Artemis Attack on the Bogleheads

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betablocker
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Artemis Attack on the Bogleheads

Post by betablocker »

Men Faber had Chris Cole from Artemis on his podcast talking about long volatility strategies. Interesting podcast and i’m Going to read his paper on the Alchemy of Risk. Towards the end he attacks passive investing and the Bogleheads specifically. Worth a listen. https://itunes.apple.com/us/podcast/the ... 507c8af234
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nedsaid
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Re: Artemis Attack on the Bogleheads

Post by nedsaid »

Well, it is pretty safe to attack anonymous avatars on the internet. My little Charlie Brown logo won't be called to appear on CNBC to rebut such attacks. The Forum does not have an official spokesman or a way to respond other than by individual posts. Jack Bogle might come to our defense with an article or in an interview.
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Re: Artemis Attack on the Bogleheads

Post by Whakamole »

Have I supposed to have heard of either Chris Cole or Artemis?
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Re: Artemis Attack on the Bogleheads

Post by TVD »

Whakamole wrote: Wed Dec 19, 2018 4:36 pm Have I supposed to have heard of either Chris Cole or Artemis?
Chris Cole is probably one of the smartest guys you will ever meet. He previously described the VIX armageddon back in Feb 18 as the appetizer.

Thanks op. Try to listen to everything Chris Cole has to say.

And, in case you are wondering, I love Bogleheads and this site!!!
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Re: Artemis Attack on the Bogleheads

Post by HEDGEFUNDIE »

So this is what he actually said:

“Passive investing is just a form of momentum trading, as a passive investor you are entirely dependent on flow”

Discuss.
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Re: Artemis Attack on the Bogleheads

Post by barnaclebob »

HEDGEFUNDIE wrote: Wed Dec 19, 2018 4:44 pm So this is what he actually said:

“Passive investing is just a form of momentum trading, as a passive investor you are entirely dependent on flow”

Discuss.
Anytime anyone says anything bad about passive index investing I respond with "Is there any data to show that another strategy will beat index investing on average?"
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Post by hdas »

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Last edited by hdas on Wed Jan 29, 2020 2:15 pm, edited 1 time in total.
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Rick Ferri
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Re: Artemis Attack on the Bogleheads

Post by Rick Ferri »

He exaggerates and overgeneralizes everything, and sounds like he is whining about why hedge fund managers like himself are underperforming:

Here is what I heard:

"Central Banks have put all active managers out of business."
"The more the market is dominated by passive investors the less opportunity for active investors."
"No active managers around to put prices back where they should be."
"Bogleheads adopted efficient markets when they don't understand what they're doing is making the markets dangerous."
"Will not be enough active managers to stop drunk passive fools like the Bogleheads from running out on the highway and getting run over."
"All advisers are telling their clients to get into a 60/40 portfolio because stocks and bonds are not correlated [they are wrong and stupid]."
"This is a perfect storm for the highly leveraged markets."
"I use machine learning because I know something about the rental car market that the Austin police told me." (I didn't get that one)

ALL Central Banks are killing active managers, All Bogleheads are drunkard passive fools, ALL advisers are dumb 60/40 allocators, blah, blah, blah...these are reason the markets are incredibly dangerous and why active managers can't outperform....really?

This is a bunch of nonsense.

BTW, all his talk about companies leveraging to buy back stock is widely known; his comments about a lot of BBB debt potentially being downgraded is widely known; there is nothing new here.

So, there you go, Meb.

Rick Ferri
Last edited by Rick Ferri on Wed Dec 19, 2018 7:16 pm, edited 3 times in total.
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Re: Artemis Attack on the Bogleheads

Post by nisiprius »

HEDGEFUNDIE wrote: Wed Dec 19, 2018 4:44 pm So this is what he actually said:

“Passive investing is just a form of momentum trading, as a passive investor you are entirely dependent on flow”

Discuss.
Wait. Is momentum supposed to be a Good Thing or a Bad Thing? I can never remember.
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Re: Artemis Attack on the Bogleheads

Post by 3funder »

HEDGEFUNDIE wrote: Wed Dec 19, 2018 4:44 pm So this is what he actually said:

“Passive investing is just a form of momentum trading, as a passive investor you are entirely dependent on flow”

Discuss.
Oh yes--when I lay my head down at night, I thank the cosmos for the opportunity to engage in momentum trading. What a dud.
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Re: Artemis Attack on the Bogleheads

Post by TVD »

HEDGEFUNDIE wrote: Wed Dec 19, 2018 4:44 pm So this is what he actually said:

“Passive investing is just a form of momentum trading, as a passive investor you are entirely dependent on flow”

Discuss.
Both passive investing and momentum trading are dependent on liquidity in the markets. That is all that you need to know.

I think many need to have an open mind on Chris Cole. Just look up at his data on performance with an allocated S&P/volatility portfolio. Also, he minted money in 2008 FWIW.
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Re: Artemis Attack on the Bogleheads

Post by oldcomputerguy »

Rick Ferri wrote: Wed Dec 19, 2018 5:32 pm "Will not be enough active managers to stop drunk passive fools like the Bogleheads from running out on the highway and getting run over."
So, do I read this right? Is he actually arrogant enough to claim that active managers are keeping passive managers from self-destruction?

Please. I don't need him to be my baby-sitter.

:annoyed
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Re: Artemis Attack on the Bogleheads

Post by DesertDiva »

betablocker wrote: Wed Dec 19, 2018 4:24 pm Men Faber had Chris Cole from Artemis on his podcast talking about long volatility strategies. Interesting podcast and i’m Going to read his paper on the Alchemy of Risk. Towards the end he attacks passive investing and the Bogleheads specifically. Worth a listen. https://itunes.apple.com/us/podcast/the ... 507c8af234
I'm resisting the urge to fall for the click-bait. 8-)
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Re: Artemis Attack on the Bogleheads

Post by PinotGris »

HEDGEFUNDIE wrote: Wed Dec 19, 2018 4:44 pm So this is what he actually said:

“Passive investing is just a form of momentum trading, as a passive investor you are entirely dependent on flow”

Discuss.
Is flow like in "flow yoga"? Sorry.
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Re: Artemis Attack on the Bogleheads

Post by Artsdoctor »

Why would a 38-year-old hedge fund manager who wears a watch that counts off the time he has left to live spend precious moments bad-mouthing Bogleheads?
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betablocker
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Re: Artemis Attack on the Bogleheads

Post by betablocker »

I don’t agree with his sentiments on passive or systematic investing but I do think his warnings are worth listening to. Bonds and stocks have been correlated in the past and we should pay attention to that. The vitriol towards Bogleheads is returned in spades though. We all side with our tribe.
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Re: Artemis Attack on the Bogleheads

Post by nedsaid »

Rick Ferri wrote: Wed Dec 19, 2018 5:32 pm He exaggerates and overgeneralizes everything, and sounds like he is whining about why hedge fund managers like himself are underperforming:

Here is what I heard:

"Central Banks have put all active managers out of business."

Nedsaid: I don't understand this. The Fed has been around since 1913. The mutual fund industry grew greatly from the 1950's on. I started hearing about the big hedge funds in the 1990's. What is it about Central Banking that is putting active managers out of business?

"The more the market is dominated by passive investors the less opportunity for active investors."

Nedsaid: Active managers did better when most stocks were owned by individuals rather than institutions, more naïve investors were out there to take advantage of. Active managers convinced these individuals that hiring a professional to pick their stocks was better than trying to pick stocks themselves. The expansion of the mutual fund industry and fewer individuals owning stock directly has made it harder to beat the market. The active managers are victims of their own success.

A bigger factor is the extensive use of powerful computer hardware and software which can sift through securities much faster than the day when analysts used to use hand-held calculators and trudge through company reports. The immense ability to perform calculations has been an extremely powerful tool for securities analysis and has been a huge factor in making markets more efficient.


"No active managers around to put prices back where they should be."

Nedsaid: It is true you need active managers for price discovery but probably only 20% of assets need to be actively managed to keep markets efficient. We are a long ways from that.

"Bogleheads adopted efficient markets when they don't understand what they're doing is making the markets dangerous."

Nedsaid: It's the idiots that do stuff like short the VIX that cause the markets to be dangerous. Bogleheads generally don't leverage or short, a minority might use an Alt fund that uses leverage and shorts but even then it would be a smaller part of their portfolio.

"Will not be enough active managers to stop drunk passive fools like the Bogleheads from running out on the highway and getting run over."

Nedsaid: Passive investors merely take the returns that business and the markets give them. Active investors try to beat the market by trading with each other and thus will receive market returns minus all of the costs. In aggregate, active investing is worse than a zero sum game because of all of the costs: management fees, trading costs, incorrect sell/buy decisions. These can run 2% a year. So active gets you market returns minus 2% a year. The best way for active to succeed is to attempt a lower cost approach to capturing the factors. It is many of the active managers that are roadkill. Look at how many retail mutual funds and hedge funds that go out of business every year.

"All advisers are telling they clients to get into a 60/40 portfolio because stocks and bonds are not correlated [they are wrong and stupid]."

Nedsaid: All advisors are not recommending 60/40 portfolios but most advise an asset allocation based on the need and ability to take risk.

"This is a perfect storm for the highly leveraged markets."

Nedsaid: This is the fault of big institutions and not investors in index funds. Passive investors usually don't leverage their investments, least of all the Bogleheads.

"I use machine learning because I know something about the rental car market that the Austin police told me." (I didn't get that one)

ALL Central Banks are killing active managers, All Bogleheads are drunkard passive fools, ALL advisers are dumb 60/40 allocators, blah, blah, blah...these are reason the markets are incredibly dangerous and why active managers can't outperform....really?

This is a bunch of nonsense.

Nedsaid: I didn't take the time to listen to the podcast but if Rick's quotes are accurate, and I have no reason to doubt him, this sounds like a drunken rant. One more comment is that active management is very profitable. An active fund can hire a sub-manager for 20 or 30 basis points a year. Vanguard does this. Maybe some managers actually do add value but the investors don't see it because the managers charge too much. The margins in this business are pretty high, active management is a great gig while it lasts.

BTW, all his talk about companies leveraging to buy back stock is widely known; his comments about a lot of BBB debt potentially being downgraded is widely known; there is nothing new here.

So, there you go, Meb.

Rick Ferri
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Re: Artemis Attack on the Bogleheads

Post by Whakamole »

betablocker wrote: Wed Dec 19, 2018 7:16 pm I don’t agree with his sentiments on passive or systematic investing but I do think his warnings are worth listening to.
Why? Because he made a good call in February? I'm not listening to Elaine Garzarelli because of the Black Monday call, or Peter Schiff, or anyone else who made a good call once. That's just luck.
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Re: Artemis Attack on the Bogleheads

Post by stlutz »

Whakamole wrote: Wed Dec 19, 2018 7:38 pm I'm not listening to Elaine Garzarelli because of the Black Monday call, or Peter Schiff, or anyone else who made a good call once. That's just luck.
I hadn't realized that Peter Schiff made a good call once.
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Re: Artemis Attack on the Bogleheads

Post by TVD »

Just finished listening to this podcast. Really important. Agree with most if not all.
To all the doubters out there, if this didn't make you concerned at least a little then, in my opinion, you do not understand the market structure. I don't fully understand everything that goes into the market structure but what little I do understand, this podcast gave me the willies. We are really in precarious times where only one/a few institutions/big playas need to liquidate their ES contracts and the markets will tank. Coupled with everything else, the next few years are going to be interesting.

And for the those that decry the short vix strategy, the boglehead/passive investment index fund strategy is one of the ultimate short vix strategies...I mean just look a the relation between S&P and the VIX.

An yes, he did predict XIV implosion....days before it happened on Macrovoices podcast. https://www.youtube.com/watch?v=uCJtcNmMmzM

Unfortunately, that was just the tip of the iceberg as his real predictions haven't happened...yet.
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Re: Artemis Attack on the Bogleheads

Post by JBTX »

Rick Ferri wrote: Wed Dec 19, 2018 5:32 pm He exaggerates and overgeneralizes everything, and sounds like he is whining about why hedge fund managers like himself are underperforming:

Here is what I heard:

"Central Banks have put all active managers out of business."
"The more the market is dominated by passive investors the less opportunity for active investors."
"No active managers around to put prices back where they should be."
"Bogleheads adopted efficient markets when they don't understand what they're doing is making the markets dangerous."
"Will not be enough active managers to stop drunk passive fools like the Bogleheads from running out on the highway and getting run over."
"All advisers are telling their clients to get into a 60/40 portfolio because stocks and bonds are not correlated [they are wrong and stupid]."
"This is a perfect storm for the highly leveraged markets."
"I use machine learning because I know something about the rental car market that the Austin police told me." (I didn't get that one)

ALL Central Banks are killing active managers, All Bogleheads are drunkard passive fools, ALL advisers are dumb 60/40 allocators, blah, blah, blah...these are reason the markets are incredibly dangerous and why active managers can't outperform....really?

This is a bunch of nonsense.

BTW, all his talk about companies leveraging to buy back stock is widely known; his comments about a lot of BBB debt potentially being downgraded is widely known; there is nothing new here.

So, there you go, Meb.

Rick Ferri
Thanks for the summary. What a.... Most of those points are complete nonsense. Saved me a wast of time reading.
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Re: Artemis Attack on the Bogleheads

Post by oaktechnical »

I haven't listened, but have read the summaries. A recent comment raised my curiosity. In regard to "We are really in precarious times where only one/a few institutions/big playas need to liquidate their ES contracts and the markets will tank.",.....why?...when?
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Re: Artemis Attack on the Bogleheads

Post by stlutz »

...where only one/a few institutions/big playas need to liquidate their ES contracts...
In case it's not clear, and "ES Contract" in an E-Mini Futures contract. Daily implied volume for the E-Mini is larger than the volume traded on the actual S&P 500 stocks. That's an interesting factoid; whether it's scary is another question entirely. Big E-Mini trades have triggered significant short-term market moves in the past.

The one thing I do know is that few people on this board are making leveraged bets on the S&P using futures contracts.
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Re: Artemis Attack on the Bogleheads

Post by nedsaid »

TVD wrote: Wed Dec 19, 2018 8:08 pm
And for the those that decry the short vix strategy, the boglehead/passive investment index fund strategy is one of the ultimate short vix strategies...I mean just look a the relation between S&P and the VIX.
Can't speak for anyone else here, but I have been a long only investor my entire investment career. Buying and holding an S&P 500 Index fund is a long only strategy, don't know how you can call a long strategy an ultimate short strategy. There is difference between investing and speculation.

I own stocks because I want to own businesses. I own REITs because I want a stake in Real Estate. I own bonds because I want to profitably lend to governments, businesses, and individuals. I can do all this without making hiring and firing decisions, having someone call me at three in the morning over a clogged toilet, or having to service loans. It is a way my savings can participate in the economy and reap gains from its productivity and continued growth.

I don't see investing as placing bets and rolling dice at a craps table.

My suspicion is that most here on the forum are long only investors. There are people here that invest in Alternative Funds that using shorting and leverage but that would be with a smaller part of the portfolio. We aren't high rollers here.
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Re: Artemis Attack on the Bogleheads

Post by columbia »

I don’t know who this guy is, but that’s probably my fault.

One thing I do know is to beware of anyone hawking the future based on their own personal interests (too many to mention) or on the basis of their politics (Ron Paul, Rand Paul, Peter Schiff, etc).
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Re: Artemis Attack on the Bogleheads

Post by nedsaid »

Speculation does have a couple of positive effects on the market. First, it provides liquidity for the market and secondly it helps make the market more efficient. It is trying to take advantage of inefficiencies in the market.

What I want to do is to participate in our economy with my savings and to reap the benefits of being a business owner, an owner of real estate, and a lender to governments, businesses, and individuals. In other words, reaping the benefits of capitalism through owning the means of production. All of these things generate cash flows, and cash flows are really what I am investing in. What I hope to capture is both income and capital gains. This is investment with a long term time horizon.

I looked up Chris Cole and Artemis. Essentially, he is a Hedge Fund manager. Minimum investment is $250,000 and you have to be an accredited investor.

Below is from Artemis letter to investors dated July 2018, the title of the piece is "What is Water in Markets?" This reflects his thoughts on passive investing and why he doesn't think it is a good thing.
Green’s theory that the alpha available to active managers is destroyed by the dominance of passive flows was not intuitive to me at first. I was inclined to believe the exact opposite: that the greater the degree of passive actors the more inefficiencies are available for exploitation. That is true to a certain point. When the market is dominated by passive players prices are driven by flows rather than fundamentals (see right tail of blue line). In my simulation, the excess alpha available to active participants peaks when passive investors comprise 42% of the market, then drops dramatically the more the passive share increases. When passive participants control 60%+ of the market the simulation becomes increasingly unstable, subject to wild trends, extreme volatility, and negative alpha. In the real world, because the ratio between active to passive is not constant, the instability threshold will occur at a much lower threshold as investors shift their preference to passive in real-time.

A good metaphor is to think of passive investors as a drunk man at the bar and active investors as his sober guide. The drunk man is hoping to walk home safely but is highly influenced by the prevailing flow of foot traffic. Fortunately, when the drunkard gets too far off the safe path, his sober guide takes over and corrects him. Now, the dual journey home is a choppy pull and push affair, but everyone gets home safe. Now in a world where passive dominates, the drunk become so strong that his sober guide is not strong enough to influence him. Unencumbered the drunk man can now move much faster in any given direction, right or wrong, but he is also more likely to get lost. The drunk man walks from the bar... starts heading toward his house… takes a wrong turn up a mountain… and right off a cliff... to his death.

The irony of the Bogle-head crowd is that they tout efficient market hypothesis to support passive investing while simultaneously failing to comprehend how the dominance of the strategy causes markets to become highly unstable and inefficient. The most immediate realities are the ones that are the hardest to see… If you want to know when volatility will truly arrive, watch the shift in the medium.
The thing is, I think there is a grain of truth to his assertions but I don't buy the premise of his arguments. First, it seems to me that daily average trades executed on the stock exchanges have increased greatly over the years. Second, the bid/ask spreads on individual stocks have narrowed. Third, the costs of trading have decreased greatly with much lower commissions and spreads. These first three points are evidence that markets are becoming more efficient and not less. Fourth, I don't buy that market volatility has been increasing. If it has, I don't think it is because of indexing. Culprits could be the growth of the hedge fund industry, the growth of the derivatives market, the creation of ETFs that allow indexes themselves to be traded. I just don't buy that passive investors are causing increased volatility if in fact it is happening. Furthermore, the academic research indicates that markets are becoming more efficient and that alpha is shrinking. He is also overlooking the rise of the Alternative funds and the rise of Factor investing.

I suppose that as the share of assets that are managed passively increases that the active traders will trade the decreasing number of securities actively managed even more between themselves. Seeing that passive investors just accept market pricing, pricing is thus being determined by fewer and fewer shares which in turn creates more volatility. This might be what Chris Cole means. We are a long ways from this in my view as research seems to indicate that we need 20% active to keep markets efficient. If this gets to be a problem, Vanguard investors could simply index maybe 60% of their investments and use low cost, lower turnover active funds for the rest.

So I don't know, he offers a couple of interesting points but I just don't think they hold water. Plus, I would be interested to know the actual performance of his funds.
Last edited by nedsaid on Thu Dec 20, 2018 12:03 am, edited 4 times in total.
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Re: Artemis Attack on the Bogleheads

Post by gwrvmd »

I am a long only investor with mostly a large load of S&P 500 Index Funds......for the last 40 years
My philosophy is the same as Nedsaid. As long as it is not worse than 2008, I will be fine......Gordon
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Re: Artemis Attack on the Bogleheads

Post by kolea »

barnaclebob wrote: Wed Dec 19, 2018 5:14 pm
HEDGEFUNDIE wrote: Wed Dec 19, 2018 4:44 pm So this is what he actually said:

“Passive investing is just a form of momentum trading, as a passive investor you are entirely dependent on flow”

Discuss.
Anytime anyone says anything bad about passive index investing I respond with "Is there any data to show that another strategy will beat index investing on average?"
I just say, "to each his own". I have friends who are stock-pickers, market timers, 100/0 dividend-income adherents, and I don't try to argue with any of them. They are happy and I am happy being passive. There are many roads to Rome. All is good.
Kolea (pron. ko-lay-uh). Golden plover.
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Re: Artemis Attack on the Bogleheads

Post by linenfort »

Remember when Mandelbrot, the father of fractals, was on the news in mid or late 2009 with his protege, Taleb? Both smart individuals. Mandelbrot said something was coming, something so bad that we haven’t seen it “since the American Revolution.”


Well, the market recovered.

Either stocks will crash or they will recover. On both sides, there will be plenty of windbags ready to take credit for calling it.
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Re: Artemis Attack on the Bogleheads

Post by Grt2bOutdoors »

The Fed is doing a fine job squeezing the liquidity out of hedge funds. Keep raising those rates, once we clear out the rif-raff like this”tool”, we can get back to making real profits. In the meantime, I’ll just keep indexing and aggravating those wannabes.
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Re: Artemis Attack on the Bogleheads

Post by Silas »

Speculation, high-frequency trading, hedging, and even playing around with options, comes with obvious drawbacks

1. Tax treatment. Short term capital gains is always strike one against your returns.
2. If you are not passive investing, or buying and holding, you are not reinvesting dividends. This impacts your total return.
3. One bad move can wipe out 10 good moves
4. If you are engaging in bond speculation, and not holding bonds to maturity, you are exposed to interest-rate risks
5. Trading fees, clearing fees, etc. start adding up
6. Your taxes will be very complicated, and will be a headache every year (see #1)

Not saying you can't do any of this. Some are successful with it, but it certainly isn't for me. I did it for a few years back in the 90s and made a little money, but it was not as effective as a long-term, disciplined approach.
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Re: Artemis Attack on the Bogleheads

Post by TIAX »

kolea wrote: Wed Dec 19, 2018 11:56 pm I just say, "to each his own". I have friends who are stock-pickers, market timers, 100/0 dividend-income adherents, and I don't try to argue with any of them. They are happy and I am happy being passive. There are many roads to Rome. All is good.
Except they won't get to Rome.
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Re: Artemis Attack on the Bogleheads

Post by Dottie57 »

stlutz wrote: Wed Dec 19, 2018 10:00 pm
...where only one/a few institutions/big playas need to liquidate their ES contracts...
In case it's not clear, and "ES Contract" in an E-Mini Futures contract. Daily implied volume for the E-Mini is larger than the volume traded on the actual S&P 500 stocks. That's an interesting factoid; whether it's scary is another question entirely. Big E-Mini trades have triggered significant short-term market moves in the past.

The one thing I do know is that few people on this board are making leveraged bets on the S&P using futures contracts.
It’s things like ES contract that worry me. I have little knowledge of their use and consequence.

I am happy that bond rates are moving to what I consider more normal. My parents retirement is in bonds and low rates really hurt them. My dad was a Great Depression kid and he was afraid of stocks.
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Re: Artemis Attack on the Bogleheads

Post by mhadden1 »

TVD wrote: Wed Dec 19, 2018 4:42 pm
Whakamole wrote: Wed Dec 19, 2018 4:36 pm Have I supposed to have heard of either Chris Cole or Artemis?
Chris Cole is probably one of the smartest guys you will ever meet.
In the immortal words of Lucy Van Pelt:

"He never got his picture on a bubble gum card. Have you ever seen his picture on a bubble gum card? Hmmm? How can you say someone is great who's never had his picture on a bubble gum card?"
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.
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Re: Artemis Attack on the Bogleheads

Post by thx1138 »

TVD wrote: Wed Dec 19, 2018 8:08 pm To all the doubters out there, if this didn't make you concerned at least a little then, in my opinion, you do not understand the market structure.
It sounds like you are new to all this. There is always a "smart" talking head making dire predictions that give people the willies. They always have a logical and well reasoned argument that is very compelling. Unfortunately there are typically logical and well reasoned arguments that are equally compelling for just the opposite outcome.

I think the safest thing to do is go listen to podcasts from similar folks three years ago. Note how they are very well reasoned and compelling. After getting the willies go look at what the market did in the following years.
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Re: Artemis Attack on the Bogleheads

Post by JasonF »

I enjoy reading Meb Faber's articles, white papers and often listen to his podcast. He has actually gone on record many times explicitly stating that high fees will erode any alpha a particular strategy may enjoy. Where I disagree with him is when it comes to trend following strategies that he personally uses and writes/talks about often. Sure these strategies when backtested have impressive results but I have serious doubts that an average investor subject to the usual biases would be able to stick to a trend following strategy when it suffers from tracking error - which they often do for months/years on end.
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nedsaid
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Re: Artemis Attack on the Bogleheads

Post by nedsaid »

Keep in mind, a hedge fund manager isn't going to be wild about buying and holding index funds. His opinions of course won't be 100% objective as passive investing is a potential threat to his livelihood. I would guess that the recent volatility in the stock market is much more of a product of hedge funds than it is of passive investing. He might be the cause of the volatility he is decrying.
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totesmagotes
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Re: Artemis Attack on the Bogleheads

Post by totesmagotes »

thx1138 wrote: Thu Dec 20, 2018 11:27 am
TVD wrote: Wed Dec 19, 2018 8:08 pm To all the doubters out there, if this didn't make you concerned at least a little then, in my opinion, you do not understand the market structure.
It sounds like you are new to all this. There is always a "smart" talking head making dire predictions that give people the willies. They always have a logical and well reasoned argument that is very compelling. Unfortunately there are typically logical and well reasoned arguments that are equally compelling for just the opposite outcome.

I think the safest thing to do is go listen to podcasts from similar folks three years ago. Note how they are very well reasoned and compelling. After getting the willies go look at what the market did in the following years.
Indeed, there are always people calling for market catastrophes. As it is, there have to be people on "both sides" of the trade. However, clamoring on about a "huge market crash just around the corner!!one!1!" will eventually prove correct, but that doesn't really mean anyone should listen to such calls if they are wrong the other 90% of the time.

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Fear sells. People generally highly dislike losing wealth (see, e.g., loss aversion), so our ears tend to perk up when we hear predictions of imminent market crashes. However, giving in to this fear often (though not always) means that one pulls out of the market too early or jumps back into the market too late, the net result of which means that one actually underperforms that broad index as a whole. Indeed, the average investor does underperform the broad index.

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staythecourse
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Re: Artemis Attack on the Bogleheads

Post by staythecourse »

Is this Mebane Farber of the GTAA fame/ infamy? Don't care to listen to the podcast, but did they ask him why he does not have the returns of his defunct GTAA on his website? That is what I want to know.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle
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Re: Artemis Attack on the Bogleheads

Post by HomerJ »

Chris Cole: "The more the market is dominated by passive investors the less opportunity for active investors."
That seems exactly opposite of the truth.
Last edited by HomerJ on Thu Dec 20, 2018 1:06 pm, edited 1 time in total.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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Re: Artemis Attack on the Bogleheads

Post by HomerJ »

mhadden1 wrote: Thu Dec 20, 2018 11:22 am
TVD wrote: Wed Dec 19, 2018 4:42 pm
Whakamole wrote: Wed Dec 19, 2018 4:36 pm Have I supposed to have heard of either Chris Cole or Artemis?
Chris Cole is probably one of the smartest guys you will ever meet.
In the immortal words of Lucy Van Pelt:

"He never got his picture on a bubble gum card. Have you ever seen his picture on a bubble gum card? Hmmm? How can you say someone is great who's never had his picture on a bubble gum card?"
I laughed :)
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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Re: Artemis Attack on the Bogleheads

Post by TVD »

nedsaid wrote: Wed Dec 19, 2018 10:59 pm
TVD wrote: Wed Dec 19, 2018 8:08 pm
And for the those that decry the short vix strategy, the boglehead/passive investment index fund strategy is one of the ultimate short vix strategies...I mean just look a the relation between S&P and the VIX.
Can't speak for anyone else here, but I have been a long only investor my entire investment career. Buying and holding an S&P 500 Index fund is a long only strategy, don't know how you can call a long strategy an ultimate short strategy. There is difference between investing and speculation.

I own stocks because I want to own businesses. I own REITs because I want a stake in Real Estate. I own bonds because I want to profitably lend to governments, businesses, and individuals. I can do all this without making hiring and firing decisions, having someone call me at three in the morning over a clogged toilet, or having to service loans. It is a way my savings can participate in the economy and reap gains from its productivity and continued growth.

I don't see investing as placing bets and rolling dice at a craps table.

My suspicion is that most here on the forum are long only investors. There are people here that invest in Alternative Funds that using shorting and leverage but that would be with a smaller part of the portfolio. We aren't high rollers here.
When someone goes long an index (i.e. S&P) they are taking an implicit short position against volatility and essentially shorting the vix. Unfortunately, I fear that when the S&P approaches triple digits, the same people stating these platitudes about being invested in the stock market as owning a business etc. will start equating owning stocks to gambling. This was the same mindset as back in the 1920s unfortunately.
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Re: Artemis Attack on the Bogleheads

Post by TVD »

thx1138 wrote: Thu Dec 20, 2018 11:27 am
TVD wrote: Wed Dec 19, 2018 8:08 pm To all the doubters out there, if this didn't make you concerned at least a little then, in my opinion, you do not understand the market structure.
It sounds like you are new to all this. There is always a "smart" talking head making dire predictions that give people the willies. They always have a logical and well reasoned argument that is very compelling. Unfortunately there are typically logical and well reasoned arguments that are equally compelling for just the opposite outcome.

I think the safest thing to do is go listen to podcasts from similar folks three years ago. Note how they are very well reasoned and compelling. After getting the willies go look at what the market did in the following years.
Maybe I am new, maybe I am not. I am lucky enough for my active investment accounts to be up (3 accounts up ranging from +15% to +25%). My other cash account is up ~2%.Three years ago I thought a 30-50% drop was coming. Now, I just hope what's coming doesn't exceed the Great Depression. Many of those people may have been early, but what I fear is coming is much worse than what most of society is ready for. Of course I can be wrong, so what is the logical and well reasoned argument that we are not heading for a global slowdown/recession or even depression?
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Re: Artemis Attack on the Bogleheads

Post by nedsaid »

TVD wrote: Thu Dec 20, 2018 2:25 pm
When someone goes long an index (i.e. S&P) they are taking an implicit short position against volatility and essentially shorting the vix. Unfortunately, I fear that when the S&P approaches triple digits, the same people stating these platitudes about being invested in the stock market as owning a business etc. will start equating owning stocks to gambling. This was the same mindset as back in the 1920s unfortunately.
You are going to have to explain that one. I have not borrowed shares from anybody. How is being long the S&P 500 shorting the VIX? I am simply accepting the volatility of the market along with its returns. Furthermore, I have not leveraged my position.

I have been at this for 30 some years now and have been through the 2000-2002 and the 2008-2009 bear markets. I understand market volatility. Shorter term, stock investing has similarities to gambling but longer term has equal returns to the economic returns of American business.

It is your buddy Chris Cole who is contributing to the volatility in the markets with his fear mongering and whatever his hedge fund is doing. It is sort of like the Fox lecturing us about the safety of the hen house. How do you know that Mr. Cole isn't saying one thing and doing another with his hedge fund? How to we know that he isn't trying to create fear in order to profit from the volatility?

It is just really rich that the guy who wants to profit from volatility is blaming the people who buy and hold stocks through the broad indexes. I am not trading now, except for whatever trading is going on within my active mutual funds. There might be a bit of trading within my ETFs but turnover there is relatively low. I am not causing this. The hedge funds are a more likely culprit.
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nedsaid
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Re: Artemis Attack on the Bogleheads

Post by nedsaid »

TVD wrote: Thu Dec 20, 2018 2:32 pm
thx1138 wrote: Thu Dec 20, 2018 11:27 am
TVD wrote: Wed Dec 19, 2018 8:08 pm To all the doubters out there, if this didn't make you concerned at least a little then, in my opinion, you do not understand the market structure.
It sounds like you are new to all this. There is always a "smart" talking head making dire predictions that give people the willies. They always have a logical and well reasoned argument that is very compelling. Unfortunately there are typically logical and well reasoned arguments that are equally compelling for just the opposite outcome.

I think the safest thing to do is go listen to podcasts from similar folks three years ago. Note how they are very well reasoned and compelling. After getting the willies go look at what the market did in the following years.
Maybe I am new, maybe I am not. I am lucky enough for my active investment accounts to be up (3 accounts up ranging from +15% to +25%). My other cash account is up ~2%.Three years ago I thought a 30-50% drop was coming. Now, I just hope what's coming doesn't exceed the Great Depression. Many of those people may have been early, but what I fear is coming is much worse than what most of society is ready for. Of course I can be wrong, so what is the logical and well reasoned argument that we are not heading for a global slowdown/recession or even depression?
How did you do when the stock market was surging in 2017? Did you know that stocks are up about 60% of all trading days and up 2-3 years for every year they are down? Did you know that historically the US Stock Market has a long term up trend? The odds are against the shorts, you are guaranteed to be wrong about 2/3 of the time. I just hope it all works out for you.

There are always things out there that we don't know. A Great Depression could come. But I have been seeing the predictions of doom for many years now and have chosen to ignore them. Not a good bet to bet against America.
A fool and his money are good for business.
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Re: Artemis Attack on the Bogleheads

Post by nedsaid »

Grt2bOutdoors wrote: Thu Dec 20, 2018 7:23 am The Fed is doing a fine job squeezing the liquidity out of hedge funds. Keep raising those rates, once we clear out the rif-raff like this”tool”, we can get back to making real profits. In the meantime, I’ll just keep indexing and aggravating those wannabes.
I was looking around for this post. I thought it was in the "Freefall", oops the "Free fall" thread. I think this might be what is happening and might be why Chris Cole made the comment that Central Banks were killing off active management. Excess liquidity from the aftermath of the 2008-2009 is being sopped up and this probably upsets the hedge funds.

I would like this idea of the Fed squeezing the liquidity out of hedge funds to be expanded upon. I know the costs of leverage is higher now that short term interest rates are up. Is there more to it than that?

The thing is, I have never played with options, shorts, leverage so there is a lot about that game that I don't fully understand. Learned a lot from the QSPIX thread but I just don't have any financial interest in funds that execute such strategies. So no incentive to learn. Hard to tell if Cole is onto something or if it is just sophistry. I am leaning towards the latter.
A fool and his money are good for business.
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Re: Artemis Attack on the Bogleheads

Post by TravelGeek »

Rick Ferri wrote: Wed Dec 19, 2018 5:32 pm He exaggerates and overgeneralizes everything, and sounds like he is whining about why hedge fund managers like himself are underperforming:

...

This is a bunch of nonsense.
So I assume we shouldn’t look for this guy on an upcoming episode of the BH podcast? :twisted:

(by the way, just listed to the Nov episode yesterday and loved it... December is queued for the flight back home).
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Re: Artemis Attack on the Bogleheads

Post by TravelGeek »

TIAX wrote: Thu Dec 20, 2018 11:10 am
kolea wrote: Wed Dec 19, 2018 11:56 pm I just say, "to each his own". I have friends who are stock-pickers, market timers, 100/0 dividend-income adherents, and I don't try to argue with any of them. They are happy and I am happy being passive. There are many roads to Rome. All is good.
Except they won't get to Rome.
Oh, they may get to Rome. A Rome. But will they realize it isn’t the Rome?

https://en.m.wikipedia.org/wiki/Rome,_Georgia

But yeah, I don’t argue. I explain what I do and why and politely listen, but I don’t go further.
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Re: Artemis Attack on the Bogleheads

Post by 2015 »

TIAX wrote: Thu Dec 20, 2018 11:10 am
kolea wrote: Wed Dec 19, 2018 11:56 pm I just say, "to each his own". I have friends who are stock-pickers, market timers, 100/0 dividend-income adherents, and I don't try to argue with any of them. They are happy and I am happy being passive. There are many roads to Rome. All is good.
Except they won't get to Rome.
This.
A study of history would show many of those roads lead in the opposite direction of Rome. I view it as a major plus that I have never heard of this Robespierre.
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Re: Artemis Attack on the Bogleheads

Post by nedsaid »

Okay, I think I have figured out what Cole is saying. If you hold the VIX, you will profit if volatility increases. If you short the VIX, you will profit if volatility decreases. Essentially what he is saying is that being long the S&P 500 is a bet on lower volatility. What he is missing is that increased volatility can exist not only on the downside but also on the upside. Indeed, much of the market upside is in violent bursts upward over relatively fewer trading days. So his strategy seems to be based on rather questionable assumptions. He is assuming that higher volatility in these market circumstances will inevitably lead to lower markets. Perhaps he has a belief markets are dangerously overvalued, another questionable assumption. He also seems to believe we are in for another depression, yet another questionable assumption.

My guess is that this guy has been long the VIX. In hindsight, this would have been a great bet since September. The thing is, how was he faring before then?

Let me know if I am correct on this. I would like further explanation.

Again, what is his actual track record? How have his funds actually performed? The Hedge Fund world is not known for being the most transparent part of the financial industry. He can make big claims but can they be independently verified?

Unless there is evidence to back up his claims, I am calling baloney on this one.
Last edited by nedsaid on Thu Dec 20, 2018 3:43 pm, edited 1 time in total.
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