Thursday, 16 January 2020
Investing Is Not Gambing?
Regular visitors to this watering hole would know I've always equated investing as same same with trading.
And trading is no different from speculation.
Speculation in turn is just another word for gambling.
Just like associating seagulls as "good" just because they're "white", and crows are "bad" because they're "black", those who are "trapped" by words tend to believe if one ownself declare ownself as an "investor", they are holier than thou compared to traders, gamblers, and speculators?
I on the other hand prefer to focus on:
Its the adjective silly! Never the noun
Howard Marks from Oaktree is well respected and followed by quite a few retail "investors" locally. His memos are religiously read and quoted like those annual letters by Warren Buffett.
So when I saw his latest memo, I can't let this opportunity pass!
You Bet!
Subscribe to:
Post Comments (Atom)
Hi SMOL,
ReplyDeleteWith the influx of new bloggers, I once read with amusement when a well-respected blogger declared that he was disgusted with the number of fakes around. Unlike them, he possess the true spirit of investing (lol!).
You ah. Suggesting that investing is akin to gambling is like swinging Nietzsche's hammer at cherished idols. Painful to those who seeks to define identity in terms of in-group and out-group. =P
Unintelligent Nerd,
DeleteParrots like to hide behind their favourite gurus - he said this, they said that...
Well, I merely presented what one of their own (Howard Marks) said ;)
LOL!
But seriously, most retail bei kambing "investors" only know the Method...
The Money Management and Mind part of investing can be found in gambling.
That's why most hedge fund managers and famous investors are also skilled in cards games.
Warren plays a mean game of bridge ;)
When one cannot control one's emotions in gambling, how can one do so in investing?
temperament,
ReplyDeleteThat's why even the Phds at Long Term Capital can get it horribly wrong depite all the human brain and machine computer powers at their disposal...
I treat trading as a craft, but humbly respect and acknowledge the role Lady Luck plays. Hence the need for hedging, position sizing, rebalancing, loss management, etc...
Why do the above if its "bao chiak"?
We know anecdotally what Howard Marks say is true.
During CNY, we teach newbies how to play mahjong or poker. Then these newbies go on to beat us until our pants drop!?
LOL!
But over several CNYs, those who are more skilled at mahjong or poker will win out over time ;)
After 20 years of "Investing" and you are an adult(Experience)swimming in a baby pool (Capital small), you are surely gambling ! Throwing oneself into the sea and survives can be lucky too. But likes of Warren Buffet should be in the Investing Class.
ReplyDeleteCory,
DeleteI prefer using adjectives than nouns (labels).
I agree Warren Buffett is GOOD at making (earning) money ;)
A lousy gambler is no different from a lousy "investor".
Similarly, the skill sets used by a competent and successful gambler are transferable to investing, and vice versa.
Money Management
-----------------
Know the odds
Know when to go all in
Know when to cut losses
Know when to run!
Mind
-----
Don't confuse luck with skill
Don't rage bet just to get even
Don't show emotions
Do play against the emotions of others
A skilled poker player can lose to a newbie in a single hand, but over many hands, the skilled player will win out.
Isn't it the same as - short term the market is a voting machine; long term its a weighing machine?
黑猫白猫，会抓老鼠的就是..
ReplyDeleteHaha. Don't care what people say if I have money in my biscuit tin when sipping pina colada by the beach. One of those instances that the result may matter more than the process :P
Kevin,
DeleteThe result is just a by-product.
Traders focus on One Good Trade at a time.
Which is focusing on what we can control (and maybe influence):
Better entries; better exits.
A GOOD Trade can result in a loss. We don't kick ourselves on it. In fact, we pat ourselves on the back for sticking to our trading rules. Discipline.
A BAD trade can result in win. We don't celebrate as we know we have let ourselves down... Keep breaking our trading rules, what's the point of having them again? We are just one trade away from blowing up...
As you can see, they apply to the Art of Gambling too ;)
Tell me about it!!
ReplyDeleteI've got an investment portfolio of Toto, 4D, horse betting, Big Sweep, football bets & international lottery tickets! Well diversified! LOL!
Spur,
DeleteOne of these days I must go visit the Singapore Turf Club as part of my "cultural" experince.
Very embarrassed. I've never been there yet.
Horse racing is a sport for kings!
Hmm ... Trading is hardcore gambling based on frequencies and number of trades and number of windows on computer screen.
ReplyDeleteInvesting is light weight gambler. Don't gamble every other day. It is like buying toto or 4d. Unlike going to casino or mahjong table.
Multibaggers are Top three prizes
DeleteCW,
Delete4D and Toto don't require skill; its just pure dumb luck. Ahem, just like passive indexing?
When it comes to gambling, most bei kambings often associate it with "pure luck" types of gambling...
But for gambling games that require skills - like poker or mahjong - we are in awe of skilled practioners and know never to play against them ;)
Investing and trading are just like "pure luck" gambling games if we don't bring any edge or skill into the arena...
Don't even bother to bring a knife to a gun fight?
Hi SmOl,
ReplyDeleteHow cleverly Howard pitch it. My first initial reaction before scanning the article is hell. No, they are different.
But when I read the part about hidden information ( or rumsfield's unknown unknowns) and luck, I cannot helped but nod my head.
Of the 3, one can only control skills, and there is no guarantee that this component can be improved in a significant way.
Suddenly quite a few phrases come to mind
生不逢时
十睹九输
技不如人
Remember the newbie I talk to u about, trying to "learn" from me. I told him
about MIT and say watch out for it. It was 1.8 then... I say if u dun mind holding longer, u actually dun really have to wait till 1.7 which is my calculate MOS 4 years ago.
He went in to buy 1.85 and sold at 1.9
I say we different styles, u might need someone else to coach u.
Yet, when we talk about returns for 2019, I told him my realised profits for the year including dividends is just about 3 K
He said he made that from.MiT and total returns is 15k. Of course he has a few counsels.
I told him he is doing very well. And hope he continue to hone what he is doing and keep his network of advices.
Skills dun have to be trained, it can be network or "bought"
Waiting for smol's response to your last sentence on skills and "bought" ha ha
DeleteSillyinvestor,
DeleteOur own skills or competence can't be bought. We have to earn it ourselves.
But other people's skills and talents, we can LEVERAGE on them - hence I like to call it OPT - Other People's Talent/Time.
Bei kambings just know how to parrot OPM (Other People's Money), this OPT is coined by me ;)
Landowners and shepherds use OPT all the time.
Smol,
ReplyDeleteInvesting gives one peace of mind. Simple.
Ben
Ben,
DeleteI got eyes no see "Tarzan"...
You are the minority who says investing gives peace of mind ;)
Having gone through melt downs in 2000 and 2008, I must humbly admit investing is NOT simple - to me.
And there were days and nights where peace was the last thing on my mind when I see the sea of red in my portfolio...
Lucky I had a good day job so I managed to claw my way back ;)
Quote : "Investing gives one peace of mind. Simple."
DeletePossible if one only spends less 50% of their dividends received for living.
CW,
DeleteAh! Yield hogs got panadol don't care about unrealised losses?
I wonder those who own Starhub will feel the same way when current stock price is even lower than the lows during 2008/9...
Or how about when dividends got cut or suspended during 2008 for those few REITs that almost went belly up...
Of course its possible some investors NEVER lose money. Too bad I'm not one of them.
I'm not Tarzan (泰山); I'm only a manwhore :(
Well, for someone who has seen his entire portfolio down by over $400K in Mar 2008 ... plus unemployed ... I can say that investing is peacefully simple -- as long you got cast iron stomach & ice water in your veins. LOL!
DeleteAs long don't lose your head, there're strategies & techniques to survive, recover & thrive. But it ain't easy! ;)
Spur,
DeleteYou win!
I at least got a day job to bail me out ;)
Sea of red AND unemployed!?
Another strategy is to marry well - wife or father-in-law landowner.
Or have parents that give out golden spoons ;)
"Daddy..."
"What now?"
"Can borrow $1 million?"
"Why?"
"I did it again..."
Ehhh .... this one not good to win LOL!
DeleteBut it was a very good experience. I realised that most mainstream methods can do well even thru 2008/2009, even buy & hold & rebalance ;) ... it's the Mind & Money Mgmt that does one in. Especially the Mind.
Rich spouse or in-laws or parents? Yeah I wish! Lol!
PS: Keynes was lucky to have rich lau pa to bail him out twice, else we wouldn't have Keynesian econs (some consider that a curse) or hear about "markets being irrational longer than you can stay solvent".
Spur,
DeleteWhat doesn't kills us will only make us stronger :)
That's the trick isn't it?
Survive, naturally will build up resistence.
Die? Well, that's that!
That's why I don't over think or over plan too much.
See pretty girl, flirt.
Girl smile and laugh, on!
Girl gives me the dirty look or tells me to f-off, OK lor...
Crash got sound!
LOL!
Same applies to investing/trading. Took me sometime to understand Peter Lynch's tiny "stay tuned" positions ;)
You married a wife is a gamble. Really.
ReplyDeleteHope for a perfect birth is also a gamble too.
Cross the red light because there aren't car in Your sight but just happens a good friend beside who holds you when a car zoom by.
Choose the Right job offer that could defines your career for next 20 years
Took your first flight and is not the 737Max that crashed. Is always the first flight...
Out of 7 major questions in your exam but only studied 5 and pass the exam.
Screw up your Math exam and only able to answer 1/5 question but able to have the rest completed in 30 minutes to define your entry into local University
LIFE IS A GAMBLE
Cory,
DeleteAnd the fun (or miserable) part we'll only know AFTER the fact!
Its so interesting to see so many veterans not shy to admit the role luck (which is another word for gamble) plays in their lives :)
"If you fail to plan, you plan to fail" - some youths and should know better old fogeys have no clue this statement, used in the wrong context, can be the most condescending, uncaring, and hurtful words to say...
To someone who is down and out...
To someone who is trying hard...
To someone who just got retrenched...
To someone who lost a love one...
To someone who realised he got cancer...
No wonder lar, I gamble since 5.
ReplyDeleteGamble makes you greedy, the earlier you realise this, the earlier u can learn to control it. You need to experience pok gai once to understand the emptiness, the loss and helpless...
Start from scratch, reborn.
WolfT,
DeleteI wonder which pre-school or kindergaten you went to!
Power!
I remember during primary school, provisions shop got "tikum tikum" games which I like to play with my pocket money.
Then there's buying zhap-ji-kee and 4D for my grandma...
No wonder big daddy banned underage kids from Singapore Pools! But now we see ah gong and ah ma in their 80s and 90s do the queuing themselves...
Pok gai?
The emotions you described, I felt when she married another man :(
Hmm... Is that why I'm playing waifu anime mobile games in my 50s?
temperament,
ReplyDeleteThat's why I say the strenght of youth is they don't know what cannot be done ;)
Hence when beginner's luck strikes, youth can and will beat old fogey veterans hands down.
However, once having survived a few bull/bear cycles, we look back and wonder how on earth we dare to do the crazy things we did in the past!?
Don't say no bxlls.
Say the weather cold... They just shrunk a little mah..
LOL!
I'll keep using Dr Mahatir as the wonderful example in outliving your poliitical rivals.
The same applies to investing/trading.
If we survive long enough for Lady Luck to smile on us, then we are set!
Of course we must do our part!
When luck strikes, must say, "Call!"
And if have hugh bxlls as in strong convictions, "All-in!"
Whether it is short-term speculative trading or long-term investing or buy-and-add-and-hold passive investing, market timing or time in market, they're all valid methods as long as the person(or "gambler") has good reason to believe he has an edge.
ReplyDeleteGambling has a bad name because it is associated with casinos and casino games are designed to have a negative edge for the gambler. The more he plays, the more likely he loses. The mathematical law of large numbers guarantees that.
Life is a gamble because many of the major life decisions we make are done without an edge. Who we marry, what career we choose, who we choose to work for, work with etc. Gambling is inevitable in life. We do our best but sometimes, life turns out differently. If life turns out well, no need to hao-lian because it's probably thanks to a lot of luck. If it turns out badly, don't give up because luck can turn later.
Happy Chinese New Year.
hyom,
DeleteGong Xi Fa Cai!