A good post and, at the risk of making subtext text, that's part of what worries me about Substack.
For Substack to feel dynamic depends on a lot of people writing for free (waves at our gracious host). There are lots of reasons why people write for free, and have done so in various platforms on the internet. But, IF people are writing for free because they think there's a good path to monetizing that later on; that path is going to get longer; there will start to be a larger divide between the professionals and casual writers.
I hope that will happen gracefully and that there will still be a culture of people supporting and encouraging each other, but I don't take that for granted. It will require people deciding that's what they want, and a fair amount of selfless energy to sustain that.
This explains a lot of the whining about index funds. Index funds have low expenses since S&P does the research and all the fund manager does is trade now and then. Index funds spread the risk. When I was a kid, the idea of a "dart board" portfolio was considered outlandish even as experiments with dart board funds outperformed more cleverly composed ones. Index funds are easy to understand. They just don't provide a good pool of suckers and generate a lot of money for brokers.
The next time you see an "Index Funds Linked to Cancer" article, remember who planted it and why.
I saw a study of day traders (in Brazil, I think) a while back. After taking trading costs into account, 99 per cent lost money. And there was nothing obviously different about the 1 per cent - they were just lucky during the period under study.
Good coverage on outrunning the bear (market). Some additional sources:
- John Kay's Other Peoples Money is a pretty damning account of the financialization of everything.
- Patrick Boyle presents an insider's view of trading that is absolutely clear-eyed about who makes and who loses money: https://www.youtube.com/@PBoyle/videos (plus he has a certain goofy deadpan delivery)
- Dan Olson's This is Financial Advice goes deeper into the sociology and psychology of shortstoppers that anyone could ever want: https://www.youtube.com/watch?v=5pYeoZaoWrA
- If you are at all interested in discussions of the realities of valuation vs trading then Aswath Damodaran is worth a look. He genuinely seems not give a f***.
There are two sides financial markets. There is the useful side. IPOs do actually allow companies to raise capital and investors to liquidate their returns. Equities do actually allow companies to return profits to their owners. Bonds do actually allow governments and companies to borrow money. Commodities are real things with real prices. Currencies can be used to buy and sell real things.
But they also allow for gambling and therefore massive wealth. Currently I have no interest in committing the kind of time to become a successful gambler in this domain. So my savings* go into a fairly standard fund that most years yields a decent return.
None of this frenzied activity, whether by "titans of finance" or "amateur traders", produces anything I consider valuable. It's just shuffling money around. People who devote their lives to it have, it appears, given up on making anything I'd find beautiful, interesting, or useful. Going into it would feel to me like committing suicide in slow motion.*
To be sure, many people are stuck in jobs that don't produce anything I (or, often, they themselves) consider valuable either (see David Graeber's book "Bullshit jobs: A theory"), and most of them aren't even paid well. That's life in the shabby scramble that is corporate capitalism. Of course, the people who make life that way tend to be the same kind of people who devote their lives to shuffling money around: greedy fools.
*For what it's worth, I have bachelor's and master's degrees in math and physics and a doctorate in biology (more specifically, population genetics), all from name-brand universities. I'm also quite facile with computers. So I certainly could have become a "quant" if I'd wanted. I didn't and don't.
(1) It's gambling. That's all it is. I actually had a whole 550-word section comparing daytrading to poker (the major difference is that you can't table-select when you're playing the market), but took it out because it felt like too tangential. Gambling doesn't produce anything of value, but it absolutely does move money around.
(2) But the scale of money being moved around means this matters A LOT. As the whole economy has started to revolve around this financialized gambling machine, it warps the incentives of everything else. We can't sustainably make nice things, because the economy doesn't reward that anymore. That pisses me off and is a huuuuuge problem.
"There's a bit in Maureen Tkacik's comprehensively damning 2019 feature about Boeing in The New Republic that I keep coming back to, both here and in general. The central tension of that story is about how, as a former Boeing physicist told Tkacik, 'a long and proud "safety culture" was rapidly being replaced ... with "a culture of financial bullshit."' The supplanting of that purpose - of any purpose, really, at just about any business in just about any industry you can think of - with the blank nihilism of financial capitalism's profit-driven imperatives is familiar by now; management's quest to see how much more cheaply an increasingly poor product can be sold at the same price and under the same name as what came before is, at bottom, the story of basically every industry or institution currently in decline or collapse."
The only way the little guy can beat the insiders and the high frequency traders is with the help of the tax man. A 5 basis point financial transaction tax would stop a lot of the schemes that skim profit from average Joes.
A good post and, at the risk of making subtext text, that's part of what worries me about Substack.
For Substack to feel dynamic depends on a lot of people writing for free (waves at our gracious host). There are lots of reasons why people write for free, and have done so in various platforms on the internet. But, IF people are writing for free because they think there's a good path to monetizing that later on; that path is going to get longer; there will start to be a larger divide between the professionals and casual writers.
I hope that will happen gracefully and that there will still be a culture of people supporting and encouraging each other, but I don't take that for granted. It will require people deciding that's what they want, and a fair amount of selfless energy to sustain that.
This explains a lot of the whining about index funds. Index funds have low expenses since S&P does the research and all the fund manager does is trade now and then. Index funds spread the risk. When I was a kid, the idea of a "dart board" portfolio was considered outlandish even as experiments with dart board funds outperformed more cleverly composed ones. Index funds are easy to understand. They just don't provide a good pool of suckers and generate a lot of money for brokers.
The next time you see an "Index Funds Linked to Cancer" article, remember who planted it and why.
I saw a study of day traders (in Brazil, I think) a while back. After taking trading costs into account, 99 per cent lost money. And there was nothing obviously different about the 1 per cent - they were just lucky during the period under study.
Good coverage on outrunning the bear (market). Some additional sources:
- John Kay's Other Peoples Money is a pretty damning account of the financialization of everything.
- Patrick Boyle presents an insider's view of trading that is absolutely clear-eyed about who makes and who loses money: https://www.youtube.com/@PBoyle/videos (plus he has a certain goofy deadpan delivery)
- Dan Olson's This is Financial Advice goes deeper into the sociology and psychology of shortstoppers that anyone could ever want: https://www.youtube.com/watch?v=5pYeoZaoWrA
- If you are at all interested in discussions of the realities of valuation vs trading then Aswath Damodaran is worth a look. He genuinely seems not give a f***.
There are two sides financial markets. There is the useful side. IPOs do actually allow companies to raise capital and investors to liquidate their returns. Equities do actually allow companies to return profits to their owners. Bonds do actually allow governments and companies to borrow money. Commodities are real things with real prices. Currencies can be used to buy and sell real things.
But they also allow for gambling and therefore massive wealth. Currently I have no interest in committing the kind of time to become a successful gambler in this domain. So my savings* go into a fairly standard fund that most years yields a decent return.
*Saving is legally mandated in Australia
None of this frenzied activity, whether by "titans of finance" or "amateur traders", produces anything I consider valuable. It's just shuffling money around. People who devote their lives to it have, it appears, given up on making anything I'd find beautiful, interesting, or useful. Going into it would feel to me like committing suicide in slow motion.*
To be sure, many people are stuck in jobs that don't produce anything I (or, often, they themselves) consider valuable either (see David Graeber's book "Bullshit jobs: A theory"), and most of them aren't even paid well. That's life in the shabby scramble that is corporate capitalism. Of course, the people who make life that way tend to be the same kind of people who devote their lives to shuffling money around: greedy fools.
*For what it's worth, I have bachelor's and master's degrees in math and physics and a doctorate in biology (more specifically, population genetics), all from name-brand universities. I'm also quite facile with computers. So I certainly could have become a "quant" if I'd wanted. I didn't and don't.
I agree, with two follow-on thoughts:
(1) It's gambling. That's all it is. I actually had a whole 550-word section comparing daytrading to poker (the major difference is that you can't table-select when you're playing the market), but took it out because it felt like too tangential. Gambling doesn't produce anything of value, but it absolutely does move money around.
(2) But the scale of money being moved around means this matters A LOT. As the whole economy has started to revolve around this financialized gambling machine, it warps the incentives of everything else. We can't sustainably make nice things, because the economy doesn't reward that anymore. That pisses me off and is a huuuuuge problem.
It is indeed a huge problem.
If you haven't already, take a look at David Roth's piece today at Defector, titled "How will the golden age of 'making it worse' end?":
https://defector.com/how-will-the-golden-age-of-making-it-worse-end
Here's a relevant excerpt:
"There's a bit in Maureen Tkacik's comprehensively damning 2019 feature about Boeing in The New Republic that I keep coming back to, both here and in general. The central tension of that story is about how, as a former Boeing physicist told Tkacik, 'a long and proud "safety culture" was rapidly being replaced ... with "a culture of financial bullshit."' The supplanting of that purpose - of any purpose, really, at just about any business in just about any industry you can think of - with the blank nihilism of financial capitalism's profit-driven imperatives is familiar by now; management's quest to see how much more cheaply an increasingly poor product can be sold at the same price and under the same name as what came before is, at bottom, the story of basically every industry or institution currently in decline or collapse."
The only way the little guy can beat the insiders and the high frequency traders is with the help of the tax man. A 5 basis point financial transaction tax would stop a lot of the schemes that skim profit from average Joes.
Magnificently said.