Markets are impossible to predict

[farmerjohn1324]

I've mentioned before that I have real money put into a leveraged gold fund.

So when there was that strike that killed the Iranian general this fund went up almost 10% in premarket. This was built up over the weekend I believe. So I thought that day was going to be great, but that 10% gain went away and it basically broke even by the end of the day. The following day it gained less than 1%. And today after Trump made a speech that calmed people down, the fund lost over 13%.

So in sum, the find lost over 13% in those 3 days. So this safe-haven fund is seen as 13% less of a good investment than it would have been if nothing had happened in the first place.

 

[guru]

So when many people predict that gold is never a good investment while S&P 500 is a good investment, then what’s impossible to predict for you?
And even dumb algorithms predict such basic gold movements. It’s not like this never happened in the past. If gold was going up every day for a year then it might’ve been hard to predict...

 

[farmerjohn1324]

So when many people predict that gold is never a good investment while S&P 500 is a good investment, then what’s impossible to predict for you?
And btw, even dumb algorithms predict such basic gold movements. It’s not like this never happened in the past. If gold was going up every day for a year then it might’ve been hard to predict...

Gold is never a good investment? Despite the fact that this very same fund is up 78% on the year?

What algorithms?

And, okay, you can predict that index funds will rise over time. That's about it.

 

[mt2rules]

Leveraged funds do not work like normal stocks or ETFs. They are only meant to track the leveraged return of a fund for the day, not for any period longer than that. Over extended periods of time they drift toward 0, due to a phenomenon known as volatility decay. This happens because a move down decreases an ETF by more than a move up. For example, if an ETF is at $100 and it loses 10% one day and gains 10% the next day, it is not back to $100 but rather at $99.

 

[farmerjohn1324]

Leveraged funds do not work like normal stocks or ETFs. They are only meant to track the leveraged return of a fund for the day, not for any period longer than that. Over extended periods of time they drift toward 0, due to a phenomenon known as volatility decay. This happens because a move down decreases an ETF by more than a move up. For example, if an ETF is at $100 and it loses 10% one day and gains 10% the next day, it is not back to $100 but rather at $99.

That's right. I remember reading about that when I bought it. I read some people arguing to the contrary (that you could hold them longer than 1 day) so I decided to just go with it.

The spot price of gold is slightly up since the attack on the Iranian general. It's hard to know the exact hour the news was released. It's up 0.9% from the time of the earliest news release I can find.

But that fund is still up 78% on the year despite that you're not supposed to hold it more than 1 day.

 

[guru]

That's right. I remember reading about that when I bought it. I read some people arguing to the contrary (that you could hold them longer than 1 day) so I decided to just go with it.

The spot price of gold is slightly up since the attack on the Iranian general. It's hard to know the exact hour the news was released. It's up 0.9% from the time of the earliest news release I can find.

But that fund is still up 78% on the year despite that you're not supposed to hold it more than 1 day.

So why are you saying that markets are impossible to predict when you’re arguing that the fund made so much money?
This would mean that someone predicted it, no?
Though many people predict that gold is never a good investment and this doesn’t mean they’re wrong. Everything goes up at one time and down at another. Hold that fund for next 10 years as your investment and see what happens. I predict you lose. And it’s not even me claiming that gold is never a good investment. There are plenty of people making money better ways than holding gold.

 

[mt2rules]

You can hold it for more than a day, but the longer you hold it the less it will resemble the returns of the underlying. If the underlying consistently goes up, it will go up by much more due to the compounding. If the underlying consistently goes down, it will go down by much more. If the underlying ranges for long periods of time, it will steadily grind lower. You are much better off shorting an inverse 3x ETF than being long a normal 3x ETF because of this.

 

[guru]

What algorithms?

You seriously never heard of algorithms?
And you seriously believe that gold and stocks are still mostly traded by humans?
Every algorithm looks at the past and if gold went up in the past and then down then the same events can be predicted. Even humans trade like this, in case you didn’t know.

 

[farmerjohn1324]

So why are you saying that markets are impossible to predict when you’re arguing that the fund made so much money?
This would mean that someone predicted it, no?
Though many people predict that gold is never a good investment and this doesn’t mean they’re wrong. Everything goes up at one time and down at another. Hold that fund for next 10 years as your investment and see what happens. I predict you lose. And it’s not even me claiming that gold is never a good investment. There are plenty of people making money better ways than holding gold.

My main point was that even the price of a well-known safe-haven like gold breaks even with this news. One might think it would go up. And for it's leveraged counterpart to fall a whopping 13% during the same 3 days. That's more volatile than it's been in a long time.

If there's one thing that can be predicted, it's that index funds will go up over time.

 

[farmerjohn1324]

You can hold it for more than a day, but the longer you hold it the less it will resemble the returns of the underlying. If the underlying consistently goes up, it will go up by much more due to the compounding. If the underlying consistently goes down, it will go down by much more. If the underlying ranges for long periods of time, it will steadily grind lower. You are much better off shorting an inverse 3x ETF than being long a normal 3x ETF because of this.

True. I wish I could sell it now. I was excited this news would get it to a point where I could sell it without feeling like I lost too much. But no such luck.