Larry Swedroe on CNBC about new book

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BeachPerson
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Larry Swedroe on CNBC about new book

Post by BeachPerson »

Larry on passive over active

Great interview.

I ordered Larry's new book.
From Jack Brennan's "Straight Talk on Investing", page 23 "Living below your means is the ultimate financial strategy"
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Brianmcg321
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Re: Larry Swedroe on CNBC about new book

Post by Brianmcg321 »

Good stuff
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.
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Forester
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Re: Larry Swedroe on CNBC about new book

Post by Forester »

'Alpha disappearing' might be partly explained by continual passive flows taking precedent over company valuation but from what I can gather Swedroe has completely rejected this possibility out of hand.
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whodidntante
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Re: Larry Swedroe on CNBC about new book

Post by whodidntante »

Forester wrote: Mon Sep 21, 2020 6:22 pm 'Alpha disappearing' might be partly explained by continual passive flows taking precedent over company valuation but from what I can gather Swedroe has completely rejected this possibility out of hand.
Yeah, I guess it's not intuitive how public markets work.

For every share sold, there must be a buyer and a seller. There cannot be a mismatch between shares sold and shares bought. Every day, there will be a bunch of actors who decide it's a good idea to sell some shares. As we learned from the Softbank market manipulation story, even someone buying options will provoke an opposite reaction as the people who sold those options hedge. So if you get a bunch of working stiffs contributing to their 401ks and dutifully buying index funds because they think those index funds will be worth something someday, it may not move prices of the underlying very much.

The market is not a store of value. It's a daily auction of a bunch of shares. You bid, I ask, maybe we meet and a transaction occurs. If you have a so-called "60 billion dollar company" like Snowflake after day 1 of trading, well, it's worth 60 billion if you could somehow sell all the shares at that price. But of course, you can't. You can maybe sell a few thousand shares at that price before your selling moves the market.
000
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Re: Larry Swedroe on CNBC about new book

Post by 000 »

As I posted in the other thread about this, it's impossible for stock picking to be worse now than in the past.

Stock pickers must, gross of expenses, have the same return as the index.

Trading costs are lower now, so the dollar-weighted-average stock picking strategy must be better than in the past.

Stock picking is not the same as actively managed mutual funds, which seems to be a source of confusion for some.
Fortune Seeker
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Re: Larry Swedroe on CNBC about new book

Post by Fortune Seeker »

whodidntante wrote: Mon Sep 21, 2020 9:27 pm For every share sold, there must be a buyer and a seller. There cannot be a mismatch between shares sold and shares bought. Every day, there will be a bunch of actors who decide it's a good idea to sell some shares. As we learned from the Softbank market manipulation story, even someone buying options will provoke an opposite reaction as the people who sold those options hedge. So if you get a bunch of working stiffs contributing to their 401ks and dutifully buying index funds because they think those index funds will be worth something someday, it may not move prices of the underlying very much.
But the same logic holds for withdrawals, right? On average, for every worker buying index funds at some point there must be a worker withdrawing from index funds. So effectively long term index funds should have no effect on prices, if we presume that popularity of index funds, number of savers and life expectancy stay the same.
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willthrill81
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Re: Larry Swedroe on CNBC about new book

Post by willthrill81 »

000 wrote: Mon Sep 21, 2020 9:32 pm As I posted in the other thread about this, it's impossible for stock picking to be worse now than in the past.

Stock pickers must, gross of expenses, have the same return as the index.

Trading costs are lower now, so the dollar-weighted-average stock picking strategy must be better than in the past.

Stock picking is not the same as actively managed mutual funds, which seems to be a source of confusion for some.
Your thoughts are similar to my own. Stock picking should do better today than in the past due to lower trading costs, which are often almost zero. That doesn't make it a good strategy, of course.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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whodidntante
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Re: Larry Swedroe on CNBC about new book

Post by whodidntante »

Fortune Seeker wrote: Tue Sep 22, 2020 6:35 am
whodidntante wrote: Mon Sep 21, 2020 9:27 pm For every share sold, there must be a buyer and a seller. There cannot be a mismatch between shares sold and shares bought. Every day, there will be a bunch of actors who decide it's a good idea to sell some shares. As we learned from the Softbank market manipulation story, even someone buying options will provoke an opposite reaction as the people who sold those options hedge. So if you get a bunch of working stiffs contributing to their 401ks and dutifully buying index funds because they think those index funds will be worth something someday, it may not move prices of the underlying very much.
But the same logic holds for withdrawals, right? On average, for every worker buying index funds at some point there must be a worker withdrawing from index funds. So effectively long term index funds should have no effect on prices, if we presume that popularity of index funds, number of savers and life expectancy stay the same.
No, a purchase does not require an offsetting redemption. A mutual fund can theoretically accumulate trillions of dollars without anything getting unbalanced.
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