Finance is essentially psychology with 6 months weather forecasting slapped on top of it.
It's way easier to predict the fate of the Universe trillions of years from now than it is to predict where Microsoft stock will sit 4 months from now.
Trading is a real job and the market is very inefficient. If you're too lazy to study it, you say things like what the GDC7 posted. It's pretty easy to predict Microsoft stock four months from now (it will probably be higher, but there's a small chance it will be lower), certainly easier than "the fate of the Universe trillions of years from now."
At the end of the day, trading is learning how to manage risk. What is Microsoft doing, how much is it likely to make, and will the macro environment support or suppress their strategy. Then you put on a trade to take advantage of this view. You may sometimes be wrong, but the idea is that over all of your decisions, you'll mostly be right and make more money than you lose.
https://www.researchgate.net/publication/235937406_Are_Rando...
It is amazing how many self-professed experts there are, without any professional or meaningful experience. And the confidence they have… Source: have been working professionally in trading for almost 24 years. Go unleash your attack dogs against me now. :)
P.S.: Since it’s “pretty easy” to predict MSFT for you, let me congratulate you in advance to your exorbitant returns of the near future. Soon, the world will know of you, the next Elon Musk.
Obviously everyone remembers the time a team of gifted nobel prize winning mathemeticians cracked the formula, managing risk better than anyone who had walked the earth before.
So magnificent were the gainz that they imploded under the weight of all their brilliance, and were bailed out with the help of the federal reserve.
There's also a lot more to finance than stock picking.
People aren't interested in finance because of the wonders of the Fed Repo plumbing mechanisms which Zoltan of Credit Suisse explain to all of us with his reports on a weekly basis.
Saying there's more to finance than stock picking is like saying there's more to poker than the actual game.
Sure somebody has to build the poker table and deliver it to the casino but that's not where the money is at.
People look at finance as a way to escape their mediocre lives, so stock picking it is, if it's not stock picking still it's some form of concentration bet.
While it’s not possible to predict exact movements of stocks, that doesn’t mean that finance isn’t filled with situations where someone drops money on the ground. It never stays there for long because someone picks it up, but you’ll certainly never be the one picking up anything if you don’t look.
* unless critical mass number of market participants who all also believe in voodoo.
If it can be coded,…
"MSFT stock is too high/low considering that such and such has just moved and according to historical trends when such and such moves, then MSFT stock moves too"
Of course i'm simplifying.
But nobody really knows what they are doing, they are excellent at sales, Soros has achieved the same results listening to his body aches, and Buffett of course not the same results on a YoY % basis but he is working with a much larger pool of money.
At the end of the day it's like people trying to extrapolate the secrets of longevity from diet and habits. That old french lady lived to 123 smoking a pack a day till she was 100. There is no reason or rhyme to extrme outliers.
The more simple and likely explanaition is that in a large enough dataset somebody has to be a positive outlier and it just happened to be those particular people with that particular personal/professional history, and people who are blinded by the $$ are trying to replicate their success by maniacally looking at their personal/professional history and copying it.
Unfortunately copying their personal/professional history won't also include copying the luck of the statistical outlier.
G-intense tasks or stuff that has a g-intense reputation is often put on a pedestal but it's essentially the same as asking Tom Brady why is he in the Super Bowl every year.
He'd answer something like teamwork, good work environment and hard work...which is the exact same stuff that Simons answers when he's asked about Medallion.
It's not like the both of them have really a clue. If they did, they'd be able to fail on purpose , get back being nobodies and then regroup and get back to the top again. Repeat the cycle 10-20 times to be sure about it.
Don't know about Brady, but Simons as a man of science would try if he was 100% really sure about what's the formula for success.
In reality , not only he doesn't do that, but he pulled the plug on Medallion in 2007 during the meltdown, it's in the book.
Don't strategies change constantly and are arbitraged away in the NFL too?
And yet Tom Brady is always in the Super Bowl and is on the record for never having a losing season and 3 distincitve Hall of Fame worthy carrers.
I insist on Tom Brady because you'd never say that he looks like he knows what he's doing, even though his numbers compared to peers are even more impressive than Simons'
That's because he doesn't look the part. He looks like the lucky jock, same thing with that French lady who lived to 123, she looks like the person who simply won the genetic lottery.
Simons "looks and feels" like the elder statesman math genius who knows what he is doing. In reality him (very much like the rest of us) can't even predict what thought will he have 10 seconds into the future, let alone predict if that thought will lead to a viable idea and if that idea will lead to a successful execution and if that execution will lead to a great result.
Again if he's confident that he knows the formula to reach extreme financial success, then why doesn't he proceed to make the experiment of going back to zero or negative net worth and then try to get to top of the Forbes list again? Every billionaire claiming that luck had nothing to do with their success should do this small experiment and repeat it 10 or 20 times, in order to back their claim.
In reality Simons is so sure of not knowing that he gets paranoid when a couple of weeks go by without Medallion making money, and if a week of intense bleeding happens he just pulls the plug on Medallion, like he did during the 2007 meltdown.
Also, unless you are betting, you don’t need to know what MS stock will be in 4 months. Just whether it is value for money to invest now.
"and today on wall street ..." is backward looking and as relevant to the future as checking the last 10 results on the roulette table.
But it is a lot easier to sound like you know what you are talking about when you talk about what happened yesterday than talking about what will happen tomorrow.
But for the layman outside of the industry or even someone trying to learn the ropes it’s useful? Also to get a conceptual understanding.
Like … history books are useful.
Reading The art of War or reviewing wartime procurement and supply chain management from the vietnam war are likely to help in times of war. Deep expertese based on the WW1 comprehensive guide to digging parallel trenches will probably be of no use when launching drones against the enemy.
The british army, based on all their experience, send troops off to the desert in iraq (iraq 1) with all the equipment they needed for what they saw yesterday - cool to cold northern european climates. Plenty of warm clothes and heavy black boots with soles that litterally melted on hot roads or sand.
Times change, some lessons are persitent, many are not. Some periods of history the lesson is "buy train stocks", more recent "buy tech stocks" and those from the turn of the century "do not under any circumstances buy tech stocks no matter how many people say it will keep going up forever".