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Question on the front page of Hacker News (a great news aggregator if you use hn.angolia.com and filter by top for last 24 hours) if you like technology.
Does market timing work?
If you believe the “A random walk on Wallstreet” and every study of managed vs index funds over the last 40 years, it does not.
But imagine if you bought and held in Japan in the 1980's even in an “diversified” index fund with just Japanese stocks. By 2023, maybe you would have broken even [1].
There are 2 ways, timing the market, has worked in the last 40 years:
1. Market timing works with:
a. Inside information e.g. US congress [2] [4][5]
b. Take an outsised risk and get very lucky e.g. crypto or meme stocks.
c. Ability psychologically to lose money every day e.g. Nassim Taleb keep buying/selling deep out of the money options. Lose money every day to make an outsised gain when an extraordinary event happens e.g. Hamas attacks Israel.
2. You are Warren Buffet. Which is basically, buy stocks like you are buying a company and get incredibly lucky. He is self made man, but in 2023 have a shit ton of capital. Have the option of buying preferential shares. And hey 1b monkeys on typewriters...
Still totally agree with the first comment on Hackernews. The last 40 years have been ridiculous from a macro perspective:
1. Interest rates, the most important price in the economy, the price of money, has fallen from 18% in the Paul Volker days till after covid close to 0. Global central bank coordination like never before. After the 1987 crash, central bankers especially in the US cut rates in the good times, and cut them more in the bad times.
2. Money has been printed like never before after the 2008 collapse and covid. This added massive Fiscal stimulus to Monetary. Suddenly the newly printed money was not just in Financial Assets, it was in the Supermarket.
It is very difficult to look at 2023, with the US Fed cash rate at approx 5%, global interest rates going up, price inflation at 7%+ in most countries for the past 2 years, US national debt at $33T and growing at $1T per month exponentially, and the US paying more on Interest expense (not principal, just Interest) than they spend on the military, and think you should buy and hold an index fund.
I like Nassim Taleb. Invest still in index funds but invest in global infrastructure that is recession proof e..g [3]. Be anti-fragile. Invest in real companies, diversify globally, only buy profitable companies that pay a dividend.
[3]
