This man can predict when bubbles burst: time to time the market?

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madpunster
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Re: This man can predict when bubbles burst: time to time the market?

Post by madpunster » Tue Nov 06, 2018 11:19 pm

I too was impressed by his academic credentials and his attempt to quantify crowd behavior. His analyses search for patterns of impending failure such as rocket motor vibrations and earthquakes. The formula he put forth struck me as curve fitting through the rectospectoscope, but it sure was pretty. In the end, human herd behavior is much less consistent than say frequencies of vibrating metal about to shatter given a certain temperature and so on. It would be great to have such a holy grail indicator, but so much depends on the experiential history of people with enough oomph to move the market and the degree to which contagion has become part of the zeitgeist. It's probably more of a Keynesian beauty contest than science.

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Re: This man can predict when bubbles burst: time to time the market?

Post by steve321 » Wed Nov 07, 2018 2:38 am

siamond wrote:
Tue Nov 06, 2018 7:45 pm
Amusingly enough, the researcher (Didier Sornette) has a rather unfortunate last name. "Sornette" in French basically means (in a light-mannered way) silly bullshit. Google Translate says it translates as 'fiddlestick', which taught me a cool new word in English... :happy
There have been several remarks on the translation of the word sornette. To me, what seems 'silly bullshit' (to quote you) in the context of this thread are the remarks themselves.
You seem to know French, so if you know France too you may check the CV of the guy and realize that he was educated at Ecole Normale Superieure (rue Ulm) which my daughter tells me is the top university in France and one of the best in Europe. He also studied physical sciences, not economics, so he has rigor and no bs. So the guy is certainly very very smart, and silly remarks about his name certainly do not confute his theories.
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Re: This man can predict when bubbles burst: time to time the market?

Post by steve321 » Wed Nov 07, 2018 2:47 am

In this video he also says there's a 'passive investing bubble', since when everyone just sits back and does passive investment, stocks cannot be priced correctly (it's active investor who determine the prices efficiently).
He also likens risk management in investments to a risk management department in a firm: when everything goes well, we think we don't need risk management, and the company fires that department, because it has a cost and no benefit. But then a catastrophic event happens and they regret they were not managing risk. All this is making me wonder whether the wisdom I had previously accepted (Buy and hold, passive investing) is valid, considering that such a great mind suggests doing the opposite!!:
https://www.cnnmoney.ch/shows/newsmaker ... six-months
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde

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Re: This man can predict when bubbles burst: time to time the market?

Post by steve321 » Wed Nov 07, 2018 2:54 am

Taylor Larimore wrote:
Tue Nov 06, 2018 8:42 pm
steve321 wrote:
Tue Nov 06, 2018 11:55 am
Contrary to Fama's postulate that bubbles do not exist because of EMH, Didier Sornette shows that they do, and he apparently can predict when they burst (in this video he says he predicted the time the stock market crashed in China):
https://www.ted.com/talks/didier_sornet ... anguage=en

Unlike many people who appear in the media with this kind of claims and who are clearly frauds, Sornette is a Professor at ETH in Zurich, which is one of the top universities in Europe (at least I hope so as I am spending a fortune on my daughter's education at ETH, though not under Sornette) and is respected by people like NN Taleb.
So why not time the market based on his predictions? Isn't the Bogleheads philosophy and belief in EMH, just like medieval philosophy, superseded by reason and scientific inquiry, as shown in Sornette's work?
Steve321:

You would be wise to forget "market-timing." Read this:

Market Timing Quotes

Best wishes.
Taylor
These quotes are from economists. The guy is a scientist, with a degree in the physical sciences from a top university.
NN Taleb describes the optimization techniques of economists, as pioneered by Samuelson, as
a second-rate engineering problem
for those who want to pretend that they are in the physics department—
so-called physics envy. In other words, an intellectual fraud.
So I'd rather go to the real thing - the Scientist - than to those who try to imitate him with dubious results.
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde

ivk5
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Re: This man can predict when bubbles burst: time to time the market?

Post by ivk5 » Wed Nov 07, 2018 3:09 am

steve321 wrote:
Wed Nov 07, 2018 2:54 am
Taylor Larimore wrote:
Tue Nov 06, 2018 8:42 pm
steve321 wrote:
Tue Nov 06, 2018 11:55 am
Contrary to Fama's postulate that bubbles do not exist because of EMH, Didier Sornette shows that they do, and he apparently can predict when they burst (in this video he says he predicted the time the stock market crashed in China):
https://www.ted.com/talks/didier_sornet ... anguage=en

Unlike many people who appear in the media with this kind of claims and who are clearly frauds, Sornette is a Professor at ETH in Zurich, which is one of the top universities in Europe (at least I hope so as I am spending a fortune on my daughter's education at ETH, though not under Sornette) and is respected by people like NN Taleb.
So why not time the market based on his predictions? Isn't the Bogleheads philosophy and belief in EMH, just like medieval philosophy, superseded by reason and scientific inquiry, as shown in Sornette's work?
Steve321:

You would be wise to forget "market-timing." Read this:

Market Timing Quotes

Best wishes.
Taylor
These quotes are from economists. The guy is a scientist, with a degree in the physical sciences from a top university.
NN Taleb describes the optimization techniques of economists, as pioneered by Samuelson, as
a second-rate engineering problem
for those who want to pretend that they are in the physics department—
so-called physics envy. In other words, an intellectual fraud.
So I'd rather go to the real thing - the Scientist - than to those who try to imitate him with dubious results.
You seem very focused on credentials and expertise. Is that rational? Do you believe that if you find the right expert to follow, that will protect your investments and allay your anxiety?

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Re: This man can predict when bubbles burst: time to time the market?

Post by JoMoney » Wed Nov 07, 2018 3:15 am

steve321 wrote:
Wed Nov 07, 2018 2:47 am
...He also likens risk management in investments to a risk management department in a firm: when everything goes well, we think we don't need risk management, and the company fires that department, because it has a cost and no benefit. But then a catastrophic event happens and they regret they were not managing risk...
Boglehead's certainly wouldn't suggest you have no "risk management".
The primary decision most suggest you make is to come up with an allocation to bonds, and stick to it.
If market timing has you invested and something happens leaving you ill-prepared, then it's a poor form of risk management. If you think market timing is going to garner you extra returns, it might happen, but the odds would seem to be against you most of the time, and it's certain that not everyone would be able to do this and come out ahead.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

ivk5
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Re: This man can predict when bubbles burst: time to time the market?

Post by ivk5 » Wed Nov 07, 2018 3:41 am

steve321 wrote:
Wed Nov 07, 2018 2:54 am
Taylor Larimore wrote:
Tue Nov 06, 2018 8:42 pm
steve321 wrote:
Tue Nov 06, 2018 11:55 am
Contrary to Fama's postulate that bubbles do not exist because of EMH, Didier Sornette shows that they do, and he apparently can predict when they burst (in this video he says he predicted the time the stock market crashed in China):
https://www.ted.com/talks/didier_sornet ... anguage=en

Unlike many people who appear in the media with this kind of claims and who are clearly frauds, Sornette is a Professor at ETH in Zurich, which is one of the top universities in Europe (at least I hope so as I am spending a fortune on my daughter's education at ETH, though not under Sornette) and is respected by people like NN Taleb.
So why not time the market based on his predictions? Isn't the Bogleheads philosophy and belief in EMH, just like medieval philosophy, superseded by reason and scientific inquiry, as shown in Sornette's work?
Steve321:

You would be wise to forget "market-timing." Read this:

Market Timing Quotes

Best wishes.
Taylor
These quotes are from economists. The guy is a scientist, with a degree in the physical sciences from a top university.
NN Taleb describes the optimization techniques of economists, as pioneered by Samuelson, as
a second-rate engineering problem
for those who want to pretend that they are in the physics department—
so-called physics envy. In other words, an intellectual fraud.
So I'd rather go to the real thing - the Scientist - than to those who try to imitate him with dubious results.
Why take Taleb’s word for it, btw? His PhD is in management science, so he’s hardly “the real thing” himself, right?

Or perhaps this is all just the classic “appeal to authority” fallacy.

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Re: This man can predict when bubbles burst: time to time the market?

Post by Valuethinker » Wed Nov 07, 2018 5:16 am

steve321 wrote:
Tue Nov 06, 2018 11:55 am
Contrary to Fama's postulate that bubbles do not exist because of EMH, Didier Sornette shows that they do, and he apparently can predict when they burst (in this video he says he predicted the time the stock market crashed in China):
https://www.ted.com/talks/didier_sornet ... anguage=en

Unlike many people who appear in the media with this kind of claims and who are clearly frauds, Sornette is a Professor at ETH in Zurich, which is one of the top universities in Europe (at least I hope so as I am spending a fortune on my daughter's education at ETH, though not under Sornette) and is respected by people like NN Taleb.
So why not time the market based on his predictions? Isn't the Bogleheads philosophy and belief in EMH, just like medieval philosophy, superseded by reason and scientific inquiry, as shown in Sornette's work?
I recommend reading Sornette's books and papers.

I don't think he has shown that he can predict bubbles -- but his characterization of bubbles is quite interesting.

ETH is a good university, depending on field.

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Re: This man can predict when bubbles burst: time to time the market?

Post by Valuethinker » Wed Nov 07, 2018 5:25 am

ivk5 wrote:
Wed Nov 07, 2018 3:41 am


These quotes are from economists. The guy is a scientist, with a degree in the physical sciences from a top university.
NN Taleb describes the optimization techniques of economists, as pioneered by Samuelson, as
a second-rate engineering problem
for those who want to pretend that they are in the physics department—
so-called physics envy. In other words, an intellectual fraud.
So I'd rather go to the real thing - the Scientist - than to those who try to imitate him with dubious results.
Why take Taleb’s word for it, btw? His PhD is in management science, so he’s hardly “the real thing” himself, right?

Or perhaps this is all just the classic “appeal to authority” fallacy.
[/quote]

Taleb.

https://en.wikipedia.org/wiki/Nassim_Ni ... #Education

It's a mathematical dissertation - without reading it. French higher education runs that way - that's why the French banks have such strong expertise in derivatives. All the way to the "C Suite" (CEO level) you have people who understand the underlying mathematics.

Taleb's philosophy is, AFAIK, that by definition you *cannot* predict market bubbles (negative or positive) or rather extreme movements. He's a follower of Mandelbrot, who did a lot of work to prove that - that the conventional assumptions of Finance i.e. lognormal or normal distributions are in fact inappropriate, empirically.

I find him incredibly annoying, but there's a germ of good sense in a lot of what he has to say. Maybe guru status turns anyone into a simplified parody of themselves. Rare to avoid that in life, I suspect.

It's fair to critique economics for "physics envy" in that the attempt to scale models of individual behaviour to models of the whole economy ("rigorous foundations" of macroeconomics, particularly the Fresh Water school) has basically been an intellectual dead end. It hasn't helped us to understand fluctuations in aggregate economic activity nor to model them better.

However modern economics has changed (a lot) in the last 20 years. The emphasis now is very much on finding new datasets and analyzing them - a sort of applied microeconomics. Still using basic economic assumptions about behaviour, but testing that against data.

That's where the field of economics has gone. There's also the behavioural strand, and I am not sure where that is at - although it could align with the above.

Not sure what's going on in macro research at the moment.

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Re: This man can predict when bubbles burst: time to time the market?

Post by ivk5 » Wed Nov 07, 2018 5:27 am

I’m just not sure what any of that has to do with how Steve manages his anxiety, or his portfolio.

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Re: This man can predict when bubbles burst: time to time the market?

Post by Valuethinker » Wed Nov 07, 2018 5:28 am

steve321 wrote:
Wed Nov 07, 2018 2:47 am
In this video he also says there's a 'passive investing bubble', since when everyone just sits back and does passive investment, stocks cannot be priced correctly (it's active investor who determine the prices efficiently).
He also likens risk management in investments to a risk management department in a firm: when everything goes well, we think we don't need risk management, and the company fires that department, because it has a cost and no benefit. But then a catastrophic event happens and they regret they were not managing risk. All this is making me wonder whether the wisdom I had previously accepted (Buy and hold, passive investing) is valid, considering that such a great mind suggests doing the opposite!!:
https://www.cnnmoney.ch/shows/newsmaker ... six-months
I would encourage you not to post here, but to focus your attentions on building a portfolio you are comfortable with. This is just a waste of your valuable time.

There are a lot of risk management techniques out there, why don't you go and study up on them?

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Re: This man can predict when bubbles burst: time to time the market?

Post by Valuethinker » Wed Nov 07, 2018 5:35 am

steve321 wrote:
Tue Nov 06, 2018 11:55 am
Contrary to Fama's postulate that bubbles do not exist because of EMH, Didier Sornette shows that they do, and he apparently can predict when they burst (in this video he says he predicted the time the stock market crashed in China):
https://www.ted.com/talks/didier_sornet ... anguage=en

Unlike many people who appear in the media with this kind of claims and who are clearly frauds, Sornette is a Professor at ETH in Zurich, which is one of the top universities in Europe (at least I hope so as I am spending a fortune on my daughter's education at ETH, though not under Sornette) and is respected by people like NN Taleb.
So why not time the market based on his predictions? Isn't the Bogleheads philosophy and belief in EMH, just like medieval philosophy, superseded by reason and scientific inquiry, as shown in Sornette's work?
From Taleb's wikipedia entry:
Taleb sees his main challenge as mapping his ideas of "robustification" and "antifragility", that is, how to live and act in a world we do not understand and build robustness to black swan events. Taleb introduced the idea of the "fourth quadrant" in the exposure domain.[64] One of its applications is in his definition of the most effective (that is, least fragile) risk management approach: what he calls the 'barbell' strategy which is based on avoiding the middle in favor of linear combination of extremes, across all domains from politics to economics to one's personal life. These are deemed by Taleb to be more robust to estimation errors. For instance, he suggests that investing money in 'medium risk' investments is pointless, because risk is difficult, if not impossible to compute. His preferred strategy is to be both hyper-conservative and hyper-aggressive at the same time. For example, an investor might put 80 to 90% of their money in extremely safe instruments, such as treasury bills, with the remainder going into highly risky and diversified speculative bets. An alternative suggestion is to engage in highly speculative bets with a limited downside.

Taleb asserts that by adopting these strategies a portfolio can be "robust", that is, gain a positive exposure to black swan events while limiting losses suffered by such random events.[65]:207 Together with Donald Geman and Hélyette Geman, he modeled the "maximum entropy barbell" which consists in "to constrain only what can be constrained (in a robust manner) and to maximize entropy elsewhere", based on an insight by E.T. Jaynes that economic life increases in entropy under regulatory and other constraints.[66] Taleb also applies a similar barbell-style approach to health and exercise
I think there's your alternative investment strategy.

80-90% in totally safe assets - eg short term gilts, US Treasury Bills. Index linked gilts if you can stomach the negative real yields (c. -1.6% at the moment).

Then you could invest the rest in out of the money calls on the FTSE 100 & the S&P 500.

As a further bell + whistle, you might consider putting say 20% into Small Cap Value stocks (including Emerging Markets) -- has the lowest correlation with the overall market as a whole. That probably means going through DFA - in the UK you would need to find an Independent Financial Adviser to work with you. Not sure in ETFs etc. there are other alternatives.

FWIW I treat British Empire Securities (BTEM) as a kind of "anti fragile" stock investment. Disclosure: I own this stock and have done so for nearly 20 years. Another example would be Sebastian Lyon's Personal Assets Trust.

Unfortunately due to tax issues (PFIC) our American readers are unable to invest in these Investment Trusts.

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Re: This man can predict when bubbles burst: time to time the market?

Post by steve321 » Wed Nov 07, 2018 5:48 am

Valuethinker wrote:
Wed Nov 07, 2018 5:35 am
steve321 wrote:
Tue Nov 06, 2018 11:55 am
Contrary to Fama's postulate that bubbles do not exist because of EMH, Didier Sornette shows that they do, and he apparently can predict when they burst (in this video he says he predicted the time the stock market crashed in China):
https://www.ted.com/talks/didier_sornet ... anguage=en

Unlike many people who appear in the media with this kind of claims and who are clearly frauds, Sornette is a Professor at ETH in Zurich, which is one of the top universities in Europe (at least I hope so as I am spending a fortune on my daughter's education at ETH, though not under Sornette) and is respected by people like NN Taleb.
So why not time the market based on his predictions? Isn't the Bogleheads philosophy and belief in EMH, just like medieval philosophy, superseded by reason and scientific inquiry, as shown in Sornette's work?
From Taleb's wikipedia entry:
Taleb sees his main challenge as mapping his ideas of "robustification" and "antifragility", that is, how to live and act in a world we do not understand and build robustness to black swan events. Taleb introduced the idea of the "fourth quadrant" in the exposure domain.[64] One of its applications is in his definition of the most effective (that is, least fragile) risk management approach: what he calls the 'barbell' strategy which is based on avoiding the middle in favor of linear combination of extremes, across all domains from politics to economics to one's personal life. These are deemed by Taleb to be more robust to estimation errors. For instance, he suggests that investing money in 'medium risk' investments is pointless, because risk is difficult, if not impossible to compute. His preferred strategy is to be both hyper-conservative and hyper-aggressive at the same time. For example, an investor might put 80 to 90% of their money in extremely safe instruments, such as treasury bills, with the remainder going into highly risky and diversified speculative bets. An alternative suggestion is to engage in highly speculative bets with a limited downside.

Taleb asserts that by adopting these strategies a portfolio can be "robust", that is, gain a positive exposure to black swan events while limiting losses suffered by such random events.[65]:207 Together with Donald Geman and Hélyette Geman, he modeled the "maximum entropy barbell" which consists in "to constrain only what can be constrained (in a robust manner) and to maximize entropy elsewhere", based on an insight by E.T. Jaynes that economic life increases in entropy under regulatory and other constraints.[66] Taleb also applies a similar barbell-style approach to health and exercise
I think there's your alternative investment strategy.

80-90% in totally safe assets - eg short term gilts, US Treasury Bills. Index linked gilts if you can stomach the negative real yields (c. -1.6% at the moment).

Then you could invest the rest in out of the money calls on the FTSE 100 & the S&P 500.

As a further bell + whistle, you might consider putting say 20% into Small Cap Value stocks (including Emerging Markets) -- has the lowest correlation with the overall market as a whole. That probably means going through DFA - in the UK you would need to find an Independent Financial Adviser to work with you. Not sure in ETFs etc. there are other alternatives.

FWIW I treat British Empire Securities (BTEM) as a kind of "anti fragile" stock investment. Disclosure: I own this stock and have done so for nearly 20 years. Another example would be Sebastian Lyon's Personal Assets Trust.

Unfortunately due to tax issues (PFIC) our American readers are unable to invest in these Investment Trusts.
I am very familiar with Taleb's advice; US treasuries are not suitable for non US investors due to currency risks; gilts are suitable for Uk investors, even though they may not be as safe as treasuries.
However, whereas Taleb manages risk through antifragility because he thinks black swans cannot be anticipated; Sornette thinks instead that we can actually predict crashes. Their diametrically opposite approach is shown here:
https://www.youtube.com/watch?v=vuvbghZuM8U
I am at present confused about which is better; that is why I am posting this thread. As for my 'valuable time' to which you refer to in another post, I have plenty of it as I am unfortunately stuck at home due to illness, so I benefit from the discussions on this board.
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Re: This man can predict when bubbles burst: time to time the market?

Post by nisiprius » Wed Nov 07, 2018 7:02 am

steve321 wrote:
Wed Nov 07, 2018 2:54 am
...These quotes are from economists. The guy is a scientist, with a degree in the physical sciences from a top university...
After being a successful investor for years, Sir Isaac Newton lost the equivalent of $20 million in the South Sea Bubble. This paper notes
...he was not an other-worldly researcher ignorant of finance. Aside from the effort he put into alchemy and theology as well as into astronomy, physics, and mathematics, he was an accomplished administrator, technologist, and engineer. As first Warden and then Master of the Royal Mint, his efficiency improvements were crucial to the success of the Great Recoinage of the 1690s... Newton was a member of the British governing elite. He took part in the debates over the major changes in monetary policy that were carried out in that period, one effect of which was to initiate the move from silver to gold as the standard, a move that was later followed by most of the world.... This paper shows that Newton did not just taste of the Bubble’s madness, but drank deeply of it....
The idea of expecting "scientists" to do better than economists is crazy. If anything, the problem with economists is that they try too hard to be scientists. I, too, have an animus against economists but they are not stupid people. The reason why there isn't a real science of economics is not that economists are not scientists, it is the inability of applying the scientific method to economists--in particular, the impossibility of performing controlled experiments. There is also the fact that even on the face of it you would need far, far more data than "1926-present" or "1870-present" to reduce sampling error; and the fact that despite the false precision of measuring things in dollars, there is no accurate, reliable way to measure the things that are actually important.

Certainly, outsiders can bring fresh insight, but the idea that they will, automatically, merely because they have expertise in a field that is utterly unlike human mass financial behavior is unsound.

Actually the biggest contribution by outsiders seems to me to be the psychologists who started the subfield of "behavioral economics."

It's also almost proverbial that experts can be idiots outside their field. Would you trust Eugene Fama for earthquake advice?
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Re: This man can predict when bubbles burst: time to time the market?

Post by steve321 » Wed Nov 07, 2018 7:28 am

nisiprius wrote:
Wed Nov 07, 2018 7:02 am


It's also almost proverbial that experts can be idiots outside their field. Would you trust Eugene Fama for earthquake advice?
No I wouldn't but then I wouldn't trust him with financial advice either. One reason is that I see people acting irrationally everywhere, so I don't understand why they should be rational when it comes to markets.

A second reason is that I don't find Fama inspiring when I watch his videos; he seems pedantic and interested in hairsplitting, rather than in understanding the real world outside.

He does not seem to be in good shape either (though admittedly this is a pretty irrational way of judging on my part). In contrast, Sornette looks really healthy and solid, I even saw a video of him skiing in the Alps whilst wearing only swimming trunks. I know this sounds quite irrational, but as someone suffering from an illness and bedridden most of the time, I know how important physical health is for clear thinking. Sornette looks like a kind of superman to me.

Finally, from my layman point of view, there does seem to be a connection between earthquakes and markets, since in both cases you have interlocking systems becoming unstable. As the instability keeps growing, you have an increasing probability of a catastrophic event happening.
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Re: This man can predict when bubbles burst: time to time the market?

Post by onourway » Wed Nov 07, 2018 7:43 am

Steve,

If you have this much anxiety about your finances, reading about finances all day and people who think they have figured things out is exactly the opposite of what you should be doing. You are feeding the monster.

I'll echo again what others have told you earlier in this thread because it doesn't seem to have clicked yet. The reason the Bogleheads method is even a thing is because it works so well and all other methods of investing work so poorly. Over time a buy and hold portfolio will out-perform 80% or more of all other investment options - and from what we can tell - the 20% that beat it do it primarily by random chance. Is beating 80% of the investment alternatives not good enough for you to meet your goal? Would you rather take the chance of being in the top 20% even though the much more likely outcome is you will end up in the bottom 80%, possibly the very bottom?

I would suggest you really think about that, and find another hobby for your spare time than worrying about your money. Once you have an asset allocation set up for your investments, the best thing you can do is forget about them and go do something else.

I'll share a personal story here that's relevant. I started work post dot-com bust but well in advance of the housing bust. I immediately started contributing a significant amount to my 401k with a generous company match. I worked hard and contributed regularly every month and didn't even look at the statements until 2016. By that point my account had grown to nearly 7 figures. A couple of my co-workers continue to tell me stories about how smart they were during the 2008 crash when they went mostly to cash and 'preserved' their money. They have remained primarily in cash to this day, and it hasn't dawned on them that their meddling has cost them hundreds of thousands of dollars - in one case - nearly a million dollars.

These folks are lucky in that they will still be fine because they have saved well and are working long careers. But keep your hands off. They are almost certain to be damaging to your wealth.

:sharebeer

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Re: This man can predict when bubbles burst: time to time the market?

Post by Silk McCue » Wed Nov 07, 2018 7:56 am

steve321 wrote:
Wed Nov 07, 2018 7:28 am

A second reason is that I don't find Fama inspiring when I watch his videos; he seems pedantic and interested in hairsplitting, rather than in understanding the real world outside.

He does not seem to be in good shape either (though admittedly this is a pretty irrational way of judging on my part). In contrast, Sornette looks really healthy and solid, I even saw a video of him skiing in the Alps whilst wearing only swimming trunks. I know this sounds quite irrational, but as someone suffering from an illness and bedridden most of the time, I know how important physical health is for clear thinking. Sornette looks like a kind of superman to me.
I'm sorry steve321 but your enamorment with Sonrette based upon his physical characteristics and judgment of Fama because he isn't inspiring and does not seem to be in good shape is irrational as you note. It is actually beyond irrational and is dangerous to your financial future.

Let me ask you this. Do you dismiss the brilliance and the writings of Stephen Hawking because he was wheelchair bound and had to have a computer generated voice speak for him? Or do you recognize that he was one of the most brilliant minds in modern history?

Your emotion is your enemy when it comes to investing and is absolutely clouding your judgement here. I would suggest that you not make any investment decisions until you work yourself out of this state.

Wishing you the best.

Cheers

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Re: This man can predict when bubbles burst: time to time the market?

Post by steve321 » Wed Nov 07, 2018 8:12 am

Silk McCue wrote:
Wed Nov 07, 2018 7:56 am


Let me ask you this. Do you dismiss the brilliance and the writings of Stephen Hawking because he was wheelchair bound and had to have a computer generated voice speak for him? Or do you recognize that he was one of the most brilliant minds in modern history?
Yes you are right I did not think of that. I actually know well someone who did a PhD under Hawking and who is now a Professor in London, he even shared the red carpet with Hawking when a film came out on his life. I am no expert but indeed I am told he was a great mind.
It's just that first thing this morning I came across this video of Sornette in the Alps, so I thought this guy is so cool and tough:
https://www.youtube.com/watch?v=zODr97dIMes
I guess he is a very luck guy, he seems to have it all: brains, fitness, money etc. But indeed that does not make him necessarily right on finance.
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Re: This man can predict when bubbles burst: time to time the market?

Post by Valuethinker » Wed Nov 07, 2018 8:26 am

steve321 wrote:
Wed Nov 07, 2018 5:48 am

I am at present confused about which is better; that is why I am posting this thread. As for my 'valuable time' to which you refer to in another post, I have plenty of it as I am unfortunately stuck at home due to illness, so I benefit from the discussions on this board.
Steve

I should have been clearer. I meant "valuable time" in terms of monetary return. If you have nailed an investment "system" you want to be applying that, rather than seeing what we think about it? Market anomalies don't tend to last forever - the profitable gap will close.

You can take it as read that 90%+ of posters here don't believe in gurus. If we do, it's more like David Swensen and Warren Buffett, both of whom tell individual investors to use index funds.

The portfolio I was outlining is actually one suggested by Zvi Bodie -- LEAPS (S&P 500 options) + TIPS bonds. It's possible to adapt that for a UK investor.

Note that there's been quite a debate about that, too.

Taking straight orthodoxy here, if you are worried about where the equity markets are going, you hold more bonds. But that should be part of a long term assessment of personal risk tolerance, not an attempt at market timing.

You can use simple historical averages of returns & volatility to work out what the expected risk/ return of that portfolio would be.

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Re: This man can predict when bubbles burst: time to time the market?

Post by wolf359 » Wed Nov 07, 2018 9:10 am

steve321 wrote:
Wed Nov 07, 2018 2:38 am
siamond wrote:
Tue Nov 06, 2018 7:45 pm
Amusingly enough, the researcher (Didier Sornette) has a rather unfortunate last name. "Sornette" in French basically means (in a light-mannered way) silly bullshit. Google Translate says it translates as 'fiddlestick', which taught me a cool new word in English... :happy
There have been several remarks on the translation of the word sornette. To me, what seems 'silly bullshit' (to quote you) in the context of this thread are the remarks themselves.
You seem to know French, so if you know France too you may check the CV of the guy and realize that he was educated at Ecole Normale Superieure (rue Ulm) which my daughter tells me is the top university in France and one of the best in Europe. He also studied physical sciences, not economics, so he has rigor and no bs. So the guy is certainly very very smart, and silly remarks about his name certainly do not confute his theories.
I think that the problem is that the markets are neither rational nor scientific. There are many very smart people who are trying to outsmart the market. Some of them are absolutely right. The problem is that it is impossible to know in advance who those outperformers are.

In 1956, there was 26-year-old who had just moved back to Omaha, Nebraska. The Wall Street firm he had worked for had just closed. He had a net worth of $174,000 (about $1.57 million today.) He had declared himself early retired, moved back to his home town, bought a house, and settled in with his wife and two children. For extra money, he wanted to create partnerships with his neighbors to manage their money.

Would you have invested your money with Warren Buffet?

Sir Isaac Newton was one of the most influential scientific minds of all time. He was said "to distinctly advance every branch of mathematics then studied." He laid the foundations of classical mechanics, advanced optics, helped establish the field of calculus, built the first practical telescope, mathematically proved the Heliocentric Theory, and formulated the laws of motion and laws of gravity that dominated physics until Einstein. He also applied his keen intellect, vast knowledge and insight to the field of finance and investing. By 1720, he had been Master of the Royal Mint for 20 years.

Would you have joined him in investing in the South Seas Company?

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Re: This man can predict when bubbles burst: time to time the market?

Post by HomerJ » Wed Nov 07, 2018 9:41 am

steve321 wrote:
Wed Nov 07, 2018 2:54 am
So I'd rather go to the real thing - the Scientist - than to those who try to imitate him with dubious results.
So look at "the Scientist" past predictions. Ignoring him in 2002 made you more money than following him.
The J stands for Jay

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Re: This man can predict when bubbles burst: time to time the market?

Post by TN_Boy » Wed Nov 07, 2018 9:43 am

steve321 wrote:
Wed Nov 07, 2018 5:48 am
Stuff deleted ...

I am very familiar with Taleb's advice; US treasuries are not suitable for non US investors due to currency risks; gilts are suitable for Uk investors, even though they may not be as safe as treasuries.
However, whereas Taleb manages risk through antifragility because he thinks black swans cannot be anticipated; Sornette thinks instead that we can actually predict crashes. Their diametrically opposite approach is shown here:
https://www.youtube.com/watch?v=vuvbghZuM8U
I am at present confused about which is better; that is why I am posting this thread. As for my 'valuable time' to which you refer to in another post, I have plenty of it as I am unfortunately stuck at home due to illness, so I benefit from the discussions on this board.
I confess I have not taken the time yet to view the video. But I wanted to step up a level and make an observation. An ability to accurately predict crashes -- and when they occur -- is literally predicting the future. Like something of a science fiction movie.

Now think about this for a moment. If a researcher -- even a really smart one! -- told you who was going to be elected US president in 2020, would you say "wow, it's cool somebody can know that two years in advance." Or would you think "The world is very complex. This sort of thing cannot be predicted with high confidence." Then consider the massive complexity of the financial system, which unlike say planetary movements, is not totally controlled by well understand physical laws.

So ponder the likelihood that the good professor can actually foretell the future. You would not believe, I hope, anyone making specific predictions about other events (X will happen in July, 2019), why would you believe this person?

I also note that you did not respond to Homerj's post about an early 2000s prediction the man made. Guru's make predictions all the time. A few of them are correct. But the incorrect ones tend to be forgotten.

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Re: This man can predict when bubbles burst: time to time the market?

Post by TheAccountant » Wed Nov 07, 2018 9:46 am

Who cares. Bogleheads and market timing are two completely different ends of the investment spectrum and a true BH accumulates wealth no matter what the market is doing because they don’t panic at every little blip and have a reasonable AA selected.

Sick of these threads.

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Re: This man can predict when bubbles burst: time to time the market?

Post by chisey » Wed Nov 07, 2018 9:55 am

Steve, I would just caution you that brilliant people can be overconfident in their ability to understand things. Sornette sounds like the real deal in terms of intelligence and credentials and I have no intention of taking anything away from him on that.

But predictions of market mania are a more complex problem than training and studies in any field can prepare someone for. Math doesn't capture it; science doesn't, economics doesn't, psychology doesn't. It's all of that and more, interacting in unpredictable ways. Sornette may have a better chance than anyone on the planet to get it right consistently, but that still doesn't mean it's likely that he will.

As others have said, your anxiety over investing should be dealt with by playing defense with your allocation, not with market timing. I suggest a healthy chunk of bonds, and on the risky side, equities that don't historically move in lockstep. There's no way to eliminate risk but there are ways to keep the US stock market from taking you down all by itself.

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Re: This man can predict when bubbles burst: time to time the market?

Post by steve321 » Wed Nov 07, 2018 9:59 am

TheAccountant wrote:
Wed Nov 07, 2018 9:46 am
Sick of these threads.
Easy remedy to your sickness: don't read them. And leave them to those who are interested in the subject and aren't made sick by it.
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde

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Re: This man can predict when bubbles burst: time to time the market?

Post by tadamsmar » Wed Nov 07, 2018 10:04 am

steve321 wrote:
Tue Nov 06, 2018 11:55 am
Contrary to Fama's postulate that bubbles do not exist because of EMH, Didier Sornette shows that they do, and he apparently can predict when they burst (in this video he says he predicted the time the stock market crashed in China):
https://www.ted.com/talks/didier_sornet ... anguage=en

Unlike many people who appear in the media with this kind of claims and who are clearly frauds, Sornette is a Professor at ETH in Zurich, which is one of the top universities in Europe (at least I hope so as I am spending a fortune on my daughter's education at ETH, though not under Sornette) and is respected by people like NN Taleb.
So why not time the market based on his predictions? Isn't the Bogleheads philosophy and belief in EMH, just like medieval philosophy, superseded by reason and scientific inquiry, as shown in Sornette's work?
Medieval is way too modern for the Boglehead philosophy, it has in origins in Logic which dates back to 600 BC.

Sornette has a convincing case, then it will convince investors and market prices will adjust. After adjustment, bubbles will either cease or at least they will cease to be predictable.

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Re: This man can predict when bubbles burst: time to time the market?

Post by balbrec2 » Wed Nov 07, 2018 10:18 am

oldcomputerguy wrote:
Tue Nov 06, 2018 11:57 am
Feel free to do so. Come back in ten or twenty years ears and let us know how you did.
+1
I'm all for it, Steve. Good luck to you!
I however will stick to a reasonable AA, then I will
Review
Rebalance
Repeat
If it ain't broke, don't fix it!

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Re: This man can predict when bubbles burst: time to time the market?

Post by German Expat » Wed Nov 07, 2018 10:24 am

It seems like you are a bit infatuated with one researcher based on your daughter studying at ETH and not sure what good skiing skills have to do with bubble prediction. If there is a correlation maybe we should ask Lindsay Vonn or Ingemar Stenmark :happy . Economics is a lot more messy then physics where you can have real experiments. Making predictions about the future are extremely hard because you have behavioral issues in the mix and the data sets are quite small.

Also the bankruptcy of LTCM debunked even nobel price winning economists can run a better hedge fund :D .

If your daughter is interested in economics the most well known and highest ranked researcher in Zurich is at the University of Zurich (Ernst Fehr) and he is a behavioral economist.

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Re: This man can predict when bubbles burst: time to time the market?

Post by steve321 » Wed Nov 07, 2018 10:36 am

German Expat wrote:
Wed Nov 07, 2018 10:24 am
It seems like you are a bit infatuated with one researcher based on your daughter studying at ETH
Yes it's costing me a fortune, and she could have studied at Ecole Normale Superieure for free, in fact they would have paid her a scholarship. But her boyfriend is in Zurich. :oops:
Also the bankruptcy of LTCM debunked even nobel price winning economists can run a better hedge fund :D .
Taleb explains the bankruptcy of LTCM in terms of the ludic fallacy and because they
used the methods and risk expertise of two
"Nobel economists," who were called "geniuses" but were in fact using
phony, bell curve-style mathematics while managing to convince themselves
that it was great science and thus turning the entire financial establishment
into suckers
But Taleb highly respects Sornette method, even though their approaches are different.
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde

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Re: This man can predict when bubbles burst: time to time the market?

Post by tadamsmar » Wed Nov 07, 2018 10:38 am

willthrill81 wrote:
Tue Nov 06, 2018 12:22 pm
Would you provide the details on Sornette's methods?
Short answer: bubbles = faster than exponential growth which ends with accelerating price volatility.
We use the Log-Periodic Power Law Singularity (LPPLS) model to hunt for the distinct fingerprint of
Financial Bubbles. Basic assumptions of the model are:
1. During the growth phase of a positive (negative) bubble, the price rises (falls) faster than
exponentially. Therefore the logarithm of the price rises faster than linearly.
2. There are accelerating log-periodic oscillations around the super-exponential price evolution that
symbolize increases in volatility towards the end of the bubble.
3. At the end of the bubble, the so-called critical time �", a finite time singularity occurs after which
the bubble bursts.
Together, these effects encompass irrational imitation and herding phenomena amongst market
participants that lead to blow-up and instability of asset prices.
https://www.ethz.ch/content/dam/ethz/sp ... r_2018.pdf

This theory has been around since 1995. Greenspan probably had the best minds at the Fed examine it in the late 90s when he was interested in predicting bubbles. Greenspan was soon joking about how his team successfully predicted 11 of the past 5 bubbles.
Last edited by tadamsmar on Wed Nov 07, 2018 10:45 am, edited 1 time in total.

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Re: This man can predict when bubbles burst: time to time the market?

Post by willthrill81 » Wed Nov 07, 2018 10:44 am

tadamsmar wrote:
Wed Nov 07, 2018 10:38 am
willthrill81 wrote:
Tue Nov 06, 2018 12:22 pm
Would you provide the details on Sornette's methods?
Short answer: bubbles = faster than exponential growth.
We use the Log-Periodic Power Law Singularity (LPPLS) model to hunt for the distinct fingerprint of
Financial Bubbles. Basic assumptions of the model are:
1. During the growth phase of a positive (negative) bubble, the price rises (falls) faster than
exponentially. Therefore the logarithm of the price rises faster than linearly.
2. There are accelerating log-periodic oscillations around the super-exponential price evolution that
symbolize increases in volatility towards the end of the bubble.
3. At the end of the bubble, the so-called critical time �", a finite time singularity occurs after which
the bubble bursts.
Together, these effects encompass irrational imitation and herding phenomena amongst market
participants that lead to blow-up and instability of asset prices.
https://www.ethz.ch/content/dam/ethz/sp ... r_2018.pdf
Thanks. It's an interesting idea. I wonder how it's held up in the past. Like most backtested theories, probably pretty well.
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Re: This man can predict when bubbles burst: time to time the market?

Post by TN_Boy » Wed Nov 07, 2018 10:56 am

steve321 wrote:
Wed Nov 07, 2018 10:36 am
German Expat wrote:
Wed Nov 07, 2018 10:24 am
It seems like you are a bit infatuated with one researcher based on your daughter studying at ETH
Yes it's costing me a fortune, and she could have studied at Ecole Normale Superieure for free, in fact they would have paid her a scholarship. But her boyfriend is in Zurich. :oops:
Also the bankruptcy of LTCM debunked even nobel price winning economists can run a better hedge fund :D .
Taleb explains the bankruptcy of LTCM in terms of the ludic fallacy and because they
used the methods and risk expertise of two
"Nobel economists," who were called "geniuses" but were in fact using
phony, bell curve-style mathematics while managing to convince themselves
that it was great science and thus turning the entire financial establishment
into suckers
But Taleb highly respects Sornette method, even though their approaches are different.
One warning -- economists, non-economists, political scientists ..... all these people are extremely good at telling you why something in the past happened (they may or may not be correct but they can come up with great sounding explanations). This does not mean they can accurately tell you why something is going to happen, and more importantly, when.

Incidentally, as I recall LTCM's view of the market pricing was actually correct -- at some point, not extremely long after they blew up -- some of the mispricing they had serious dollars on reverted back to what they expected.

Sadly, because of their leverage, their inability to actually know when the mispricing would go away killed them. I also recall they put some money in investments where they had no special expertise. Someone who has read up on this interesting chapter in financial history more recently than I can correct anything I have wrong.

But the point doesn't change. When people say they can accurately predict what will happen in the future, and when, you should run away from them. A lot of people knew the US markets were very high in the 90s. The trick was knowing when things would go bad, and when they would get better.

I notice you continue to avoid responding to the post about Sornette's earlier prediction. Does that not make you think?

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Re: This man can predict when bubbles burst: time to time the market?

Post by steve321 » Wed Nov 07, 2018 11:06 am

TN_Boy wrote:
Wed Nov 07, 2018 10:56 am
steve321 wrote:
Wed Nov 07, 2018 10:36 am
German Expat wrote:
Wed Nov 07, 2018 10:24 am
It seems like you are a bit infatuated with one researcher based on your daughter studying at ETH
Yes it's costing me a fortune, and she could have studied at Ecole Normale Superieure for free, in fact they would have paid her a scholarship. But her boyfriend is in Zurich. :oops:
Also the bankruptcy of LTCM debunked even nobel price winning economists can run a better hedge fund :D .
Taleb explains the bankruptcy of LTCM in terms of the ludic fallacy and because they
used the methods and risk expertise of two
"Nobel economists," who were called "geniuses" but were in fact using
phony, bell curve-style mathematics while managing to convince themselves
that it was great science and thus turning the entire financial establishment
into suckers
But Taleb highly respects Sornette method, even though their approaches are different.
One warning -- economists, non-economists, political scientists ..... all these people are extremely good at telling you why something in the past happened (they may or may not be correct but they can come up with great sounding explanations). This does not mean they can accurately tell you why something is going to happen, and more importantly, when.

Incidentally, as I recall LTCM's view of the market pricing was actually correct -- at some point, not extremely long after they blew up -- some of the mispricing they had serious dollars on reverted back to what they expected.

Sadly, because of their leverage, their inability to actually know when the mispricing would go away killed them. I also recall they put some money in investments where they had no special expertise. Someone who has read up on this interesting chapter in financial history more recently than I can correct anything I have wrong.

But the point doesn't change. When people say they can accurately predict what will happen in the future, and when, you should run away from them. A lot of people knew the US markets were very high in the 90s. The trick was knowing when things would go bad, and when they would get better.

I notice you continue to avoid responding to the post about Sornette's earlier prediction. Does that not make you think?
yes you are right; he did get it right about China, but like it's been noted above, he also made some wrong ones. I guess his results should improve as the work progresses; he got it wrong on the US nearly 20 yrs ago so he should have improved his research method by now. But yes it's probably a good idea to have some skepticism.
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Re: This man can predict when bubbles burst: time to time the market?

Post by EyeYield » Wed Nov 07, 2018 11:08 am

steve321 wrote:
Tue Nov 06, 2018 11:55 am
Contrary to Fama's postulate that bubbles do not exist because of EMH, Didier Sornette shows that they do, and he apparently can predict when they burst (in this video he says he predicted the time the stock market crashed in China):
https://www.ted.com/talks/didier_sornet ... anguage=en

Unlike many people who appear in the media with this kind of claims and who are clearly frauds, Sornette is a Professor at ETH in Zurich, which is one of the top universities in Europe (at least I hope so as I am spending a fortune on my daughter's education at ETH, though not under Sornette) and is respected by people like NN Taleb.
So why not time the market based on his predictions? Isn't the Bogleheads philosophy and belief in EMH, just like medieval philosophy, superseded by reason and scientific inquiry, as shown in Sornette's work?
An interesting fellow. I’ve searched and searched for pertinent information about him, but could find nothing but theoretical hypothesis, such as this:

https://seekingalpha.com/article/407598 ... ade-market
Predicting Bubbles in Advance
The Financial Crisis Observatory (FCO) was founded in response to the crisis of 2008 and uses "a scientific platform to test the hypothesis that... excesses in the market have a degree of predictability that can be diagnosed in advance," Sornette said.
Here's his explanation of "the engine powering the Financial Crisis Observatory":
"We are using a concept that looks at the financial markets as fundamentally unstable, like Hyman Minsky famously said in his financial instability hypothesis... and we are essentially pushing this idea further by developing an operational implementation looking at the market as having trenchant phases - pockets of predictability - where it may accelerate for a while and then change its regime... We have developed a methodology called the log-periodic power law singularity method or formula that we calibrate on different time windows at multiple scales... to indeed identify these times when there is a non-sustainable market regime or deviation from efficient markets... that is the core of what is the engine powering the Financial Crisis Observatory."
How It Works
There are essentially two dimensions to the supercomputer's analysis, Sornette stated. One dimension is technical, performing a daily scan on 25,000 assets for bubble-like characteristics (faster than exponential price behavior up or down), and the other is fundamental, simultaneously ranking them according to their valuation (high or low).”
Maybe you could help me out and point me to anywhere that he mentions he ever invested a dime of his own money. That would be pertinent.

Science and your brain is one thing, but your money and your brain is quite another.

I would be far more interested in how he behaves than in how he thinks - when in comes to money.

Thanks for any links.
"The stock market is a giant distraction from the business of investing." - Jack Bogle

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Re: This man can predict when bubbles burst: time to time the market?

Post by tadamsmar » Wed Nov 07, 2018 11:15 am

willthrill81 wrote:
Wed Nov 07, 2018 10:44 am

Thanks. It's an interesting idea. I wonder how it's held up in the past. Like most backtested theories, probably pretty well.
The guy has this experiment going where he "releases" encrypted short-term predictions and reveals them 6 months later. According to the TED talk.

The theory should allow short-term prediction of bubble crashes if it is true. Bubble formation is a bit longer term I think.
Last edited by tadamsmar on Wed Nov 07, 2018 11:20 am, edited 1 time in total.

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Re: This man can predict when bubbles burst: time to time the market?

Post by garlandwhizzer » Wed Nov 07, 2018 11:15 am

I have a strong fundamental belief that no one, no formula, and no method can reliably and consistently predict the market's future: when bubbles will actually form or burst, or any other major market moves. There are too many variables in behavioral herd psychology/investor sentiment which interplays with macroeconomic factors like FED policy, interest rates, inflation, systemic economic risk, stage of economic cycle, unexpected global political/terrorist events, etc. None of these factors are stable. Instead they are dynamically changing and reacting to each other constantly often in ways that are not expected. IMO the ability to reliably and consistently forecast market action is the short/intermediate term is quite limited. Long term I believe stocks will outperform bonds with higher volatility but that's about as far as predictions go for me. I would like to ask those who claim to have such a method to discern the future one question. "If you know in advance where the market is going, why tell us the secret? Why not just use it, leverage up your bet, and make yourself extremely rich quietly?"

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Re: This man can predict when bubbles burst: time to time the market?

Post by Mr.BB » Wed Nov 07, 2018 11:36 am

tadamsmar wrote:
Wed Nov 07, 2018 11:15 am
willthrill81 wrote:
Wed Nov 07, 2018 10:44 am

Thanks. It's an interesting idea. I wonder how it's held up in the past. Like most backtested theories, probably pretty well.
The guy has this experiment going where he "releases" encrypted short-term predictions and reveals them 6 months later. According to the TED talk.

The theory should allow short-term prediction of bubble crashes if it is true. Bubble formation is a bit longer term I think.
Why encrypt anything? Just have the specific predication written down, certified, sealed and put in a safety deposit box by a neutral party and then just reveal it at the proper time. Don't need to encrypt anything; a bunch of BS.
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Re: This man can predict when bubbles burst: time to time the market?

Post by tadamsmar » Wed Nov 07, 2018 11:42 am

EyeYield wrote:
Wed Nov 07, 2018 11:08 am

Maybe you could help me out and point me to anywhere that he mentions he ever invested a dime of his own money. That would be pertinent.

Science and your brain is one thing, but your money and your brain is quite another.

I would be far more interested in how he behaves than in how he thinks - when in comes to money.

Thanks for any links.
First, making money based on a theory is not scientific proof of the theory.

Second, if you listened to the Ted talk, you will see he is doing something that could lead to a scientific hypothesis test of the theory that he can predict when "bubbles" (as he formally defines them) crash.
Last edited by tadamsmar on Wed Nov 07, 2018 11:43 am, edited 1 time in total.

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Re: This man can predict when bubbles burst: time to time the market?

Post by steve321 » Wed Nov 07, 2018 11:43 am

Mr.BB wrote:
Wed Nov 07, 2018 11:36 am
tadamsmar wrote:
Wed Nov 07, 2018 11:15 am
willthrill81 wrote:
Wed Nov 07, 2018 10:44 am

Thanks. It's an interesting idea. I wonder how it's held up in the past. Like most backtested theories, probably pretty well.
The guy has this experiment going where he "releases" encrypted short-term predictions and reveals them 6 months later. According to the TED talk.

The theory should allow short-term prediction of bubble crashes if it is true. Bubble formation is a bit longer term I think.
Why encrypt anything? Just have the specific predication written down, certified, sealed and put in a safety deposit box by a neutral party and then just reveal it at the proper time. Don't need to encrypt anything; a bunch of BS.
Hi BB, there was someone in the art business also called BB (Bernard Berenson), lucky guy, he made piles of money without having to bother with the stock market. Anyways, what's the difference between your method and encrypting the predictions? Don't they achieve the same thing? Why is encrypting BS?
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Re: This man can predict when bubbles burst: time to time the market?

Post by HomerJ » Wed Nov 07, 2018 11:45 am

tadamsmar wrote:
Wed Nov 07, 2018 11:15 am
willthrill81 wrote:
Wed Nov 07, 2018 10:44 am

Thanks. It's an interesting idea. I wonder how it's held up in the past. Like most backtested theories, probably pretty well.
The guy has this experiment going where he "releases" encrypted short-term predictions and reveals them 6 months later. According to the TED talk.

The theory should allow short-term prediction of bubble crashes if it is true. Bubble formation is a bit longer term I think.
So how many has he released so far?

Back-tested theories mean nothing to me. They are ALWAYS correct. They don't get released unless they back-test well.

Someone saying "This system, looking backwards, would have accurately predicted the past 3 bubbles" means absolutely nothing.

I always look at actual past predictions, and see how those do. So if he's releasing predictions, how have they done? Can we be sure they were actually written 6 months before they were released?
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Re: This man can predict when bubbles burst: time to time the market?

Post by tadamsmar » Wed Nov 07, 2018 11:48 am

Mr.BB wrote:
Wed Nov 07, 2018 11:36 am
tadamsmar wrote:
Wed Nov 07, 2018 11:15 am
willthrill81 wrote:
Wed Nov 07, 2018 10:44 am

Thanks. It's an interesting idea. I wonder how it's held up in the past. Like most backtested theories, probably pretty well.
The guy has this experiment going where he "releases" encrypted short-term predictions and reveals them 6 months later. According to the TED talk.

The theory should allow short-term prediction of bubble crashes if it is true. Bubble formation is a bit longer term I think.
Why encrypt anything? Just have the specific predication written down, certified, sealed and put in a safety deposit box by a neutral party and then just reveal it at the proper time. Don't need to encrypt anything; a bunch of BS.
One would encrypt something because it is cheaper and equivalent to the safety deposit box thing. Also, it's probably more transparent in that it is harder to claim that he faked it

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Re: This man can predict when bubbles burst: time to time the market?

Post by steve321 » Wed Nov 07, 2018 11:50 am

EyeYield wrote:
Wed Nov 07, 2018 11:08 am

Maybe you could help me out and point me to anywhere that he mentions he ever invested a dime of his own money. That would be pertinent.

he says it here,
https://www.youtube.com/watch?v=7jncWyx3I94
and adds that banks are using his forecasts, but does not go into details.
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Re: This man can predict when bubbles burst: time to time the market?

Post by aspirit » Wed Nov 07, 2018 11:56 am

willthrill81 wrote:
Tue Nov 06, 2018 12:05 pm
onourway wrote:
Tue Nov 06, 2018 11:59 am
Many people get famous for predicting a major market event. Once.
Bingo.

This reminds me of Alan Greenspan's famous 'irrational exuberance' talk back in 1996. He was sort of right, but his timeline was four years off, and even during the financial crisis of 2008-2009, the market never returned to 1996's levels.
I disagree. In 96 the sp500's top was about 600/614. All it did was rise from there, ...yet In 2009 during its downslide (07-09) due to housing failures & banking failures it crashed and bottomed to about 666. just sayin.. :?

I certainly agree with onourways comment of becoming famous w/1 event's predictions materializing. :happy
Last edited by aspirit on Wed Nov 07, 2018 12:01 pm, edited 1 time in total.
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Re: This man can predict when bubbles burst: time to time the market?

Post by balbrec2 » Wed Nov 07, 2018 11:57 am

garlandwhizzer wrote:
Wed Nov 07, 2018 11:15 am
I have a strong fundamental belief that no one, no formula, and no method can reliably and consistently predict the market's future: when bubbles will actually form or burst, or any other major market moves. There are too many variables in behavioral herd psychology/investor sentiment which interplays with macroeconomic factors like FED policy, interest rates, inflation, systemic economic risk, stage of economic cycle, unexpected global political/terrorist events, etc. None of these factors are stable. Instead they are dynamically changing and reacting to each other constantly often in ways that are not expected. IMO the ability to reliably and consistently forecast market action is the short/intermediate term is quite limited. Long term I believe stocks will outperform bonds with higher volatility but that's about as far as predictions go for me. I would like to ask those who claim to have such a method to discern the future one question. "If you know in advance where the market is going, why tell us the secret? Why not just use it, leverage up your bet, and make yourself extremely rich quietly?"

Garland Whizzer
If I had some magic formula or power or whatever you want to call it, to predict markets,
I wouldn't be telling anyone about it. I would just quietly make a killing and be done with it.
Last edited by balbrec2 on Wed Nov 07, 2018 12:32 pm, edited 1 time in total.

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Re: This man can predict when bubbles burst: time to time the market?

Post by edgeagg » Wed Nov 07, 2018 11:59 am

tadamsmar wrote:
Wed Nov 07, 2018 11:48 am
Mr.BB wrote:
Wed Nov 07, 2018 11:36 am
tadamsmar wrote:
Wed Nov 07, 2018 11:15 am
willthrill81 wrote:
Wed Nov 07, 2018 10:44 am

Thanks. It's an interesting idea. I wonder how it's held up in the past. Like most backtested theories, probably pretty well.
The guy has this experiment going where he "releases" encrypted short-term predictions and reveals them 6 months later. According to the TED talk.

The theory should allow short-term prediction of bubble crashes if it is true. Bubble formation is a bit longer term I think.
Why encrypt anything? Just have the specific predication written down, certified, sealed and put in a safety deposit box by a neutral party and then just reveal it at the proper time. Don't need to encrypt anything; a bunch of BS.
One would encrypt something because it is cheaper and equivalent to the safety deposit box thing. Also, it's probably more transparent in that it is harder to claim that he faked it
To be clear, just encryption isn't enough. You need a trusted timestamp and encryption.

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tadamsmar
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Re: This man can predict when bubbles burst: time to time the market?

Post by tadamsmar » Wed Nov 07, 2018 12:32 pm

One probably fatal flaw is that this guy is just an elf.

Assume the stampede can be predicted by market movements as Mr. Elf claims.

That's just a social psychology theory based on not using all the available data.

Some other social psychology big data machine learning algorithm could eat Mr. Elf's lunch by making an earlier prediction based on all the available data about the potential stampeders.

What do elves eat for lunch anyway?

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Re: This man can predict when bubbles burst: time to time the market?

Post by Valuethinker » Wed Nov 07, 2018 12:39 pm

aspirit wrote:
Wed Nov 07, 2018 11:56 am
willthrill81 wrote:
Tue Nov 06, 2018 12:05 pm
onourway wrote:
Tue Nov 06, 2018 11:59 am
Many people get famous for predicting a major market event. Once.
Bingo.

This reminds me of Alan Greenspan's famous 'irrational exuberance' talk back in 1996. He was sort of right, but his timeline was four years off, and even during the financial crisis of 2008-2009, the market never returned to 1996's levels.
I disagree. In 96 the sp500's top was about 600/614. All it did was rise from there, ...yet In 2009 during its downslide (07-09) due to housing failures & banking failures it crashed and bottomed to about 666. just sayin.. :?

I certainly agree with onourways comment of becoming famous w/1 event's predictions materializing. :happy
Over long enough periods Total Return matters.

Even given the very low yield of the S&P 500 in the late 1990s, there's 14 years x 2% x a bit of compounding so on a total return basis the S&P was quite a bit higher.

Balancing against that one would have had inflation, so the bottoms would be closer on a real returns basis ;-).

This is why the Japan numbers are so devastating because the Nikkei yielded less than 1% at the peak.

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JoMoney
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Re: This man can predict when bubbles burst: time to time the market?

Post by JoMoney » Wed Nov 07, 2018 12:49 pm

Valuethinker wrote:
Wed Nov 07, 2018 12:39 pm
...Even given the very low yield of the S&P 500 in the late 1990s, there's 14 years x 2% x a bit of compounding so on a total return basis the S&P was quite a bit higher...
The current yield on cost is over 4% of late 1990's S&P prices... book value and earnings have almost tripled... the big change with the S&P is the lower price multiples, which counter-intuitively would be more justifiable now in this lower interest rate environment than they were with the bond yields available back then.
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Re: This man can predict when bubbles burst: time to time the market?

Post by inbox788 » Wed Nov 07, 2018 1:19 pm

greg24 wrote:
Tue Nov 06, 2018 2:03 pm
Should the clickbait title be changed to "This man THINKS he can predict..."?
This man DID predict the 1987 stock crash. He's predicting a whole different crash. You'd better sell all your bonds before the end of the year!
Hedge fund boss who predicted the 1987 stock crash warns of a selloff in bonds
Published: Mar 2, 2018 11:40 a.m. ET
Paul Tudor Jones expects the 10-year yield to hit 3.75% by the end of 2018
https://www.marketwatch.com/story/hedge ... 2018-03-01

What will we do when these men die? Just go back to a 3 fund portfolio?

FWIW, I like the guy and he knows his math and system analysis. I don't think he's overclaiming as much as people are overreading his claims. He's still running his experiment (what's his batting average so far?), and I wouldn't be surprised if someday, we hear about the Sornette Overbought Indicator that's more accurate than RSI.

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Re: This man can predict when bubbles burst: time to time the market?

Post by willthrill81 » Wed Nov 07, 2018 1:22 pm

aspirit wrote:
Wed Nov 07, 2018 11:56 am
willthrill81 wrote:
Tue Nov 06, 2018 12:05 pm
onourway wrote:
Tue Nov 06, 2018 11:59 am
Many people get famous for predicting a major market event. Once.
Bingo.

This reminds me of Alan Greenspan's famous 'irrational exuberance' talk back in 1996. He was sort of right, but his timeline was four years off, and even during the financial crisis of 2008-2009, the market never returned to 1996's levels.
I disagree. In 96 the sp500's top was about 600/614. All it did was rise from there, ...yet In 2009 during its downslide (07-09) due to housing failures & banking failures it crashed and bottomed to about 666. just sayin.. :?
So you're disagreeing with what I said even though you agree that what I said is accurate? :?:
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