No. At the high level I don’t think I’m that good at forecasting, and beating the bar for being better at day-to-day investing than the Efficient Market Hypothesis must be really hard. Also, finding financial market inefficiencies is very much not neglected, so even if by some miracle I discovered some small inefficiency, I doubt the payoff would be worth it, relative to finding more neglected things to forecast on.
At a lower level, the few times I actually attempted to do forecasting on economic indicators, I did much worse than even I expected. For example, I didn’t predict the May jobs rally, and I’m also still pretty confused about why the S&P 500 is so high now.
I think it’s possible for EAs to sometimes predictably beat the stock market without intense effort. However, the way to do this isn’t by doing the typical forecaster thing of having a strong intuitive sense of probabilities and doing the homework (because that’s the bare minimum that I assume everybody in finance has).
Rather, I think the thing to maybe focus on is that EAs and adjacent communities in a very real sense “live in the future.” For example, I think covid and the rise of Bitcoin were both moderately predictable way earlier than the stock market caught on (in Bitcoin’s case, not that it will definitely take off, but it would have been reasonable to assign >1% chance of it taking off), and in fact have been predicted by those in our community. So we’re maybe really good in relative terms at having an interdisciplinary understanding of discontinuities/black swans that only touch finance indirectly.
The financial world will be watching for the next pandemic, but maybe the next time we see the glimmers of something real and big on the horizon (localized nuclear war, AI advances, some large technological shift, something else entirely?), we might be able to act fast and make a lot of (in expectation) money. Or at least lose less money by encouraging our friends and EAs with lots of financial assets to de-risk at important moments.
Anyway, the main thing I believe is something like
you can maybe spot a potential EMH violation once a decade, so you gotta be ready to pull the trigger when that happens (but also have enough in reserves to weather being wrong)
This looks very different from normal “investing” since almost all of the time your money just sits in normal financial assets until you need to pull it out to do something weird.
I’m also still pretty confused about why the S&P 500 is so high now.
Some possible insight: the NASDAQ is doing even better, at its all-time high and wasn’t hit as hard initially, and the equal-weight S&P 500 is doing worse than the regular S&P 500 (which weights based on market cap), so this tells me that disproportionately large companies (and tech companies) are still growing pretty fast. Some of these companies may even have benefitted in some ways, like Amazon (online shopping and streaming) and Netflix (streaming).
20% of the S&P 500 is Microsoft, Apple, Amazon, Facebook and Google. Only Google is still down since February at their peaks before the crash, the rest are up 5-15%, other than Amazon (4% of the S&P 500), which is up 40%!
No. At the high level I don’t think I’m that good at forecasting, and beating the bar for being better at day-to-day investing than the Efficient Market Hypothesis must be really hard. Also, finding financial market inefficiencies is very much not neglected, so even if by some miracle I discovered some small inefficiency, I doubt the payoff would be worth it, relative to finding more neglected things to forecast on.
At a lower level, the few times I actually attempted to do forecasting on economic indicators, I did much worse than even I expected. For example, I didn’t predict the May jobs rally, and I’m also still pretty confused about why the S&P 500 is so high now.
I think it’s possible for EAs to sometimes predictably beat the stock market without intense effort. However, the way to do this isn’t by doing the typical forecaster thing of having a strong intuitive sense of probabilities and doing the homework (because that’s the bare minimum that I assume everybody in finance has).
Rather, I think the thing to maybe focus on is that EAs and adjacent communities in a very real sense “live in the future.” For example, I think covid and the rise of Bitcoin were both moderately predictable way earlier than the stock market caught on (in Bitcoin’s case, not that it will definitely take off, but it would have been reasonable to assign >1% chance of it taking off), and in fact have been predicted by those in our community. So we’re maybe really good in relative terms at having an interdisciplinary understanding of discontinuities/black swans that only touch finance indirectly.
The financial world will be watching for the next pandemic, but maybe the next time we see the glimmers of something real and big on the horizon (localized nuclear war, AI advances, some large technological shift, something else entirely?), we might be able to act fast and make a lot of (in expectation) money. Or at least lose less money by encouraging our friends and EAs with lots of financial assets to de-risk at important moments.
Anyway, the main thing I believe is something like
This looks very different from normal “investing” since almost all of the time your money just sits in normal financial assets until you need to pull it out to do something weird.
Thanks for the answer. Makes sense!
Some possible insight: the NASDAQ is doing even better, at its all-time high and wasn’t hit as hard initially, and the equal-weight S&P 500 is doing worse than the regular S&P 500 (which weights based on market cap), so this tells me that disproportionately large companies (and tech companies) are still growing pretty fast. Some of these companies may even have benefitted in some ways, like Amazon (online shopping and streaming) and Netflix (streaming).
20% of the S&P 500 is Microsoft, Apple, Amazon, Facebook and Google. Only Google is still down since February at their peaks before the crash, the rest are up 5-15%, other than Amazon (4% of the S&P 500), which is up 40%!