Financial Knowledge All Adults Should Know?

[NTL2009]

Mark Cuban on credit cards: ...

So again, rather than answer the challenges from me, you just post another nothing-burger video.

I don't pay 18%-19% to credit card companies. They pay me 2%-4% on every purchase. And I don't spend more with a credit card, I am agnostic to the method of payment, I look at the big picture - value for what I truly need/want. You seem to just ignore this, I wonder why?

Hey, if you want to throw away 2%-4% of most purchases, and give up the flexibility and float time, that's your business. But don't try to tell me it makes good financial sense to bypass those benefits.

 

[NTL2009]

... He's relevant to our culture I suppose, because he has America's #1 radio show (at least, I think it's #1)?

What does "relevant to our culture I suppose" have to do with whether his financial advice is solid and helpful or not?

Anyhow, do a little research and I think you'll find that someone other than DR is in the #1 spot. I'm not sure of your political leanings, but I doubt that info will help your case (and it shouldn't in either case, right/wrong is not a popularity contest, or Justin Bieber > Bach).

 

[NTL2009]

Mark Cuban on credit cards: ...

Hey, you never answered my previous question from post # 55:

A little follow up:

@kyphysics - Can you point out the BIG logical fallacy from Dave Ramsey in that video? It jumped out at me, even as I 'skimmed' it. I'd be interested to see if you are approaching this with a touch of critical thinking.

And again, if a point is so strong, why use false logic to try to make it? Let it stand on it's own strong feet.

Find the logic flaw, or are you blind to it?

 

[russ_watters]

Hey, you never answered my previous question from post # 55:Find the logic flaw, or are you blind to it?

Oooh, ooh, pick me, pick me! [raises hand]

 

[Vanadium 50]

Kyphysics, I see we're back to the parade of gurus. I tried to be polite, and it's not working, so let me be direct. You are providing terrible, terrible advice.

The whole point of a guru is to avoid having to think for oneself. This is diametrically opposed to personal responsibility, in this case personal financial responsibility. Furthermore, having a guru who is primarily an entertainer...well, does that sound like a good idea to you? Is it not better to understand the fundamentals of finance yourself, rather than peddling a one-size-fits-all solution from a self-proclaimed guru who gets paid based on criteria other than the financial success of his clients?

 

[NTL2009]

Oooh, ooh, pick me, pick me! [raises hand]

I'll give our guru-groupie, @kyphysics , a full 24 hours since that post, before I play "Mistah Kaddah"!

 

[kyphysics]

Kyphysics, I see we're back to the parade of gurus. I tried to be polite, and it's not working, so let me be direct. You are providing terrible, terrible advice.

The whole point of a guru is to avoid having to think for oneself. This is diametrically opposed to personal responsibility, in this case personal financial responsibility. Furthermore, having a guru who is primarily an entertainer...well, does that sound like a good idea to you? Is it not better to understand the fundamentals of finance yourself, rather than peddling a one-size-fits-all solution from a self-proclaimed guru who gets paid based on criteria other than the financial success of his clients?

I think there might be a possible misunderstanding of intentions, Vanadium 50. But, also, there might be some mischaracterizaton of Mark Cuban.

I posted Cuban's thoughts as a humorous gesture, given our earlier thread discussion and that's why I placed a big smiley face next to it. But to add to that, I also don't always endorse the perspective of content that I post, as I would assume everyone understand as well. But maybe this is the part I'm wrong to assume? Rather than "peddling" certain views of "gurus" as you put it, I am merely post content for discussion (as in we're free to debate or discuss the ideas). Sometimes I post for humor and/or discussion-starter purposes (as in the Cuban clip).

As for Mark Cuban being a "guru" in the way you're thinking of, I'm not so sure about that. He's definitely very strong-willed and outspoken when he truly believes in something, but I see him as also someone constantly seeking truth. I've watched him over the years as an NBA executive and Shark Tank investor and he seems open-minded and willing to adapt to reality. I also believe Dave Ramsey is genuine in his beliefs (often genuinely wrong! ), but is more restricted on what he's able to even allow (I'm not sure "allow" is the right word here, but I can't think of a better one atm) into his economic and personal finance worldview, as a result of his religious beliefs (I think he misunderstands some of the Bible's economic teachings and their context and applicability in my humble opinion, but I do think he's genuine).

Having said that, Vanadium 50, I'm actually not sure what the gripe is, as I've pointed out areas of disagreement I have with Ramsey and lauded him for areas where he's right. I think, at worst, even if Ramsey could be considered some sort of ignorant, loud-mouthed, rigid ideologue, who is wrong much of the time, I'm not sure what bearing that has on this thread and its conversation. What I mean is that I take it as a presumption that the whole point of a forum of this sort is to debate and analyze ideas. So, from my perspective, I'm thinking: "Who cares! Just disprove a person's ideas if you want. There's nothing wrong with discussing a person's views." (By the way, I know written text on a forum can't always capture "tone" and I am not trying to be abrasive in my comments above if it at all sounds that way. You can think of me as a friend/acquaintance having an honest conversation with you at a restaurant or just hanging out somewhere with good intentions.)

So, basically, I don't think anyone's just absorbing things on this forum (I hope not) in a kind of blind and uncritical way. I guess I assumed everyone was a critical thinker here and thus not at risk of having potentially incorrect views of someone like Dave Ramsey be taken as unfailingly true. Mainly, I think I've appreciated his personal finance views that hold people responsible for their spending - particularly, his tough love lectures. And the main reason it's touched a nerve with me is that I've been an over-spender (sp?) too and had some credit card debt issues in the past. But, being a spoiled kid with decently stable or "well-off" parents, I was able to "get away" from my mistakes. I still am working to pay my parents back, but, honestly, if I was from a poor family, then I'd be in some minor trouble (my debt was $3,000-ish on a credit card...don't even ask what I spent it on, as I'm totally embarrassed). I actually get inspired by Ramsey's common sense, tough love talks on personal spending responsibility.

On the other hand, I am genuinely distraught, disappointed, and even angered (b/c of the negative effects it has on society) by some of Ramsey's views on macro-economic policy and also healthcare and unions. I totally disagree with him on those things and believe his views - if accepted by others - harm society. Just as a single example (I could give more, but will keep this short), he's against min. wage strikes and dictating a min. wage. He calls people spoiled brats who want a higher min. wage, yet makes no reference to the fact that the min. wage has not kept up with inflation in at least 20 (I think it's even more - close to 40) years and that if it did, we'd have $18 min. wage. His admonishment of "spoiled brats" doesn't factor in how he himself benefited from a much better economic structure in his early life that saw a higher min. wage and proper social safety net in society. He, unfortunately, doesn't recognize his own privilege in life, nor the unequal economic system we have. We've seen those things (and much more) "good society" and New Deal protections erode under corrupt/evil/self-serving (I don't have enough proper negative words to even throw out there...) Republican (and sometimes even Democrat) politicians in this country, who've progressively dismantled FDR's New Deal that gave rise to the world's strongest economy by having fair taxes, a strong social safety net, good public works and social programs, etc. ...But, I digress! Don't want to get too heated, as this is something I'm very angry about in America.

The point is, I have plenty of things I am frustrated and upset by when I hear Dave Ramsey speak on those topics. But, I think I AM being critical in acknowledging things that I think he's correct on and being willing to admonish him in areas where I believe he is wrong. I honestly thought/assumed most people on an academic forum like this would be similarly critical of ideas and not just showing a blind acceptance to them in the face of a "guru." If it'd be more interesting and productive, I wouldn't mind talking about other people and/or ideas in this thread. I don't want to really start a hostile or personalized (in a negative way) exchange with others. I know, for me, I never personalize discussions like this. If someone disagrees with me, I just focus on the ideas. I don't make it personal, which I'm worried might be happening. And, if so, it'd probably be good to steer that chat away to something else.

 

[NTL2009]

I think there might be a possible misunderstanding of intentions, Vanadium 50. But, also, there might be some mischaracterizaton of Mark Cuban.

I posted Cuban's thoughts as a humorous gesture, given our earlier thread discussion and that's why I placed a big smiley face next to it. ...

Just a quick reply. When someone posts something, and then just puts a smiley after it, it can't be assumed that others understand the "angle" or intent of that smiley.

I took that smiley (and I think I'm not the only one), as a smug, "Look at this, here's another brilliant rich guy/guru that puts down credit card usage. Take THAT!". Based on your previous posts on the subject, and your (apparently continued) inability to actually discuss why someone should turn down the benefits of a credit card, I think it was a reasonable interpretation. If it wasn't, then I think you need to think more about your communication style.

I don't have time now, just skimmed the rest of your long post, but it didn't appear to me that you answered any of the challenges we presented. That seems to be a recurring (and now tiring) theme. I'll take that back, if upon closer examination, there are actually some answers in there, if/when I look in more detail.

 

[russ_watters]

I think there might be a possible misunderstanding of intentions, Vanadium 50. But, also, there might be some mischaracterizaton of Mark Cuban.

I posted Cuban's thoughts as a humorous gesture, given our earlier thread discussion and that's why I placed a big smiley face next to it. But to add to that, I also don't always endorse the perspective of content that I post, as I would assume everyone understand as well.

While I recognize that you started this thread and therefore have some level of control over its direction, it appeared to me to be a legitimate thread offering real/serious advice, which I consider a valuable mission. I would appreciate it if you treated it more seriously even if you didn't intend it to be serious when you started it.

 

[StoneTemplePython]

There's an old quip from Buffett (which admittedly made more sense in the newspaper dominant, pre-internet era), that says

"In finance, the media uses the term guru because charlatan requires too much ink"

 

[NTL2009]

While I recognize that you started this thread and therefore have some level of control over its direction, it appeared to me to be a legitimate thread offering real/serious advice, which I consider a valuable mission. I would appreciate it if you treated it more seriously even if you didn't intend it to be serious when you started it.

I just noticed, he put a smiley face after the opening sentence in the opening post. So is this whole thread a joke to @kyphysics ?

 

[kyphysics]

I just noticed, he put a smiley face after the opening sentence in the opening post. So is this whole thread a joke to @kyphysics ?

No, no! I a smiley doesn't mean I'm being humorous necessarily. In the context of what we'd been talking about, I thought it would be obvious to others the Mark Cuban post was semi-humorous...but, alas, I'm assuming too much. lol The thread itself was definitely serious.

***I say semi-humorous, because while it's obvious that credit cards are not inherently bad if one can use them smartly (which can be hard oftentimes, due to the psychology and business marketing involved that drive many people to spend more), Cuban's basic idea that they have a terrible cost to them if you're not paying off the balance is non-controversial and a no-brainer. On a random note, Cuban appeared on Ramsey's talk show once and the two seem to share a lot in common. It's on YouTube.

Btw, NTL2009, the reason I haven't responded to your responses for my more recent posts has been the same reason I gave for being hesitant to engage with you earlier on: While I appreciate your passion and interest in these topics, I can't help but feel you personalize things and/or are being overly "aggressive." For the moment, I don't know how to respond back when that is the case.

 

[johnjohn22]

The advice I've read here today on finance is very sound. In 2015 I wrote a book about the stock market called, "You, The Stock Market, and Your Money." I did not write it for publication. I wrote it to use as my own reference material. The book is registered with the Bureau of Copywrite in Washungton D.C. I liked to add a few bits of info from the book. My second book on probably be released to the public.

1. If you want to trade stocks it is imperative that you learn and understand that the financial charts are one of the most important investment tools in an investors tool box. If you learn and understand the importance of the Resistance and Support Level patterns you will enhance your ability to make money in the market.

2. Ignorance, arrogrance, and ego are three human traits that can interfere with and even destroy our intellectual development as we move through time. We all posses these traits. As an investors we must keep these traits under control, and not let them control us. Keep an open mind (impossible for some) and concentrate on making observations and not making judgements.

3. You must know and understand SREG and FUGA. SREG represents the Sales, Revenue, Earnings, and Growth of a corporation. SREG is why corporations exist. FUGA represents Fear, Uncertainty, Greed, and Assumptions. Do not ever under estimate the power of FUGA. Do not under estimate the power of investor or consuner sentiment. SREG AND FUGA are powerful market movers.

4. Someone once asked me, in two words, to describe the stock market. Here is what I said, "the stock market is Uncertainty and Risk. Once you learn how to make Uncertainty and Risk work in your favor, you will be able to make sound, savvy and educated investment decisions.

 

[NTL2009]

The advice I've read here today on finance is very sound. In 2015 I wrote a book about the stock market called, "You, The Stock Market, and Your Money." I did not write it for publication. I wrote it to use as my own reference material. The book is registered with the Bureau of Copywrite in Washungton D.C. I liked to add a few bits of info from the book. My second book on probably be released to the public.

1. If you want to trade stocks it is imperative that you learn and understand that the financial charts are one of the most important investment tools in an investors tool box. If you learn and understand the importance of the Resistance and Support Level patterns you will enhance your ability to make money in the market.

2. Ignorance, arrogrance, and ego are three human traits that can interfere with and even destroy our intellectual development as we move through time. We all posses these traits. As an investors we must keep these traits under control, and not let them control us. Keep an open mind (impossible for some) and concentrate on making observations and not making judgements.

3. You must know and understand SREG and FUGA. SREG represents the Sales, Revenue, Earnings, and Growth of a corporation. SREG is why corporations exist. FUGA represents Fear, Uncertainty, Greed, and Assumptions. Do not ever under estimate the power of FUGA. Do not under estimate the power of investor or consuner sentiment. SREG AND FUGA are powerful market movers.

4. Someone once asked me, in two words, to describe the stock market. Here is what I said, "the stock market is Uncertainty and Risk. Once you learn how to make Uncertainty and Risk work in your favor, you will be able to make sound, savvy and educated investment decisions.

JMO, but your rules # 1, 3, and 4 are in conflict with your rule #2. I like rule #2. I often say that the most powerful three words that have contributed to whatever success I may have had are the words "I don't know".

Never (and I 'never' say never!), be afraid to admit you don't know something. That's how you open your mind to learning. And avoid making some stupid mistakes. And that reminds me... "A smart person learns from their mistakes, a wise person learns from other people's mistakes".

Hey, I'm on a roll (and on my second IPA)! "If you are the smartest person in the room, you aren't learning anything!". That's one reason I hang out here - lots of posters far smarter than me. But I may have some momentary niche where I can contribute, hopefully. I try.

 

[johnjohn22]

JMO, but your rules # 1, 3, and 4 are in conflict with your rule #2. I like rule #2. I often say that the most powerful three words that have contributed to whatever success I may have had are the words "I don't know".

Never (and I 'never' say never!), be afraid to admit you don't know something. That's how you open your mind to learning. And avoid making some stupid mistakes. And that reminds me... "A smart person learns from their mistakes, a wise person learns from other people's mistakes".

Hey, I'm on a roll (and on my second IPA)! "If you are the smartest person in the room, you aren't learning anything!". That's one reason I hang out here - lots of posters far smarter than me. But I may have some momentary niche where I can contribute, hopefully. I try.

JMO, but your rules # 1, 3, and 4 are in conflict with your rule #2. I like rule #2. I often say that the most powerful three words that have contributed to whatever success I may have had are the words "I don't know".

Never (and I 'never' say never!), be afraid to admit you don't know something. That's how you open your mind to learning. And avoid making some stupid mistakes. And that reminds me... "A smart person learns from their mistakes, a wise person learns from other people's mistakes".

Hey, I'm on a roll (and on my second IPA)! "If you are the smartest person in the room, you aren't learning anything!". That's one reason I hang out here - lots of posters far smarter than me. But I may have some momentary niche where I can contribute, hopefully. I try.

Hi: How are rules 1, 3, and 4 in conflictcwith rule #2?

 

[NTL2009]

Hi: How are rules 1, 3, and 4 in conflict with rule #2?

Fair question. For your rule #2 ("Ignorance, arrogance, and ego are three human traits that can interfere with and even destroy our intellectual development as we move through time."), I was mainly focused on the "arrogance, and ego" aspect, though ignorance is important as well.

Applied to your Rule #1, " If you want to trade stocks it is imperative that you learn and understand that the financial charts..." , I see this as 'arrogance'.. the feeling that 'understanding' charts will provide an advantage. More later...

Applied to your Rule #3, "You must know and understand SREG and FUGA... " . Again, I see this as 'arrogance'.. the feeling that 'understanding' SREG and FUGA. will provide an advantage. More later...

Applied to your Rule # 4, "you learn how to make Uncertainty and Risk work in your favor, ...". I may cut you some slack here, those are important, but I still feel it is arrogant to believe that will provide a means to 'beat the market' (my words, but if it doesn't, what's the point? Just invest in 'the market' and take a nap.).

If that is all it took, there would be fund managers (well compensated for beating the market with other people's money), using those principals to consistently beat the market. But very few do, and almost none consistently. That makes me skeptical of all that.

 

[johnjohn22]

Hi NTL2009
As for question #1 - So you think that understanding the chart patterns is not an advantage to an investor? By the way, i never used the term BEAT THE MARKET. i said an advantage, which is a lot different than beating the market. By advantage i mean that you know positive information about the stock you want to buy before you buy it. Such as, The stock I want to buy just beat its earnings estimate for the third time this year. So your saying, that what I just said in that last sentence does not give you an advantage? Knowing the corporation that you want to buy stock is making money, according to you is arrogrance. According to all investors, it is a big advantage to know that the stock in the corporation you want to buy is beating its earnings estimates because beating earnings estimates, making money is what makes stocks and other equities go up.

As per question #2 - So you also do not think that knowing what the sales, revenue, earnings, and growth (SREG) of a stock (corporation) you want to buy gives you an advantage? You also don't believe that fear, uncertainty, greed, and assumptions (FUGA) play an is important part in the investment world. What your saying is that an investors and consumer sentiment is not important.

As per question #4 - You also don't think that understanding risk management, and making uncertainty work for you is a good thing. By the way, it's not about beating the market. Its about making sound and savvy investment decisions to minimize your risk and enhance your ability to make money in the financial.markets. Your favorite word seems to be Arrogrance.

I have taught 25 plus years in the technical trades, which included high school, tec school, community college, and industry, and over the years my students have taught me more about human behavior than ten years of college. From my teaching experience i have learned that studends do not always comprehend what is being taught. They misunderstand what is said which anyone can do, which is the case with you. Your whole conversation with me was about arrogrance and beating the market. As a seasoned investor, and long time academic and hands on teacher I understand where you are comming from, and I only hope that you're not investing other peoples money.

In essence, what your were saying is that knowing the fundamentals and technical analysis of a stock before you buy it is not an advantage. What your saying is that, if a stock chart shows you that a stock you were interested in buying is crashing is not an advantage to an investor. So does this mean you would, let's say, buy $50,000 worth of a stock without looking at its stock chart, without knowing the fundamentals of the stock (corporation)? If that is the case, keep your money under the matress.

 

[NTL2009]

Hi NTL2009
As for question #1 - So you think that understanding the chart patterns is not an advantage to an investor? By the way, i never used the term BEAT THE MARKET. i said an advantage, which is a lot different than beating the market. ...

Yes, I added "my words" to the "beating the market" phrase. But let's get this out of the way first. If applying all this information does not provide a reasonable assurance of beating the market, then why not do as I say, invest in a broad-based index fund and take a nap?

And related to what I thought the intent of this thread is about, I do think that is the best approach for personal investment.

... In essence, what your were saying is that knowing the fundamentals and technical analysis of a stock before you buy it is not an advantage. What your saying is that, if a stock chart shows you that a stock you were interested in buying is crashing is not an advantage to an investor. ...

It's not about what I am saying, it is about what the data tells us. About 85% of professional money managers do not beat the market over a 5 year period. Of the ones that do, few of those repeat it the next 5 years (there's actual negative correlation, IIRC).

So does this mean you would, let's say, buy $50,000 worth of a stock without looking at its stock chart, without knowing the fundamentals of the stock (corporation)? If that is the case, keep your money under the matress.

No, that's not what it means, and my personal money has done far better than mattress money, so your advice is very poor indeed.

What it means is that I simply do not buy an individual stock (and don't recommend that others do either). So I don't need to look at charts (and the data tells us it wouldn't help anyway). An investor can determine an asset allocation of stocks/bonds/fixed/cash, and put that money in broad based index funds and forget about it.

You might find this interesting and relevant - these high flying hedge fund managers, using all these sophisticated analysis techniques, are losing to the guy who is effectively taking a nap and just letting the market do its thing:

http://www.marketwatch.com/story/bu...ictory-lap-over-million-dollar-bet-2017-02-25

I'll add that all the analysis in the world doesn't provide the skill set that an investor would need - and that is the ability to predict the future. The information is available to all, and the current value and future expectations are reflected in the stock price. So the stock has to do better than expected to have better than expected returns. Hmmm, how do we predict that something will do better than predictions? Well, the data says it isn't done consistently, and that makes sense.

 

[johnjohn22]

Hi NTL2009

What we have here NTL is a problem with mind set, that means the way we look at things. It''s not about your right, I'm wrong, or I'm right, your wrong. It's about understanding the rhythm, cycle, and processes. Retail investors have a hard time understanding what i am going to say.
Many times soneone would tell me, don't tell me what to buy unless its a SURE THING, or I would not read your book unless its a SURE THING.
Well, that mind set is DISNEY LAND, LA, LA LAND. if anyone can tell you a SURE THING IN THE THE STOCK MARKET, WITH 100% ACCURACY ALL OF THE TIME, THAT PERSON OR PERSONS WOULD NOT BE BILLIONAIR, THEY WOULD BE TRILLIONAIRS, as in 1,000,000,000,000.00.

There is a very old saying...the truth will set you free...However, many do not accept the truth, they want to continue to believe what they want. Whether we like it or not, the stock market is not a sure thing, The stock market is about probabilities, uncertainty, fear, greed, and risk. Many investors want for sure answers. There is no FOR SURE in the stock market, that is not until it happens. Then, when it happens its FOR SURE because it has already happened. Until it has happened it's not for sure. If it was for sure we would all be billionairs. Only after the facts can we be 100% sure. Guess what, savvy investors make money, all of the time, after the facts, or to put it another way, after the sure a thing.happens.

I'll give you an example of probabilities. I have been watching a stock that I wanted to buy to hold for 1 to 3 years. I wanted to buy 2,000 shares of this stock at $25 a share. $25 x 2000 shares = $50,000. Before buying this stock my first though was, what are the probabilies of this stock going up instead of down after I buy it. Since there is no sure thing I look at the probabilities. My knowledge and understsnding of how this company makes money, and what they were doing to raise new revenue over the next three years gave me the buy signal to buy the 2,000 shares. Did you notice that I did not say it's a sure thing, but the probabilities were backed up by the numbers the company was producing. What numbers? current and estimated future earnings were very good and steady, they had new products to sell to increase revenue, this company bought other companies to increase revenue. They have a major break through in one of their products. This company has global sales with global money coming into this company. NTL, are you catching on yet. My friend, its about money not nonsense as in it's a sure thing. Another plus for this stock is the company has been around for decades, it is well known all over the world.

NTL2009, I hope this information can help you in some way. By all means, believe whatever you want to believe, but I hope whatever you believe is making you a ton of money this year in the stock market. I'll leave you with a very, very important message...Buy the company, and not the stock. If you can answer that question you may wind up in the money side of the rainbow. What does that really mean NTL? IF YOU DON'T KNOW, I'LL HELP YOU, but I'd like to hear your version.of "buy the comosny and not the stock."

 

[russ_watters]

1. If you want to trade stocks it is imperative that you learn and understand that the financial charts are one of the most important investment tools in an investors tool box. If you learn and understand the importance of the Resistance and Support Level patterns you will enhance your ability to make money in the market.

2. Ignorance, arrogrance, and ego are three human traits that can interfere with and even destroy our intellectual development as we move through time. We all posses these traits. As an investors we must keep these traits under control, and not let them control us. Keep an open mind (impossible for some) and concentrate on making observations and not making judgements.

3. You must know and understand SREG and FUGA. SREG represents the Sales, Revenue, Earnings, and Growth of a corporation. SREG is why corporations exist. FUGA represents Fear, Uncertainty, Greed, and Assumptions. Do not ever under estimate the power of FUGA. Do not under estimate the power of investor or consuner sentiment. SREG AND FUGA are powerful market movers.

4. Someone once asked me, in two words, to describe the stock market. Here is what I said, "the stock market is Uncertainty and Risk. Once you learn how to make Uncertainty and Risk work in your favor, you will be able to make sound, savvy and educated investment decisions.

Ya know, I was thinking that at first read that this all sounded like good stuff, but then I realized that @NTL2009 is right and the later advice circles back and undermines the Rule #2...and then that makes the rules out of order: Rule #2 should be Rule #1, and there should be a yes/no decision tree after that. It's generic, and should be more pointed: the thing that people are most ignorant/arrogant about is their ability to beat the market. So the rule should include that great, big, important piece of information: you can't beat the market (except by luck, over the short term). So the decision is: do you still want to try? If yes, move on to the other rules, if not, skip all the rest, invest in an index fund and take a nap.

Once one recognizes that no one, not even professionals, can reliably beat the market, all the BS that goes along with investing just melts away. It's a powerfully liberating realization. It means that:

1. For the most part you can manage your own money without the need of a professional advisor.
2. You can do so with confidence (not arrogance) that you are doing it well.

I will admit though (and this probably applies to most of us) that even though I accept the correct answer is "no", I still answer "yes" somewhat. I do some of my own stock picking, but it is with eyes open to the idea that it will likely be a losing proposition vs what I could have done with the simpler strategy (well...you may have to ask me twice). I do try to keep that component of my investing limited though and use the S&P/nap strategy for the vast majority of my investments.

 

[russ_watters]

Hi NTL2009

What we have here NTL is a problem with mind set, that means the way we look at things...

NTL2009, I hope this information can help you in some way. By all means, believe whatever you want to believe, but I hope whatever you believe is making you a ton of money this year in the stock market. I'll leave you with a very, very important message...Buy the company, and not the stock. If you can answer that question you may wind up in the money side of the rainbow. What does that really mean NTL? IF YOU DON'T KNOW, I'LL HELP YOU, but I'd like to hear your version.of "buy the comosny and not the stock."

That really was non-responsive to his point, and I really am curious about your answers to his question(s):
1. Do you think people can use your advice to reliably "beat the market"?
2. If not, why advise people to try?

One of the the rules we have in the technical forums is that we don't provide advice on potentially dangerous projects to people who can't handle the projects (most common: how to do my own electrical wiring). Because offering them help instead of warning them to stop and close the thread makes us culpable if they get hurt because they tried something we told them and did it wrong. I would think the same principle applies here. There is a different school of thought that says it is better to provide help to do the dangerous thing safely than to not provide help and let them flounder because they'll try anyway, but that still has to start with the warning that they shouldn't be attempting it. I have a great photo of me at the top of a ski slope next to a sign and fence warning of the dangerous slope ahead, ending with: "...rescue, if available, will be difficult and expensive."

 

[NTL2009]

Hi NTL2009

What we have here NTL is a problem with mind set, that means the way we look at things. ... Whether we like it or not, the stock market is not a sure thing, The stock market is about probabilities, uncertainty, fear, greed, and risk. Many investors want for sure answers. There is no FOR SURE in the stock market, that is not until it happens. ...

NTL2009, I hope this information can help you in some way. By all means, believe whatever you want to believe, but I hope whatever you believe is making you a ton of money this year in the stock market. I'll leave you with a very, very important message...Buy the company, and not the stock. If you can answer that question you may wind up in the money side of the rainbow. What does that really mean NTL? IF YOU DON'T KNOW, I'LL HELP YOU, but I'd like to hear your version.of "buy the comosny and not the stock."

I have no idea why you went into the "sure thing" discussion. What does that have to do with anything I said?

I sure do not expect someone who invests in individual stocks to be right 100% of the time. Heck, if they have lots of 'wrongs', but are consistently even slightly more right than what the market is doing, they're doing well.

No problem, but no, your information does not help me in the least, as it is not relevant to my successful investing (or what the studies show a personal investor should be doing). I thought I made it clear, I do not "buy the company" nor do I "buy the stock". I buy 500 to 2000 companies, in a broad based index fund. How was that not clear?

So I already mentioned that it's easy to find the studies that show 85% of professional money managers fail to outperform the market. I'd be interested to see a study of individual investors, and their success rates.

And since this is a science-based forum, let's get scientific. One of the basic tenets of science, is to have individuals repeat an experiment, following the original documented, defined process. If the results are not reproducible and repeatable, the claims are brought into question.

So if technical and/or fundamental stock analysis is a true defined process, it should be able to be learned and repeated. I'd like to see the results of a statistically significant number of personal investors following these procedures, and see if they would beat the market over a 5 year period. Not anecdotes, but controlled studies. And since this is personal investing we are talking about, there is an added burden - averages aren't very important.

That means that even if the average of those stock pickers beat the market (and volatility should be taken into account as well), we need to look at the distribution. What if 30% did significantly worse? What if 10% did really badly? Should a personal investor take the risk that 10% of followers of that method end up in dire straights? I don't think so.

OK, back to "the sure thing". I think as close as you can come to a "sure thing" with investing is that if you buy into a well known, broad based, low expense-ratio index fund, that that fund will come very close to the returns of its index. And that's very likely the best approach for a personal investor (or just about any investor).

 

[johnjohn22]

NTL we are talking about two different things. i am ralking about buying individual stocks. I just learned from your post that you are talking about large funds, Ii suppose you don't believe that uncertainty and risk play an important role in the investment business. and I suppose the sales, revenue, earnings, snd growth numbers of a corporation don't mean a hill of beans to investors.

By the way, those rules i gave are not in any specific order of importance.

 

[NTL2009]

NTL we are talking about two different things. i am ralking about buying individual stocks. I just learned from your post that you are talking about large funds, Ii suppose you don't believe that uncertainty and risk play an important role in the investment business. and I suppose the sales, revenue, earnings, snd growth numbers of a corporation don't mean a hill of beans to investors.

By the way, those rules i gave are not in any specific order of importance.

So you are the second poster to this thread that just seems unwilling to engage in a dialog (the first was just preaching that 'credit cards are bad'). What is that about? I think russ_watters covered it, so I'll just quote him, and maybe you can address the questions this time, and maybe we can all learn something from each other:

That really was non-responsive to his point, and I really am curious about your answers to his question(s):
1. Do you think people can use your advice to reliably "beat the market"?
2. If not, why advise people to try? ..."

 

[NTL2009]

With apologies to NTL2009, I couldn't resist posting this Ramsey segment from 7.17.17 -



Really relates to a lot of our earlier conversation and is interesting in and of itself.

A little follow up:

@kyphysics - Can you point out the BIG logical fallacy from Dave Ramsey in that video? It jumped out at me, even as I 'skimmed' it. I'd be interested to see if you are approaching this with a touch of critical thinking.

And again, if a point is so strong, why use false logic to try to make it? Let it stand on it's own strong feet.

Oooh, ooh, pick me, pick me! [raises hand]

OK @russ_watters, I gave him some time - I'm calling on YOU! :)

 

[russ_watters]

I've deleted a couple of unhelpful posts/responses. Please, all, this might be the General Discussion forum, but this thread should be taken seriously. A couple of things to remember as part of the discussion:
1. Nobody here is an investment guru/expert, so:
2. Everything you read here is opinion, but:
3. You should be willing/able to back-up your opinion with expert opinion, facts (data) and logic.

 

[russ_watters]

OK @russ_watters, I gave him some time - I'm calling on YOU! :)

Only because it generated a bunch of posts, I didn't delete the line of discussion...

I had to go back and re-watch it because I forgot what it was about (I only got 1/3 of the way through...):

He's tripping over the definition of "cash". As used here, it is about "physical currency", but it also means "ready money", as opposed to credit, and I thought he was against credit [borrowing], not just against plastic (because who cares about plastic?). Visa is called a "credit card" company, but isn't a credit company, it is a card company; It doesn't provide credit, it just provides transaction services. So it can't, even in theory, eliminate "cash" - meaning "ready money" in its transactions.

Then also: it's voluntary (and Visa is paying people for it), so if it is a bad idea, people won't do it -- and he spends a lot of time talking about it being a bad idea. So what? Why even bother with it if it isn't going to work?

Now, the misunderstanding of "cash" is common, so when I use the term I usually define it, but him being an investment guru who reads it, defines it correctly, and then keeps using it wrong is ridiculous. Having not watched many of his videos I'm not sure what his crusade is, but it is either about credit, cards, both or meaningless blather. I'm leaning toward blather.

So: if you don't want to make a transaction with borrowed money, fine! Use a debit card. Mine still gives me incentives (though not as good as my Amazon credit card).

 

[NTL2009]

RE: this Dave Ramsey video, and my calling out the logical fallacy in this post: https://www.physicsforums.com/threa...adults-should-know.916758/page-5#post-5819703

... He's tripping over the definition of "cash".

I agree, but it isn't the logical fallacy I was thinking of.

Then also: it's voluntary (and Visa is paying people for it), so if it is a bad idea, people won't do it -- and he spends a lot of time talking about it being a bad idea. So what? Why even bother with it if it isn't going to work?

Here he was talking about Visa offering some business $10,000 to go cashless. That bugged me too, but it isn't the one I was thinking of. First he seems to say the small business owner will fall for it (but, at 4:00 - not the big guys like Costco, Sams, Home Depot, etc, who have data on their customers), and that is rather insulting to small business owners. But then he comes around to say they are too smart to fall for it? Eight minutes to tell us this?

But here is the one that jumped out at me. At 2:12 he says that “cash accounts for 32% of all consumer transactions” (I'll pick that number apart later), but the logical fallacy is then at 2:35, where he says that if a business went cashless (debit, credit, cell-phone only), they'd lose 1/3rd of their customers. “A third of your customers - forever!". And he does reference a "Mom & Pop" small restaurant.

Now wait a minute. Even if we accept for the moment that "32% of all consumer transactions" means 1/3rd of your customers use only cash at your business, it just doesn't make sense. There is no logic to say that some/most of those customers wouldn't just switch to debit, credit, or cell-phone if cash was not an option. Further, there's nothing saying those 32% are the same customers. I sometimes use cash at a restaurant, if I've managed to collect a $100 bill, it's a convenient place to use it, many other places won't take anything > $20 bill. But I pay by credit (and earn 3% rewards) when I can. I'd bet that the number who exclusively use cash is far lower than that 32% he uses.

Some data:
https://www.foodnewsfeed.com/fsr/vendor-bylines/cost-being-cash-only-restaurant
http://www.tsys.com/Assets/TSYS/downloads/rs_2016-us-consumer-payment-study.pdf

What I see here is that smaller transactions are more likely to be cash-based (coffee shop, fast food), but dining is more like 18% cash transactions (and it seems we could assume the trend holds and even that is weighted to the smaller restaurant transactions). So first, we aren't talking about giving up 32% of your business (in total $) since the cash transactions are smaller. And no basis for saying 'forever'. And no basis for saying these cash payers would not switch to other forms of payment. It's all a big nothing, and just shows his bias against credit cards (which I think is just a ploy, a straw-man 'enemy' to fight, so he can play the hero).

And in terms of personal finance, instead of teaching people to use credit wisely, he just turns into a one-size-fits-all monster to avoid at all costs, and I don't think that is helpful. It's kinda funny how he talks about Visa having a "war on cash" - what successful business doesn't try to get you to use their product, over their competitors? I guess Ford, Chevy, Apple and Samsung are all 'evil'?

Well, I think we've beaten that to death. Just one irony I'd like to point out before I move on. Funny how he rounded 32% up to 1/3rd. OK, I'll give him some 'artistic license' for shorthand in a video presentation, but... 33.333/32 = 1.04, or 4% more. And that's the rewards I get buying gas with my credit card!

 

[kyphysics]

related articles:
http://www.businessinsider.com/mark-cuban-the-value-of-cash-2012-11
https://www.forbes.com/2010/11/03/b...preneur-dallas-mavericks-secrets-self-made-10

I thought this was interesting from Mark Cuban and was wondering what people thought about it. Note that the above is a very short and edited clip (with lots of stuff "missing") from a 20+ minute interview (that can be found on YouTube as well) he did with the Wall Street Journal on investing.

He's big on keeping cash vs. investing in the market (in the traditional buy and hold school of thought). For investing, he's more into short term trading. But, putting aside this broad philosophy, he mentioned something I thought to be interesting for those with a "smaller" amount of discretionary savings (say, in the $50K to $100K range). He says you're better off using the transactional value of cash to generate wealth vs. plugging that money into the market.

What does he mean by the TVOC (this quote below is from the second article above - the Forbes piece)?:

9) You have $100,000--where do you put it?

First I pay off all my credit card debt and evaluate paying off any other debt I have. What I have left I put in the bank.

Then I try to create as much transactional value as possible from that cash. I look at my annual budgets for everything and anything, and I look to see where I can save the most money on those items. Saving 30% to 50% buying in bulk--replenishable items from toothpaste to soup, or whatever I use a lot of--is the best guaranteed return on investment you can get anywhere. Then whatever I have left I keep in the bank and let it earn nothing. Why? Because then its available for when I get a good opportunity.

Every five years or so there is a bubble bursting or amazing deals available because of a change in the economy. Anyone who just kept their cash in the bank rather than in stocks over the past five to 10 years could be buying the home of their dreams for half price in most of the country. They earned good money in half the past 10 years on the cash, and even though they aren't making much now, they have the transactional value available to them. Plus they have cash to invest if the market craters and, most importantly, they sleep great at night. Cash is king--and works far better than Ambien when you want a good night's sleep every night.

I think this is a very cool way of thinking. He's said elsewhere (IIRC) that you can beat losses from inflation from having cash sitting around (uninvested) by using it to find bargains and savings. If you wait around for big sales like during Black Friday and use coupons, rebate & cash back programs (like TopCashBack.com), and buy things in bulk (particularly, necessities and things you use a lot of), then the money you save during any given year is more than what you'd earn (or lose) in the stock market with that same cash. Non-perishables like toilet paper, which every human needs, can be bought in massive bulk and last "forever," for example.

Thoughts on this specific philosophy?

And thoughts maybe on his broader philosophy of investing? I think he makes compelling points about cyclical bubbles bursting and being able to find amazing deals you're able to snap up if you have cash vs. having all your money tied into investment accounts.

 

[russ_watters]

What does he mean by the TVOC (this quote below is from the second article above - the Forbes piece)?:

I think this is a very cool way of thinking. He's said elsewhere (IIRC) that you can beat losses from inflation from having cash sitting around (uninvested) by using it to find bargains and savings. If you wait around for big sales like during Black Friday and use coupons, rebate & cash back programs (like TopCashBack.com), and buy things in bulk (particularly, necessities and things you use a lot of), then the money you save during any given year is more than what you'd earn (or lose) in the stock market with that same cash. Non-perishables like toilet paper, which every human needs, can be bought in massive bulk and last "forever," for example.

Thoughts on this specific philosophy?

And thoughts maybe on his broader philosophy of investing? I think he makes compelling points about cyclical bubbles bursting and being able to find amazing deals you're able to snap up if you have cash vs. having all your money tied into investment accounts.

Your second link is dead and I can't watch the video right now, so for now I'll just respond to the quote and first article:

Basically, what good is in the advice is overshadowed by the very bad/wrong presentation.

1. Mark Cuban should recognize that he's not the average investor and if he intends to give advice to the average investor he should tailor that advice to them, not say what is good for him. I can't find a clear definition of "transactional value of cash" but it sounds like he's saying you should have $25-$100k just lying around because you might see a $25-$100k deal you want to invest in. Um, really? Mark Cuban might, but I certainly won't. I only own one thing in that value range: my car.

2. If you have $25K-100k in the bank and have credit card debt, you've already done something wrong. "First" is paying off the credit card debt before acquiring $25-100k in cash.

3. Keep money as cash and use cash to find discounts are separate pieces of advice. Meaning: if you always have at lest $25k in cash, that's at least $25k in cash that is losing value to inflation. And if you're constantly buying things, then that means there's new money flowing in that you are directing to those purchases. E.G., if the largest single purchase of that type you make is $5k, then you never need more than $5k available even if you are spending $100,000 a year on such purchases. You just put $2k per paycheck into that account that you are pulling $4k a month out of to make the volume discount purchases. These values start to look silly when you try to identify in practice how you use this strategy, righ?

4. If you have $25k worth of canned cream corn, that's fine, but most people don't eat enough canned cream corn to make use of a $25k reserve, much less spending a hundred grand a year on it. I think most people would struggle to store more than $5k worth of inflation-hedge perishible goods. Good investment, unreasonable commitment level. And I'd be shocked if Cuban himself really keeps that much in a stash somewhere, even though he may have room for it. Remember: filling your basement with creamed corn is a one time investment and after that you only can/have to buy it at the rate you are eating it.

I think when he says keep $25-$100k in cash, he isn't thinking about so he can buy creamed corn, he's thinking about someone popping in with a company he can invest in like on Shark Tank, where he regularly invests on that level. Again: great for him, but that has nothing to do with us.

5. Mark Cuban is more interested in short term trading. Again, fine for him, terrible for most people.

6. Even setting aside the self-contradiction, the math fails on holding cash until a crash instead of buying stock. You don't make money by buying during a crash, you make money by holding during a boom. If a stock rises from $10 to $40 a share over 10 years and then drops to $20 and you buy some, there are two ways to look at what just happened:
a. You neither gained nor lost anything because you just bought the stock.
b. You lost $10 versus what you would have had if you bought it 10 years ago. But if it makes you feel better, you lost $20 less than when the stock peaked.

For the stock market, sitting on the sidelines waiting for a good deal is terrible advice.

edit:
For reference, one "car" of a garage will hold about 560 cases of soda. At $0.25 / can, that's $3,360 worth of soda. That's a lot of volume to dedicate to an inflation hedge perishible good. If cans of creamed corn or soup cost 2-4x that, you're still only in the $13,000 range, and again once you have that stored, you're only contributing a few hundred dollars a month to maintaining it while getting awfully tired of eating canned food for every meal.

It's a good investment, but not practical to make big.