Please help me understand this.

[sle]

Quote from Don Bright:
Don't be fooled by "buy and hold" - if you believe the "market" returns something like 5-8% well, you've been sold a bill of goods. Replacement accounting is what it is called. Take out the bad stocks from an index, and replace with good ones. A big scam since the 1929 crash and before. The ONLY Dow Jones stock still in business is GE, right? All stocks go to zero pretty much.

Again, true and false.

The true part is that there are practically no companies that remained the "pillars of the market" over the last 100 year. It's the way of the world, companies rise and fall. Any person that would buy Facebook today and hold it for the next 30 years is an idiot.

Now for the false part. No, there is no survivorship bias in the index price. Nothing prevents you from replicating the index and dropping the stock when it's dropped out of index. These days it's even easier, ETFs do it for you.

The conclusion? Well, simple - buy and hold works on broad indices (though for any term, median return is way smaller then mean one) and it would not work on single stocks.

 

[trader198]

not true. even with broad indeces.

look at qqq, once it was 120+ ten years ago. now it is just half of it, and struggle.

since all things will finally die, like aapl. just sell it, and hold it infinitely, you will win.

when you look at FSLR, you know why you should have "sell and hold" or UNG.

time decay not just applies to option. actually to all things. we human being individuals, experience baby, youth,adult, then aging..... companies individuals are the same, some may last a little bit long, some may just a splash and gone,...

when new technology comes out, aapl may be history again. sell and hold, or buy put is the best way to win the game.

Quote from sle:

Again, true and false.

The true part is that there are practically no companies that remained the "pillars of the market" over the last 100 year. It's the way of the world, companies rise and fall. Any person that would buy Facebook today and hold it for the next 30 years is an idiot.

Now for the false part. No, there is no survivorship bias in the index price. Nothing prevents you from replicating the index and dropping the stock when it's dropped out of index. These days it's even easier, ETFs do it for you.

The conclusion? Well, simple - buy and hold works on broad indices (though for any term, median return is way smaller then mean one) and it would not work on single stocks.

 

[trader198]

stocks are just like fresh vegetables. not those coins, after a while, they becomes antique, and more valuable, the longer you hold, the more thy will worth.

when no fresh, just worthless. there is a time span, when past, it starts to decay, and pretty quickly.

when i read jsessie livermore's book, i found he made his fortune on selling, and he lost his fortune on buying.

 

[newwurldmn]

Quote from trader198:

not true. even with broad indeces.

look at qqq, once it was 120+ ten years ago. now it is just half of it, and struggle.

since all things will finally die, like aapl. just sell it, and hold it infinitely, you will win.

when you look at FSLR, you know why you should have "sell and hold" or UNG.

time decay not just applies to option. actually to all things. we human being individuals, experience baby, youth,adult, then aging..... companies individuals are the same, some may last a little bit long, some may just a splash and gone,...

when new technology comes out, aapl may be history again. sell and hold, or buy put is the best way to win the game.

sle's right about indices. if you bought a well diversified mutual fund 30 years ago, you would be up about 8%/year.

look at the spx over 30 years. look at the dow over 30 years?
For the qqq you took the highest eurphoria level pricing we've had in 3 generations and compared it to a recovery from the greatest bear market we've had in 3 generations.

edit: and to further the single stock point vs indices, how diversified was the qqq in 2000. I don't know but i suspect it was basically all internet companies, intel and msft.

 

[Rationalize]

Quote from Don Bright:

...
But, when you spend money to buy stock, plus carrying costs, it is worse than receiving money for sale of naked put. My only point.
...

Depends entirely on your cost of capital vs the market.

Basically a rates trade, actually.

edit: If a covered call cost more than a naked short put .. then there'd be a frenzy of short stock + long call + short put trades going on, boxing it in.

Come on Don

 

[TskTsk]

Quote from trader198:

not true. even with broad indeces.

look at qqq, once it was 120+ ten years ago. now it is just half of it, and struggle.

since all things will finally die, like aapl. just sell it, and hold it infinitely, you will win.

when you look at FSLR, you know why you should have "sell and hold" or UNG.

time decay not just applies to option. actually to all things. we human being individuals, experience baby, youth,adult, then aging..... companies individuals are the same, some may last a little bit long, some may just a splash and gone,...

when new technology comes out, aapl may be history again. sell and hold, or buy put is the best way to win the game.

QQQ wasnt exactly a broad index back then, neither is it now. Try that same exercise with a basket of stocks that span accross multiple industries and you'll get killed. The market as a whole has nowhere to go but up.

 

[StarDust9182]

Quote from sle:

..... and it would not work on single stocks.

Wow. Someone better tell Mr. Buffet right away.

My analogy is that stocks are like people. They have an infant stage where they can be wiped out if not nursed properly, then grow and get stronger, reach maturity and eventually die away.

Even the mighty GE could have fallen in 2008 or so if deals to help them with their auto financing hadn't stepped in. GM would have seemed untouchable 10 years ago. Chrysler has recurring near-death experiences.

BTW, I have bought back my SPY puts based on the market action so far today and will look to sell calls if an opportunity presents itself. Naked trading requires some nimbleness.

 

[Don Bright]

Quote from sle:

Again, true and false.

The true part is that there are practically no companies that remained the "pillars of the market" over the last 100 year. It's the way of the world, companies rise and fall. Any person that would buy Facebook today and hold it for the next 30 years is an idiot.

Now for the false part. No, there is no survivorship bias in the index price. Nothing prevents you from replicating the index and dropping the stock when it's dropped out of index. These days it's even easier, ETFs do it for you.

The conclusion? Well, simple - buy and hold works on broad indices (though for any term, median return is way smaller then mean one) and it would not work on single stocks.

I was speaking historically, pre-ETF's of course. You could not buy the DJI (INDU) without buying all the stocks, and yet the "brokers" told you the "market returns 6, 8% Historically." Nonsense of course.

Don

 

[sle]

Quote from StarDust9182:
Someone better tell Mr. Buffet right away.

Buffet does not practice "buy and hold", his strategy is "buy and manage". There is a big difference between a passive investor and a true stakeholder.

 

[Random.Capital]

Quote from newwurldmn:


look at the spx over 30 years. look at the dow over 30 years?

That's cherry-picking the last major bottom, and you're not adjusting for inflation.

Adjusted for inflation, in '08 the Dow hit the same level as 1928. That's 80 years of net zero return.