7 ms·

I read a lot of these type of predictions, often you see some people say it's a great time to buy, and others it's a bad time to buy, and generally you will onl

I read a lot of these type of predictions, often you see some people say it's a great time to buy, and others it's a bad time to buy, and generally you will only remember the people who guessed correctly, so none of this helps you today at all. Every time those people who got lucky will appear in some future ad or article making a new prediction, and generally fewer will be lucky twice. In the long run, everyone is likely wrong.

hotpotamus 4y ago
It turns out it's hard to make predictions; especially about the future.
foobarian 4y ago
Your comment makes me realize that in the medium term, after most of the unlucky predictors drop off, you are statistically likely to be left with a few really lucky ones (i.e. if a thousand people are tossing coins, you're likely to get one guy with a streak of 10 heads), and these individuals are perfect to put on pedestals as rare and brilliant talents.
- deleted 4y ago
  [deleted]
- twawaaay 4y ago
  What you do is look at the rationale that was given before it happened. You look at their reasoning and figure out if it was actually what happened in reality. Just make sure you are not picking up on their rationalisation after the fact.
  - KptMarchewa 4y ago
    The fact that they had good reasoning in the past does not guarantee they will continue in the future.
    - twawaaay 4y ago
      You are right, but it is not very useful way of looking at the world. Sometimes you just need to trust people on certain things to be able to make useful decisions having very little or no knowledge in the subject. One useful way of dealing with this is to look at the past performance of the person. Assuming you have no other information about the market, if you see a person having track record of well-reasoned, accurate market predictions it is probably as good signal as it gets that you should trust their predictions. Ideally you would want to check this with other people having knowledge in the topic (and also good track record), check that their knowledge is still applicable to circumstances (if they were able to give good predictions in peace maybe they are not suited to doing this in the time of war) and hopefully also educate yourself just a bit to be able to ask clarifying questions and spot obvious problems.
      - thingification 4y ago
        So who has done well on this score in your book? :-)
      - xdavidliu 4y ago
        “well reasoned” is often easily faked, and often confused with “articulate”
  - danielmarkbruce 4y ago
    The rationalizations before they happened are always very intelligent sounding, even in retrospect. If you have 100 intelligent sounding speculators lay out their reasoning and one hits the jackpot, it doesn't mean much. The general problem is each has a mental (or computer) model of the world that is a vast simplification of the world. When they get it right it sounds like they understood and accounted for all the variables. They never did.
    - twawaaay 4y ago
      You are not looking if they "sounded" intelligent. You are looking if they were true.
      - danielmarkbruce 4y ago
        If I flip a coin and someone has an intelligent sounding reason for it to come up heads... and then it does... it means practically zero. Being right means little when there are 100s of folks with predictions and reasons.
      - xdavidliu 4y ago
        if someone made a correct prediction on a coinflip, you’re more likely to believe they knew what they were doing (rather than just get lucky) if they sound intelligent
- ericbarrett 4y ago
  The inverse of this is an old, old scam: 1) Send out a bunch of letters predicting moves on (usually) penny stocks; a different set of stocks is used for each letter 2) A few days later, cull the recipients whose predictions didn't work out. Send another batch of predictions, again individually varied, to the remainder 3) Repeat once or twice more and you've got a small list of people who've received three or four correct predictions in a row. Hammer them with solicitations to invest in your "foolproof" scheme 4) Collect (via a pump-and-dump, or just solicit the money directly and run) Nowadays it's probably happening in Telegram groups or some such. Or you could do this on Reddit et al. using different usernames, and only keep the accounts that were right.
- tchalla 4y ago
  Your comment reminds me of Buffet’s 1984 article titled “The super investors of Graham and Doddville”. Here’s the relevant excerpt > Before we begin this examination, I would like you to imagine a national coin-flipping contest. Let’s assume we get 225 million Americans up tomorrow morning and we ask them all to wager a dollar. They go out in the morning at sunrise, and they all call the flip of a coin. If they call correctly, they win a dollar from those who called wrong. Each day the losers drop out, and on the subsequent day the stakes build as all previous winnings are put on the line. After ten flips on ten mornings, there will be approximately 220,000 people in the United States who have correctly called ten flips in a row. They each will have won a little over $1,000. Now this group will probably start getting a little puffed up about this, human nature being what it is. They may try to be modest, but at cocktail parties they will occasionally admit to attractive members of the opposite sex what their technique is, and what marvelous insights they bring to the field of flipping. Assuming that the winners are getting the appropriate rewards from the losers, in another ten days we will have 215 people who have successfully called their coin flips 20 times in a row and who, by this exercise, each have turned one dollar into a little over $1 million. $225 million would have been lost, $225 million would have been won. By then, this group will really lose their heads. They will probably write books on “How I turned a Dollar into a Million in Twenty Days Working Thirty Seconds a Morning.” Worse yet, they’ll probably start jetting around the country attending seminars on efficient coin-flipping and tackling skeptical professors with, “If it can’t be done, why are there 215 of us?” By then some business school professor will probably be rude enough to bring up the fact that if 225 million orangutans had engaged in a similar exercise, the results would be much the same — 215 egotistical orangutans with 20 straight winning flips. I would argue, however, that there are some important differences in the examples I am going to present. For one thing, if (a) you had taken 225 million orangutans distributed roughly as the U.S. population is; if (b) 215 winners were left after 20 days; and if (c) you found that 40 came from a particular zoo in Omaha, you would be pretty sure you were on to something. So you would probably go out and ask the zookeeper about what he’s feeding them, whether they had special exercises, what books they read, and who knows what else. That is, if you found any really extraordinary concentrations of success, you might want to see if you could identify concentrations of unusual characteristics that might be causal factors. Scientific inquiry naturally follows such a pattern. If you were trying to analyze possible causes of a rare type of cancer — with, say, 1,500 cases a year in the United States — and you found that 400 of them occurred in some little mining town in Montana, you would get very interested in the water there, or the occupation of those afflicted, or other variables. You know it’s not random chance that 400 come from a small area. You would not necessarily know the causal factors, but you would know where to search. I submit to you that there are ways of defining an origin other than geography. In addition to geographical origins, there can be what I call an intellectual origin. I think you will find that a disproportionate number of successful coin-flippers in the investment world came from a very small intellectual village that could be called Graham-and-Doddsville. A concentration of winners that simply cannot be explained by chance can be traced to this particular intellectual village. https://www8.gsb.columbia.edu/articles/columbia-business/superinvestors https://www8.gsb.columbia.edu/articles/columbia-business/sup...
- sorokod 4y ago
  Pretty much like the brilliant founders of successful startups.
- deleted 4y ago
  [deleted]
taylodl 4y ago
This is why the dollar cost averaging technique works so well. No, it's not likely to provide you a financial windfall, but it's also not likely to yield you financial devastation either. If you're investing for retirement then it generates quite a bit of wealth in the long term.
- lexapro 4y ago
  Yeah, but if you have a lump sum of money it's still better to invest everything at once if you plan to hold it for decades. Vanguard has a good paper on that titled "Dollar-cost averaging just means taking risk later". And as you get close to retirement, you need to be mindful about sequence of returns risk.
  - nprateem 4y ago
    Got a link please? That surely depends on having a > 20 year time horizon
    - serioussecurity 4y ago
      https://static.twentyoverten.com/5980d16bbfb1c93238ad9c24/rJpQmY8o7/Dollar-Cost-Averaging-Just-Means-Taking-Risk-Later-Vanguard.pdf https://static.twentyoverten.com/5980d16bbfb1c93238ad9c24/rJ...
    - tunesmith 4y ago
      This one isn't bad: https://www.reddit.com/r/Bogleheads/comments/wpqsno/lumpsum_investing_vs_dollar_cost_averaging_the/ https://www.reddit.com/r/Bogleheads/comments/wpqsno/lumpsum_... And here's a question. Say you have a windfall and you're deciding whether to lump sum or DCA it. And you decide to DCA. So therefore, why wouldn't you liquidate your entire investment portfolio and also DCA that the same way?
      - andrewf 4y ago
        If you liquidate your portfolio you're going to have to recognize (pay tax on) capital gains.
babyshake 4y ago
> Every time those people who got lucky will appear in some future ad or article making a new prediction, and generally fewer will be lucky twice. Survivorship bias, survival bias or immortal time bias is the logical error of concentrating on the people or things that made it past some selection process and overlooking those that did not, typically because of their lack of visibility.

hotpotamus 4y ago

It turns out it's hard to make predictions; especially about the future.

foobarian 4y ago

Your comment makes me realize that in the medium term, after most of the unlucky predictors drop off, you are statistically likely to be left with a few really lucky ones (i.e. if a thousand people are tossing coins, you're likely to get one guy with a streak of 10 heads), and these individuals are perfect to put on pedestals as rare and brilliant talents.

deleted 4y ago
[deleted]
twawaaay 4y ago
What you do is look at the rationale that was given before it happened. You look at their reasoning and figure out if it was actually what happened in reality. Just make sure you are not picking up on their rationalisation after the fact.
- KptMarchewa 4y ago
  The fact that they had good reasoning in the past does not guarantee they will continue in the future.
  - twawaaay 4y ago
    You are right, but it is not very useful way of looking at the world. Sometimes you just need to trust people on certain things to be able to make useful decisions having very little or no knowledge in the subject. One useful way of dealing with this is to look at the past performance of the person. Assuming you have no other information about the market, if you see a person having track record of well-reasoned, accurate market predictions it is probably as good signal as it gets that you should trust their predictions. Ideally you would want to check this with other people having knowledge in the topic (and also good track record), check that their knowledge is still applicable to circumstances (if they were able to give good predictions in peace maybe they are not suited to doing this in the time of war) and hopefully also educate yourself just a bit to be able to ask clarifying questions and spot obvious problems.
    - thingification 4y ago
      So who has done well on this score in your book? :-)
    - xdavidliu 4y ago
      “well reasoned” is often easily faked, and often confused with “articulate”
- danielmarkbruce 4y ago
  The rationalizations before they happened are always very intelligent sounding, even in retrospect. If you have 100 intelligent sounding speculators lay out their reasoning and one hits the jackpot, it doesn't mean much. The general problem is each has a mental (or computer) model of the world that is a vast simplification of the world. When they get it right it sounds like they understood and accounted for all the variables. They never did.
  - twawaaay 4y ago
    You are not looking if they "sounded" intelligent. You are looking if they were true.
    - danielmarkbruce 4y ago
      If I flip a coin and someone has an intelligent sounding reason for it to come up heads... and then it does... it means practically zero. Being right means little when there are 100s of folks with predictions and reasons.
    - xdavidliu 4y ago
      if someone made a correct prediction on a coinflip, you’re more likely to believe they knew what they were doing (rather than just get lucky) if they sound intelligent
ericbarrett 4y ago
The inverse of this is an old, old scam: 1) Send out a bunch of letters predicting moves on (usually) penny stocks; a different set of stocks is used for each letter 2) A few days later, cull the recipients whose predictions didn't work out. Send another batch of predictions, again individually varied, to the remainder 3) Repeat once or twice more and you've got a small list of people who've received three or four correct predictions in a row. Hammer them with solicitations to invest in your "foolproof" scheme 4) Collect (via a pump-and-dump, or just solicit the money directly and run) Nowadays it's probably happening in Telegram groups or some such. Or you could do this on Reddit et al. using different usernames, and only keep the accounts that were right.
tchalla 4y ago
Your comment reminds me of Buffet’s 1984 article titled “The super investors of Graham and Doddville”. Here’s the relevant excerpt > Before we begin this examination, I would like you to imagine a national coin-flipping contest. Let’s assume we get 225 million Americans up tomorrow morning and we ask them all to wager a dollar. They go out in the morning at sunrise, and they all call the flip of a coin. If they call correctly, they win a dollar from those who called wrong. Each day the losers drop out, and on the subsequent day the stakes build as all previous winnings are put on the line. After ten flips on ten mornings, there will be approximately 220,000 people in the United States who have correctly called ten flips in a row. They each will have won a little over $1,000. Now this group will probably start getting a little puffed up about this, human nature being what it is. They may try to be modest, but at cocktail parties they will occasionally admit to attractive members of the opposite sex what their technique is, and what marvelous insights they bring to the field of flipping. Assuming that the winners are getting the appropriate rewards from the losers, in another ten days we will have 215 people who have successfully called their coin flips 20 times in a row and who, by this exercise, each have turned one dollar into a little over $1 million. $225 million would have been lost, $225 million would have been won. By then, this group will really lose their heads. They will probably write books on “How I turned a Dollar into a Million in Twenty Days Working Thirty Seconds a Morning.” Worse yet, they’ll probably start jetting around the country attending seminars on efficient coin-flipping and tackling skeptical professors with, “If it can’t be done, why are there 215 of us?” By then some business school professor will probably be rude enough to bring up the fact that if 225 million orangutans had engaged in a similar exercise, the results would be much the same — 215 egotistical orangutans with 20 straight winning flips. I would argue, however, that there are some important differences in the examples I am going to present. For one thing, if (a) you had taken 225 million orangutans distributed roughly as the U.S. population is; if (b) 215 winners were left after 20 days; and if (c) you found that 40 came from a particular zoo in Omaha, you would be pretty sure you were on to something. So you would probably go out and ask the zookeeper about what he’s feeding them, whether they had special exercises, what books they read, and who knows what else. That is, if you found any really extraordinary concentrations of success, you might want to see if you could identify concentrations of unusual characteristics that might be causal factors. Scientific inquiry naturally follows such a pattern. If you were trying to analyze possible causes of a rare type of cancer — with, say, 1,500 cases a year in the United States — and you found that 400 of them occurred in some little mining town in Montana, you would get very interested in the water there, or the occupation of those afflicted, or other variables. You know it’s not random chance that 400 come from a small area. You would not necessarily know the causal factors, but you would know where to search. I submit to you that there are ways of defining an origin other than geography. In addition to geographical origins, there can be what I call an intellectual origin. I think you will find that a disproportionate number of successful coin-flippers in the investment world came from a very small intellectual village that could be called Graham-and-Doddsville. A concentration of winners that simply cannot be explained by chance can be traced to this particular intellectual village. https://www8.gsb.columbia.edu/articles/columbia-business/superinvestors https://www8.gsb.columbia.edu/articles/columbia-business/sup...
sorokod 4y ago
Pretty much like the brilliant founders of successful startups.
deleted 4y ago
[deleted]

taylodl 4y ago

This is why the dollar cost averaging technique works so well. No, it's not likely to provide you a financial windfall, but it's also not likely to yield you financial devastation either. If you're investing for retirement then it generates quite a bit of wealth in the long term.

lexapro 4y ago
Yeah, but if you have a lump sum of money it's still better to invest everything at once if you plan to hold it for decades. Vanguard has a good paper on that titled "Dollar-cost averaging just means taking risk later". And as you get close to retirement, you need to be mindful about sequence of returns risk.
- nprateem 4y ago
  Got a link please? That surely depends on having a > 20 year time horizon
  - serioussecurity 4y ago
    https://static.twentyoverten.com/5980d16bbfb1c93238ad9c24/rJpQmY8o7/Dollar-Cost-Averaging-Just-Means-Taking-Risk-Later-Vanguard.pdf https://static.twentyoverten.com/5980d16bbfb1c93238ad9c24/rJ...
  - tunesmith 4y ago
    This one isn't bad: https://www.reddit.com/r/Bogleheads/comments/wpqsno/lumpsum_investing_vs_dollar_cost_averaging_the/ https://www.reddit.com/r/Bogleheads/comments/wpqsno/lumpsum_... And here's a question. Say you have a windfall and you're deciding whether to lump sum or DCA it. And you decide to DCA. So therefore, why wouldn't you liquidate your entire investment portfolio and also DCA that the same way?
    - andrewf 4y ago
      If you liquidate your portfolio you're going to have to recognize (pay tax on) capital gains.

babyshake 4y ago

> Every time those people who got lucky will appear in some future ad or article making a new prediction, and generally fewer will be lucky twice. Survivorship bias, survival bias or immortal time bias is the logical error of concentrating on the people or things that made it past some selection process and overlooking those that did not, typically because of their lack of visibility.