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After investing on my own for about 7 years now I've learned several things. Your first Keynes quote sums it up.

  1. My combination of ecological/psychological doomerism and consideration of "sustainable" economic metrics (ie, not buying property back in 2001 because I already knew it was a bubble then) has cost me financially, as the market is a group psychological process and little else (ie, not in any way connected to my way of thinking, emotional or analytical).

  2. I don't have the financial muscle or insider knowledge to beat the market. The few areas where I can beat the street's common knowledge, such as going long in oil, still didn't work for me - you need a lot of money to buy actual oil contracts, and ETFs like USO are continually dropping vs. the spot price due to market contango. That outcome in particular has really killed my interest in the game of investing.

  3. The spots in which I've beat the market were effectively dartboard buys/sells. Over the long run, though, those moves have cost me almost as much as they have made me.

As a result there are only a few things I am willing to do now:

  1. buy CDs / insured bonds.
  2. basic mutual fund plays, such as taking advantage of the bull market and declining dollar buy investing in funds that buy Euro based shares over the past few years
  3. Currency trading (more to lower my overall risk vs. inflating fiat currencies and general dollar weakness than speculation).

With higher market volatility and a bear market on the way, my interest in buying individual stocks or even mutual funds (beyond bond funds) is pretty much zero.

you are the media you consume.

by MillMan (millguy at gmail) on Thu Aug 9th, 2007 at 05:58:21 PM EST
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as the market is a group psychological process

The market is also about information. If you're not inside the inner loop, you won't get that information ahead of time.

Specifically it's about digested information. Without gossip, news, and good live analysis tools, you're already behind the professionals, and unlikely ever to catch up.

It was interesting looking at wchurchill's posts, because although we mostly disagreed with him politically, he was an excellent presenter of Wall St's common wisdom. His predictions also seemed to be more accurate than anyone else's on here.

In practical terms, it's only possible to make accurate predictions if you can enter the mindspace of the psychological process that drives the markets.

Since most of us assume that market processes are mostly insane, and clearly so, we're predictively disadvantaged in the short and medium term. Suspension of disbelief seems to be a useful skill which may be in short supply around here.

So even though we can see an approaching train wreck from far enough away to be able to say 'Wtf are these people doing?', it's very hard to turn that into an effective investment strategy.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Aug 9th, 2007 at 06:16:23 PM EST
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In Europe if you want to do trading as a consumer you have cheap access to call and put options, they're called "warrants". They're leveraged and thus more risky than their underlying stock since you're much more likely to loose all your position.

My employer BNP Paribas markets warrants on various Brent futures, currently September 2007 to June 2008, many strikes/call/put. There are also gold, silver, housing indexes, indexes, stocks, etc...

It's curious because in the USA these products are not marketed at all, cultural thing?

Disclaimer: my wage comes in part from those warrants sales, and I personally own a few Brent warrants.

by Laurent GUERBY on Fri Aug 10th, 2007 at 02:00:06 PM EST
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