投资思想的多样性 :用不同诱饵钓不同的鱼

Diversity of investment ideas: catching different fish with different bait.

期樂會 ·  Jul 10 22:49

Source: Qilehui.


Victor Niederhoffer was once George Soros' advisor and trader, a hedge fund wizard on Wall Street, known as the godfather of speculation. Between 1982 and 1997, the hedge fund he managed had an average annual return of 30%, far exceeding the market average. In terms of product structure, the operating income of products worth 10-30 billion yuan was 401/1288/60 million yuan, respectively.

But he went bankrupt twice after 1997, once in 1997 and again in 2007, with ups and downs and legends.

In his book "The Black Swan: The Impact of the Highly Improbable," Nassim Taleb mentioned Niederhoffer in one chapter. Taleb praises Niederhoffer as "the bacon of the financial field" because he was the first to oppose the "research spider web" of the University of Chicago and the efficient market theory. Unlike the philosophers of finance who believe in empirical philosophy, Niederhoffer is committed to observing data and trying to find anomalous phenomena. He has written a highly insightful book called "The Education of A Speculator", which has shone brightly in his career full of randomness.

Niederhoffer's disciples were mostly the early big shots and the most successful traders. Although Niederhoffer had stumbled, some of his disciples did well because they incorporated his rigorous attitude and methodology into statistical inference. In other words, Niederhoffer's experiential approach was lacking in some methodology.

Taleb was inspired by Niederhoffer's experiential approach, which was very beneficial to his knowledge accumulation. In 1996, Niederhoffer pointed out to him that any "testable" statement should be tested.

Since then, Taleb's style has changed. From that day on, Taleb verified any proposition that could be verified. However, the difference between him and Niederhoffer is still great: Taleb uses data to negate a proposition, not to prove it; and uses history to refute it, not to confirm a speculation.

Although Niederhoffer's and Taleb's trading methods are diametrically opposed, and many financial products handled by Niederhoffer are now held by Taleb, Taleb still deeply respects Niederhoffer. Niederhoffer made a living selling out-of-the-money options, while Taleb made a living buying out-of-the-money options.

Selling out-of-the-money options is betting that something won't happen, while buying out-of-the-money options only bets that it will happen. Niederhoffer tried to earn a steady income, while Taleb preferred to have an occasional big harvest.

Interestingly, Niederhoffer, who tried to earn a stable income, went bankrupt twice later, while Taleb, who likes an occasional big harvest, is still alive today.

1. A way to test the viability of theory. Niederhoffer wrote a memoir in 1997. In this memoir, he reflected on everything he learned from experience, including chess, gambling, horse racing, music, sports, etc., and developed a "philosophy of experience," which formed a grid thinking similar to that of Charlie Munger.

Empiricism, also known as empiricism, holds that sensory experience is the sole source of all knowledge and ideas. Francis Bacon is a famous empiricist. Niederhoffer believes that life is "speculative," and we are all "speculators."

Even investors like Warren Buffett are speculators. The ability to make decisions that change one's life depends on our ability to read and anticipate the outcome of events.

Niederhoffer always believed that it was wise to be skeptical of the sayings, experiences, and maxims of Wall Street. The best way to test seemingly wise theories is to rigorously evaluate, test, and analyze them.

No matter how reliable any investment or speculative activity may look, it is always likely to go wrong. Things are often not what they seem, and a business that seems to have a bright future may not be reliable.

George Soros once told Niederhoffer that his losses from short selling were greater than from any other speculative activity. Niederhoffer also had similar experiences. Therefore, authors of books advocating that individual investors should short sell stocks, and market them as doomsayers, are essentially selling tickets to the poorhouse.

Niederhoffer found that nine out of ten companies his grandfather liked in the 1920s were destined for bankruptcy. This indicates a general tendency: business is constantly changing, as are consumers' preferences.

Of the 12 companies involved in the Dow Jones industrials index at the end of the 19th century, only General Electric has stood the test of time, while other companies have either been merged, no longer exist, or have been overshadowed by better-performing peers.

On the other hand, the companies that Niederhoffer's grandfather warned him to avoid, such as Disney, Walmart, and Merck, have seen their stock prices increase by 4000% to 10000% in the past 30 years.

Finding the poor and excellent performing stocks of late and quantifying their relative strengths and weaknesses may help draw some more scientific conclusions.

Research in behavioral finance in the 1990s showed that stocks often overreact to bad news. Popular studies at the time showed that buying relatively popular stocks would result in higher returns.

Today's popular practice is to make appropriate matches for various stocks, sell overvalued stocks, and buy undervalued ones. In these two opposing methods, choosing the other method when one appears to have exceptional ROI is often the right choice. It is always a good strategy to use academic technical analysis methods sparingly.

As Carl Popper said, the process of scientific research is to advance by refuting incorrect ideas. Feedback is one way to eliminate false views. Only hypotheses that can be rejected by others are scientific hypotheses. If a hypothesis can explain everything and is all-powerful, then it is not a scientific theory. Therefore, Niederhoffer built his business on a foundation of scientific methods rather than pseudoscience to protect his wealth.

2. Failure provides a measure of success

There are many ways to lose, but very few to win. Perhaps the best way to achieve victory is to master all the rules of disasters and focus on avoiding them. The markets that can make money are often developed during recessions and fluctuations. Comparatively depressed market conditions cause investors to give up all hope, but they are followed by amazing volatility.

Niederhoffer has many records of failures, so Soros gave him a nickname "Loser".

But some failures have taught him many valuable lessons:

①Don't rush to harvest when danger is imminent, this may be the most important rule;

② Political events are often unpredictable, especially during the ups and downs of the stock market;

③ Even apparently new information often "molds".

Niederhoffer learned from tennis champion Rene Lacoste's winning experience that unexpected failures are always followed by a series of successes, and the best way to achieve the will to win is to occasionally be defeated. Failure provides a good measure of losing and winning.

People are born with a habit of winning rather than losing, and a series of successes seems to weaken their willpower. Conversely, failure always arouses well-known reactions and regains what was lost. This is like playing chess. The more you play and lose, the more you learn.

Almost all great champions are particularly modest about their abilities and especially praise the efforts made by amateur players. In the ten years Niederhoffer operated for Soros, he never heard Soros say he made a deal to make money. Just listening to him talk, we'd think he's a big loser.

On the contrary, listening to the biggest losers talk might make us think they are often winners. Athletes often exhibit the tendency to become more courageous after repeated setbacks, and market behavior exhibits the same phenomenon. But in both sports and markets, the most dangerous time is when you are ahead.

Niederhoffer likes to play chess with Soros. Soros likes to forget his speculation in a game of chess. Even after the stock market crash on October 19, 1987, Soros won three games of chess in a row against Niederhoffer, revealing the tremendous power he had accumulated.

Of course, there is a major difference between playing chess and living. Chess games are zero-sum games with only one winner and one loser, while life often ends in a win-win situation.

"The world's most famous speculator" Buffett believes that the market is an omniscient and omnipotent opponent. Sometimes Mr. Market will buy your goods at a very low price, and sometimes at a high price. The question is whether you can take full advantage of the market situation and gain an advantage from it.

Soros's brilliance lies in his ability to change different strategies and obtain maximum profits from his expertise in balanced, leading, and rapid actions that he is good at but does not want to show.

In an open situation, such as when the British pound depreciates, he makes full use of leverage to make timely adjustments, so that fluctuations move in the right direction. In a closed situation, where the price is fluctuating before and after government intervention, he cautiously creates turbulence in one market and strengthens balance adjustments in another, playing the final game carefully.

Niederhoff learned a lot of valuable experience in playing chess. The best moves are often not deliberately pursued. Even the oldest moves are brand new. When the game seems very safe, it may be in extreme danger. Product structure, 10-30 billion yuan products operating income of 401/1288/60 million yuan respectively.

Choosing the right strategy and tactics for each situation may be the secret of life. Winners are not based on opportunities. Rather, technique, science, and research are the keys to victory. Don't give up on seemingly hopeless games or draws.

A bad move that doesn't match the aesthetic mood doesn't mean it's a bad move, and a bad move that looks bad can lead to a draw or even a win. When is it worth losing in chess? It's when you learn something new and important. These experiences can also apply to the investment field.

Niederhoff has an absolute resistance to dogma. He doesn't believe in the Efficient Market Hypothesis. The Efficient Market Hypothesis holds that all information is reflected in stock prices, so everyone cannot beat the market.

However, Niederhoff clearly saw that prices sometimes behave like wild beasts, sometimes like gentle lambs, and sometimes like naughty salmon. He gained important insights from Francis Galton's meteorology and focused on systematization in random phenomena; calling it 'anomaly' rather than any arbitrary observations. In meteorology, predictions are particularly important and evidence can be tested by anyone. The forces involved in meteorology are extremely complex and there are many changing variables.

Climate conditions on any given day will not be exactly the same, and weather conditions at any given moment will never be completely the same in the future.

When choosing risky investments, people like to be in the crowd, which makes them feel secure. Galton learned from his experience driving cattle in Africa that humans have a tendency to live in groups and be enslaved. Cows will rush back to the barn at dusk. Cow nature explains the group behavior of the vast majority. If you engage in speculation and choose lottery numbers, following the crowd may result in disastrous results and you are bound to play the role of failure.

Use different baits to fish for different fish.

The biggest difference between gambling and speculation is that the risk of gambling is created by the casino for the purpose of entertainment. Speculation is different. Regardless of whether it is ultimately possible to accumulate capital, expand commodities or buy land and houses, it must be fought for. However, in Niederhoff's view, the most terrifying thing in the world is to become a gambler.

As long as the casino takes 5% of the handle, the chances of winning after betting on American roulette 0.01 million times are almost zero. Long-term gambling losses make profit opportunities almost negligible. All clever professional gamblers will eventually go bankrupt.

Niederhoff himself does not bet on horses, but he loves to learn. In his view, dark horses with high odds are like value stocks, with a price-to-earnings ratio of less than 10 times, and can be bought at lower prices than the book value.

Benjamin Graham and David Dreman both like this kind of stock, which often outperforms growth stocks in profitability. When profits rise, the return on growth stocks is not outstanding, but the return on value stocks is amazing.

On the other hand, occasionally growth stocks may not perform as well as expected, and when expected values ​​are lowered, they may cause heavy losses. When the profitability of value stocks is poor, it often only causes small losses because everyone doesn't look good in the first place.

Gamblers may make money in the short term, but they will eventually lose to the difference between the rake and the jackpot, and the proportion of payouts from the lottery will also deplete the capital of the average horse player. It's amazing that there are a few gamblers in every horse racing venue who can profit in the long run.

Robert Bacon summed it up in his book The Secret of Professional Horse Racing: 'Anytime... bet opposite to the crowd.' This is because since most horse players are losers, then the winners must be people who are different from the crowd when placing bets. Horse racing is a game where only a very small number of people win.

David Dreman also emphasized the importance of being a person with opposite opinions in Contrarian Investment Strategies. In any case, if someone gambles frequently, they will eventually lose money.

So the only advice is: gamble less and you will lose less. Both racetracks and financial markets have a strange power that eliminates the weak before making a profit. Therefore, follow a systematic approach. Even a bad system is better than none at all.

From the ages of 20 to 25, Niederhoff first studied at the University of Chicago and later served as an associate professor at the University of California, Berkeley. At that time, the enemies he faced were supporters of the radical random walk theory in the expert industry. Mary Bart once wrote a thought-provoking book that experimentalism is the most important tool in scientific research.

Except for rare exceptions, those who make major discoveries must first master this method. The only skill Niederhoff learned from Bart was how to use experimentalism to reveal and summarize laws. Many thinkers believe that organizing individual data and constructing relationships is the basic organizational ability of human nature. Speculators or other successful people must have this ability to adapt to changes in the environment.

According to Lewis Engel's research in the book "How to Trade Stocks," from the end of 1925 to December 1991, out of all the possible combinations of 2,211 annual comparisons, only 72 investments had negative returns, and most of these losses were short-lived. For investments with a term of at least seven years, only five situations may cause losses.

You should realize that every investment that lasts for 10 years or more will bring more or less profit. When the investment period is extended to more than 10 years, the past law is particularly inspiring.

In the statistical list of 1653 stocks with a term of more than 10 years, 95% of the investment's ROI is higher than 9.1%, 90% is higher than 10.6%, and 50% is higher than 13.6%. In fact, the probability of the sample annual ROI exceeding 15% is 3/10.

James Lorie, the creator of the University of Chicago Business School Education Law, established his own stock investment portfolio. He chose stocks with excellent topics, bought them on the first day of trading, and then held them for 5 to 10 years, or until they were acquired.

By extensively contacting high-quality products, he searched for such stocks. Once discovered, he asked suppliers, customers, former employees, business editors, and competitors to understand their views on the stock's potential.

Surprisingly, competitors don't like to brag about their own companies, but are better at nitpicking about their opponents. Niederhoffer has seen a variety of stock selection techniques that experts can imagine. But he eventually found that almost all successful techniques, from the housewives in Berths Town to the best super fund managers today, use the same principles as Lorie's.

According to Niederhoffer, "the most important thing is to have a reverse thinking. Once you become a successful person, it is unlikely that you will find another successful person in the same field. The biggest fish often swim in the deepest waters, and different fishes need to use different baits to catch them."

Editor / jayden

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