The people, united, will never be defeated
I used to have "Notes from the Lounge" in my blogroll a long time ago, but dropped it when there didn't seem to be any new content. I haven't checked this site out for a while, but now that I did, I note that there is quite a lot of good stuff available. In the front page alone, we can find the posts "A Good Word for Bad Faith", "When Is Hate Speech Funny?" and "Gresham's Law for the Blogosphere?" Now, I have always held that appealing to Gresham's Law when it comes to anything else than money is a surefire sign of an idiot, but I can't deny that Sanchez's version of Gresham's Law seems quite apt.
When I have to choose what to put my retirement money in, I don't pay much attention which mutual fund I invest in (other than it is of high volatility), since I tend to believe in the efficient market hypothesis and the random walk hypothesis. However, I am getting second thoughts after reading Dennis Mangan's posts "Are You the Next Warren Buffett?" and "Beating the Market: An Occasional Series". Stumbling and Mumbling disagrees with this in his post "Yes - markets are efficient". Greg Mankiw examines the topic in his post of the same title, and concludes that
Here is my bottom line: The efficient-market hypothesis is not strictly true, but it is close enough to true that most investors are better off believing in it nonetheless.
Sometimes pragmatic
approach to truth is the best. This is especially true (or meta-true?)
at times when objective statistics trump the vague subjective feelings,
as in, for example, the article "The Six Most Feared but Least Likely Causes of Death".
The
wives of the local gang of islamists that was famously caught by the
RCMP also don't seem to like Canada very much, tells the news article "Hateful chatter behind the veil".
If they really hate Canada so much, I could immediately think of at
least one easy solution for this problem. I guess that there is a good
reason why Western feminists so seldom advocate liberating the Muslim
women from their patriarchal slavery. But perhaps these angry Muslims
could be made happier by having Wonderland amusement park organize a
Muslim-only day, the way that another amusement part apparently recently did in Britain.
Sometimes
when I want to feel really pretentious and intellectual, I read the New
Yorker. Other than the famous cartoons, I haven't really found much
anything of value in this magazine. Michael Blowhard has a slightly
different view in his post "Looking Through The New Yorker".
I am not entirely sure if "DiversityInc Factoids & Style Guide"
is a genuine article or a joke, but it's often so hard to tell these
days. (As a humorous aside, as I was writing this sentence, I became
aware that I had "Hello Dummy" by Don Rickles playing in the
background.) The observation
Acceptable words and phrases today can become obsolete and even offensive tomorrow. The opposite can also be true, breathing new life into formerly forbidden words and phrases.
remound me of The Danimal's observation that he laughs at people who think the moral high ground represents anything other than the most rapidly moving piece of real estate in the world. I casually browsed the same site and discovered another product, an 80 dollar piece called "Avoiding Liability Under the New FLSA", whose description informs the potential buyers that
It is not easy to comply with the labor and employment laws, especially the FLSA. Relying on your common sense will not work with the FLSA.
I
guess that American employers are lucky that they have Diversity Inc
advising them. But let's leave that site for future browsing and move
on to something that actually does make common sense. If the idea is to
establish a floor for everybody's standard of living, screw the minimum
wage and other socialist ideas, since there is only one fair and
efficient way to do this: "A Basic Income for All".
The essay "Speciesism: a beastly concept" at Spiked explains why it is OK for humans to use animals to advance their ends.
Fausta's post "Yesterday at the Church of Oprah"
tells us how Oprah swooned about the wisdom of Leonardo di Caprio. I
kind of hope that global warming is true and will result in a disaster,
as it certainly would be a fitting end for all the irrationalist
leftists who oppose nuclear power simply because it is such a constant
reminder of how wrong their worldview of romantic antitechnology is.
The hardline opponents of nuclear power simply cannot be convinced with
reason, because for them, nuclear power is a symbol for everything they
hate in the larger cultural war. You could just as well ask a fundy
Christian to bow down in front of a statue of Buddha. No objective
comparison of safety and price will ever be enough to convince them of
the blatant superiority of nuclear energy, so it is perhaps best not to
even try.
You know, it's pretty funny how both Soviet Union and
the Western coal and petroleum industries have played the leftists
almost like a violin; the former wanted to hinder the growth of the
superior Western economy, whereas the latter knew perfectly well that
the only real alternatives to nuclear power were coal and hydrocarbons.
Not having learned anything, leftists continue even today to repeat their hysterical talking points
that were originally written by KGB and Exxon, apparently blissfully
unaware that the world didn't even come close to an end at the
Chernobyl disaster the way that it was supposed to by the arguments of
anti-nuclear activists. In fact, the total death toll of Chernobyl,
which was pretty much the worst nuclear accident that is even possible,
ended up being less than what the coal industry (or leftism, for that
matter) still continue to kill every single day. If building more
nuclear power is forbidden because it is too "risky", leftism should
also be forbidden and even more so.
In his post "Marital Rape Never, Ever Happens", Glaivester
comments on some TV show that apparently featured marital rape. That
reminds me of how in one of the last episodes of "Desperate Housewives"
of the second season, according to the feminist definition of rape, Tom
clearly raped his wife Lynette inside the company elevator, since he
did not accept an explicit and repeated no for an answer but kept
pushing until she finally relented. I may be mistaken, but I don't
recall anybody raising a fuss about this, not even the Dworkinite wing
of Internet feminists. Or maybe they just don't watch soaps.
On the efficiency of the capital market:
Yes, they are efficient to a large extent and no, you can't really beat the index without insider information.
Having said that, there are behavioural aspects to the market, i.e. bubbles and the sort, which make zero sum game play possible, and some do get rich. And yes, your average investor - even a professional one - has neither the brains nor the capital to do so.
But there are also other aspects, like risk-aversion and personal hedging preferences, which need to be taken into account. I cannot go into details right now, but I will write about it shortly.
I strongly urge you to read some intermediate finance books.
However,
Posted by Tiedemies | 3:30 PM
Here's an interesting thought:
given that stock prices have a random error component on top of the intrinsic value of the underlying businesses, we know that market cap is correlated with overvaluation. Thus you can beat the market simply by holding a portfolio weighted according to some other measure than market cap.
I can't quite figure what's wrong with that argument, but I'd think the effect is so small that the transaction costs of regularly readjusting a portfolio would more than offset the extra returns.
John Mauldin
discusses the idea and shows some statistics on the performance of non-market-cap based indexes. It seems that a portfolio weighted according to fundamentals (e.g. sales, book value or something else) can outperform the market by as much as 2% per annum without increased volatility.
Posted by Antero Kälvä | 6:27 AM