Tiziano schreef: ↑17 januari 2019, 06:14 John Bogle is overleden..

But, my time there was also quite interesting and formative for why and how I became a Boglehead. Sharing a few reflections below. You see, I worked directly in the equity trading floor of Lehman. My daily responsibilities were to trade large market-moving portfolios of stocks on behalf of large institutional investors (BlackRock, Vanguard, Fidelity, etc.)

Broadly speaking (and hopeless generalization), there were two types of trading that went on the pre-Volcker Rule days: one was "agency" trading, where you traded as an agent on behalf of client and took a commission, and the other was "prop" or proprietary trading where you traded on Lehman's own proprietary books and tried to make money based on selling a stock for more than you bought it for.

The "agency" traders where like truck drivers. Unglamorous, day to day execution, steady margins. The "prop" traders were Ferrari-driving drag racers. Everyone wanted to be a prop trader. But what I noticed is that prop traders didn't last long — you were only as good as your last trade, and if you made a bad trade that lost a certain amount of money, sometimes you were fired on the spot. The head of prop trading was this mythical master of the universe that everyone looked up to and wanted to emulate. But what nobody pointed out was that he won a years-long game of survivor, being lucky to be in the right place at the right time over and over again, an astronomically low statistical likelihood.

Over time, I observed that the trading floor at Lehman Brothers had all sorts of informational, technological, and talent advantages that Mr. and Mrs. Retail Investor did not. These included:
Faster access to market moving insights. Due to Regulation FD, all access to market moving insights are released publicly, but the Wall Street traders can often get information seconds or even minutes before they hit the AP news wires via Bloomberg feeds and other sources. In fact, there was even a case a few years ago where the SEC was selling early access to public filings before they hit the EDGAR website. That is enough time to place a large positional bet. We even had an "event driven team" whose sole job it was to scan newswires and place trades based on keyword algorithms.
Exclusive access to market moving metadata. Lehman and a few other top shops on the street, like Goldman and the two Morgans, traded the lion's share of institutional investor activity. That means they had access to metadata, things like volume of stock to be traded, volumes of buy and sell orders, broken down by industry. On the basis of this metadata (which by the way does not contain any material non-public information), traders were able to infer directional swings of the market. Of course, this wasn't available to the general public.
Index composition intelligence. Not only that, but index funds relied on these top brokers to maintain their indices. Every few weeks or months, we had an "index rebalance", a highly technical task during which an index (like the S&P 500) recalculates its components and their weights, and all the index funds rejigger their multi-trillion dollar portfolios to match. We had a team whose sole job it was to minimize the tracking error and their insights on how many buy and sell orders of what stocks were likely to come through based on index changes — again, not material non-public information — but provided arbitrage opportunities for traders.
Faster pipes. Wall Street players have better, more direct, and faster links to the market, and often better access to liquidity.
The reason I am sharing all this was that even with all these informational and technological advantages, the "prop" traders' profits were volatile, uneven, and taken over a period of years, was unclear if it ever outperformed the "agency" guys (and often led a trail of of corpses in their wake). Yet, the survivorship bias of a few extraordinarily lucky individuals who were able to be in the right place at the right time over and over and over again made everyone dream of chasing the brass ring.

Needless to say, if you are market-timing or picking stocks on your Fidelity.com account... and you don't have the advantages and resources these "prop" traders did.. you are even more unlikely to outperform the market.

Tiziano schreef: ↑18 maart 2019, 20:47 Het enige interessante zijn de emerging markets met vooral China.