TheAiGuy

Let me disagree with some of these: - There's a number of professions where people are taught how to react to a crisis. Police, firefighters, military, astronauts, etc. Yeah, results vary. - Yes, you can teach patience. The remaining ones are IMO also teachable somewhat, but I don't have good examples. I agree that it's way harder to teach these things to someone not predisposed for them. Also they are not easy to teach and would usually take great teachers (or great teaching institution) and a bunch of time. +1

Well, I think that question of whether these are inherent qualities necessary for a successful investor is to some degree moot. Largely, I get the sense that there is a lot of the blind leading the blind going on, which makes it difficult to tell. When I look at the board, I see a lot of investors who do things like quote Buffet or make commodity price assumptions based on the recent past -- basically, it sounds like there are a lot of self taught investors here who are probably well meaning but most likely not very good posting in an effort to learn. Which suggests to me that a lot of posts are very low information and sort of terrible to learn from. Contrast this to, say, being an analyst for Julian Roberts in the 90's -- you would probably learn something with that type of mentor. I would extrapolate from this more broadly and guess that most sources of information for investors are of low value and that most people they can learn from are of low skill. Buffet's letters (etc.) are good, but that's learning to do something difficult from impersonal, 3rd person writing that's often not germane to the task at hand. So, kind of like reading a guy describing how he build a car this one time and then trying to go build a different car with different parts on your own.

So, I'm pretty conservative with my stock picks and haven't been doing this that long (few years), so I don't have any big blowups. My biggest mistakes are: 1) Bond funds -- I'll try to be conservative, keep some money in a nice, safe diversified instrument but I always %$@^ing loose money I'm investing in something I don't understand and buy/sell at the wrong time. 2) Not going longer in late 2012 / early 2013 after it was clear there was not going to be another recession. and the little things 3) rushing into a stock too quickly relative to its price, and then not being able to increase in size (sufficiently) if it goes down 4) not selling a stock that has risen to a price that I think is rich 5) buying something b/c I've done a lot of work on it

k, so "sigma events" are only useful if you are primarily concerned with the mean and not the distribution of outcomes. Its a like a quick and dirty measure of surprise factor. But, you know, a bad one. The clearest example of this of the ones you gave is Obama. Someone has to be president, so the surprise factor (as a probability) that someone is president is close to zero, but that it would be Obama specifically would be close to 1 (ex-ante). I would argue this pattern is true with basically everything you named.

RYCEY, V

I think the play here is the combo of credit card debt and short-dated, out of the money call options (don't do this)

I was thinking US but North America and Europe make sense (as a poll).

Just for kicks.

Another closet predictor with no record of such prediction. Nice to see you. Yeah, that's definitely fair. ;) I just meant that the move isn't surprising -- I didn't have a prediction of oil prices (and still don't) -- but its the type of thing that happens in commodities markets all the time and thus, shouldn't be *surprising*.

I can definitely state that I have not been surprised by the oil move. I would be surprised by anything much below $20 or anything much above $120, based on the historical range. There have been wild swings in prices since the 1850s, and its a commodity, so there's not necessarily an upward bias towards prices.

Here's the inflation adjusted price of oil going way back:

Hmm, my example of cheep for a reason stock would be FOSL Hence the question mark. Lots of those have stigmas that cause people to pass. ah -- I misunderstood

Hmm, my example of cheep for a reason stock would be FOSL

no problem

As you increase your bets over kelly, the growth rate of your capital declines and will eventually become negative. see table 3 in the attached paper. In blackjack, the expected growth rate of your capital is 0 if you bet 2x the kelly criterion, and above that it's negative. Section 4.3 they discuss what the kelly bets for lottery's are (note that these lotteries have much higher win probabilities that Powerball) 2632470.pdf

But the expected winnings of a $2 ticket is now greater than $2 right? It is therefore a rationale thing to play it tonight No. Using the Kelly criterion, the optimal bet would have been 1.2 x 10^-8 % of your bankroll on the lottery ticket (without considering splitting). That would have been one $2 ticket if you're worth $17.5 Billion. I actually read it as....if the pot is worth $17.5 billion then it makes sense to invest the $2. I will wait until the price is right... :) Well, that would be the wrong interpretation. If the pot is $17.5 Billion, then it would make sense to buy a $2 ticket if your net worth was $616 Million. aah I think your interpretation of kelly's theorem is wrong. Kelly theorem tells you how much to bet on a random binary event where the payout is in your favour. So that answers my question, which is I should play right because the the expected payout is greater than my odds of the payout. I put the odds of winning at 1:300M and the payout as 1:400M (assuming you share a 1.6B prize with one other person). Kelly's theorem says how much you should play. So given your assumptions whatever they are it is $2 to $17B. And you are saying since I don't have $17B I shouldn't play. But let's suppose for argument sake say I have a more realistic $1.7M then I should play 0.02cents according to kelly's theorem. But common sense says I can either play $2 or zero. You are arguing I should play zero? why? because 0.02cents is closer to zero than it is to $2? Or as the earlier poster implied, you should only play if kelly's theorem gives $2 or greater. But why can't you argue that you play the kelly amount rounded up? In which case it should be $2? Also, Kelly's theorem is based on the log utility function which is an guideline for rational better, but I can argue against log utility function. .... and finally..... you have assumed that the lotto is either the jackpot or nothing, I am pretty sure the other prizes have a non-negligible effect on the odds..... btw I didn't play ostensiablly because the cost of my time to buy it is too great compared to the expected winnings..... Yeah, you don't round up to $2. That would be over betting your edge by a lot, more than 100x, and (formally) the expectation of such a strategy is going broke. The idea is that if you made repeated (i.e. sequential) $2 bets with a $1.7M dollar bankroll with these odds and payouts, you will likely run out of money before you win. That's driven by the variance of the stochastic process, and is true irrespective of the positive expected value of each bet. My math is different than yours as I used different assumptions (35% tax rate, no split pot, no other winners). Those assumptions will definitely change the minimum bankroll size for a $2 ticket to make sense (and the number can vary substantially), but regardless, the minimum bankroll size is in the Billions.

But the expected winnings of a $2 ticket is now greater than $2 right? It is therefore a rationale thing to play it tonight No. Using the Kelly criterion, the optimal bet would have been 1.2 x 10^-8 % of your bankroll on the lottery ticket (without considering splitting). That would have been one $2 ticket if you're worth $17.5 Billion. I actually read it as....if the pot is worth $17.5 billion then it makes sense to invest the $2. I will wait until the price is right... :) Well, that would be the wrong interpretation. If the pot is $17.5 Billion, then it would make sense to buy a $2 ticket if your net worth was $616 Million.

But the expected winnings of a $2 ticket is now greater than $2 right? It is therefore a rationale thing to play it tonight No. Using the Kelly criterion, the optimal bet would have been 1.2 x 10^-8 % of your bankroll on the lottery ticket (without considering splitting). That would have been one $2 ticket if you're worth $17.5 Billion. Lol. The problem with using the statistical expected value of the ticket is that the analysis is almost pointless. Basing your math on probabilities only makes sense if you're going to get enough chances for the probabilities to eventually play out. With the lotto, you're luck if you play a handful of times before there's a winner and the odds reset to something far less favorable. Realistically, the chances in your lifetime of playing with odds like this more than say, 100 times, is probably not very good either..and playing 100 times when your odds are 1 in 282,000,000 still isn't really enough to give the odds time to work in your favor. It reminds me of the old joke: What's the best way to make money at a casino? Start a casino.

But the expected winnings of a $2 ticket is now greater than $2 right? It is therefore a rationale thing to play it tonight No. Using the Kelly criterion, the optimal bet would have been 1.2 x 10^-8 % of your bankroll on the lottery ticket (without considering splitting). That would have been one $2 ticket if you're worth $17.5 Billion.

Entry fee to the Brooklyn half marathon.

And just because he built a huge part of his business with insurance companies doesn't mean everybody else should. Not everybody needs to own an insurance company to be a successful investor. I was going to say something about how quoting a great investor (thinker/writer/whatever) probably belies a lack of understanding. I also believe that corporate filings are over-rated. Not that a deep dive into the filings doesn't have its use (complex structures, distressed situations, asset investing, etc.) but typically I think what's going to happen in the future is the domain of business analysis and not financial analysis.

Are there cases in history were a commodity exporting country lowered output in a response to a regime change in an effort to stabilize prices? I'm actually asking -- I don't know but it seems far fetched.

This is why cartels don't work. (sigh), no. Why would a bankrupt, oil producing nation decide to pump less oil? Why would it be less incentivized to cheat on quotas in a cartel? The Saudis are pumping oil because it's their only option. In the past (100+ years ago in the US), opening the oil spigots to drive down prices was a good strategy because a stronger financed company could whether the storm, and then buy the assets of its bankrupt competitors cheaply. It could then rationalize production. This cannot work for the Saudis because a) they can't afford to buy up enough of production and b) oil is a sovereign issue: Venezuela, Nigeria, etc won't seed control of their oil assets to a foreign government.

This. 100% People underestimate the cohesiveness and power of OPEC. If the puppet masters could pull the strings, wouldn't they have already?

In all seriousness, you have to learn to act rationally in this game, and in some circumstances, that means ignoring your emotions. That may or may not correlate with checking stock prices all the time. Uncle Warren is suggesting a shortcut, one that is kind of dumb unless you think that it's directed at the people whose business he's purchased and the people that invested with him 50 years ago. You are not that; if you are interested in stock investing, you will probably check stock prices regularly, and you will need to learn the hard way.