRATES]

Soc,
When you invent another nick next time, try to cover you trail well:
1. Never have a conversation with yourself, particularly in a thread which is already heated enough. It's a deadly giveaway. It attracts attention.
2. Make sure both your nicks are using the invisible mode, not one.
3. Try to change your writing style. I know this is the most difficult one, but I'm sure someone as talented as you shouldn't have too much trouble with this.

There are a few other ways of spotting multiple nicks, but let's keep them for the next occasion, okay?

Nonsense, somebody tell him and put him out of his misery, please.

 

[charliechan]

No, I am only excluding myself from the group awaiting an explanation, as I do not need any.

I consider enough have beans have been spilled about arbitrage than would be prudent in a public forum, that's all.

yes i think i will retire on your advise.

correcting ducatti anymore would be a crime! for a start it would deprive us both and other knowledgable lurkers of a good laugh.

i think it best to let him wallow in his own ignorance - we have both tried to help him.

btw - besides ducattis interesting choice of head gear (a cowboy hat! how appropriate), that he looks like george w bush!!!

 

[charliechan]

.

exactly.