It contains a tip that a certain stock will soon rise sharply.
A week passes, and as he predicted, the stock goes up.
The Baltimore Stockbroker Parable
How one stockbroker managed to achieve a 100% success rate in predicting stock movements
/THREAD/
It contains a tip that a certain stock will soon rise sharply.
A week passes, and as he predicted, the stock goes up.
And next week, the stock craters.
Every time the prediction comes true.
That sounds like a great deal, right?
It is incredibly unlikely that a complete buffoon with no special knowledge would have gotten 10 correct stock predictions in a row.
For a 50-50 chance of being right or wrong, and 10 picks, the calculation is (1/2) in the power of 10.
This comes down to 1/1024, less than 0.1%.
But things look different from the stockbroker's side.
He sent out 10,240, half with the prediction the stock will rise and half with the opposite prediction.
The 5,120 who received the incorrect prediction never heard from him again.
The recipients that got the correct prediction, receive another newsletter.
Half the recipients get the "correct" prediction and half of them the "incorrect".
Ten people who think the stockbroker from Baltimore is an investing genius.
Ten people from whom he expects to collect hefty fees.
A British magician, Derren Brown, pulled off a similar stunt, mailing various horse-racing picks to thousands of people, eventually convincing one that he had created a foolproof prediction system.
When an investment firm launches a mutual fund, they often maintain it in-house before they open it to the public.
Typically, these firms incubate dozens of funds at the same time, experimenting with different strategies and allocations.
The ones that fail, are thrown into the trash can, and the public never notices they even existed.
Instead, they offer the same mediocre returns as all the other mutual funds in the market.
It means you would be better off resisting the temptation of the hot new funds with the excellent track record and incredible returns over the past couple of years.
Stop looking for the stock magician with the golden touch and put your money in a low-cost index fund and forget about it.
https://t.co/l9sb5X2z2F
Jack Bogle, the Father of Indexing
— Kostas \U0001f468\u200d\U0001f4bc \U0001f4c8 \U0001f4b8 (@itsKostasWithK) January 8, 2021
How John "Jack" Bogle's creation impacted investors more than Bill Gates, Steve Jobs, and Warren Buffett combined
/THREAD/ pic.twitter.com/4wPi8x3cXn
You have been lured by the impressive results, but you don't know how many chances they had to get them.
But they never tell you how many predictions they have made.
/END/
https://t.co/a0k6jzZ6wg
The Baltimore Stockbroker Parable
— Kostas \U0001f468\u200d\U0001f4bc \U0001f4c8 \U0001f4b8 (@itsKostasWithK) January 23, 2021
How one stockbroker managed to achieve a 100% success rate in predicting stock movements
/THREAD/ pic.twitter.com/xCRL6CfxBu
https://t.co/6o3A2IQCMs
List of Educational Threads on Financial Independence and Investing for Beginners#FinancialIndependence #financialeducation #financialfreedom #investing
— Kostas \U0001f468\u200d\U0001f4bc \U0001f4c8 \U0001f4b8 (@itsKostasWithK) January 3, 2021
1/ Financial Freedomhttps://t.co/8j5KG5ioFK
More from Kostas 👨💼 📈 💸
The Mother of All Squeezes
How Volkswagen went from being on the brink of bankruptcy to the most valuable company in the world in two days
/THREAD/
1/ At the peak of the 2008 financial crisis, Volkswagen was considered a very likely candidate for bankruptcy.
Heavily indebted and already financially struggling before 2008, with car sales expected to plummet due to the ongoing global crisis.
2/ With GM and Chrysler filing for bankruptcy in 2009, shorting the VW stock would seem a safe bet.
If you are not familiar with stock shorts and short squeezes check my thread
3/ On October 26, 2008, Porsche announced it had increased its stake at VW from 30% to 74%.
This was a surprise to many who were led to believe that Porsche wasn't planning a takeover of VW, based on the company's announcements.
4/ Before the announcement, the short interest was approximately 13% of the outstanding shares, a number considered relatively low.
Porsche had a 30% stake, the Lower Saxony government fund held 20% of the shares, and another 5% was held by index funds.
How Volkswagen went from being on the brink of bankruptcy to the most valuable company in the world in two days
/THREAD/
1/ At the peak of the 2008 financial crisis, Volkswagen was considered a very likely candidate for bankruptcy.
Heavily indebted and already financially struggling before 2008, with car sales expected to plummet due to the ongoing global crisis.
2/ With GM and Chrysler filing for bankruptcy in 2009, shorting the VW stock would seem a safe bet.
If you are not familiar with stock shorts and short squeezes check my thread
Shorts, Squeezes, and Betting Against Stocks
— Kostas on FIRE \U0001f525 (@itsKostasOnFIRE) January 27, 2021
What is short selling, how is it used and why is it risky?
/THREAD/ pic.twitter.com/PyDd208hFe
3/ On October 26, 2008, Porsche announced it had increased its stake at VW from 30% to 74%.
This was a surprise to many who were led to believe that Porsche wasn't planning a takeover of VW, based on the company's announcements.
4/ Before the announcement, the short interest was approximately 13% of the outstanding shares, a number considered relatively low.
Porsche had a 30% stake, the Lower Saxony government fund held 20% of the shares, and another 5% was held by index funds.
More from Trading
12 TRADING SETUPS used by professional traders:🧵
Collaborated with @niki_poojary
Here's what you'll learn in this thread:
1. Capture Overnight Theta Decay
2. Trading Opening Range Breakouts
3. Reversal Trading Setups
4. Selling strangles and straddles in Bank Nifty
6. NR4 + IB
7. NR 21-Vwap Strategy
Let's dive in ↓
1/ STBT option Selling (Positional Setup):
The setup uses price action to sell options for overnight theta decay.
Check Bank Nifty at 3:15 everyday.
Sell directional credit spreads with capped
@jigspatel1988 2/ Selling Strangles in Bank Nifty based on Open Interest Data
Don't trade till 9:45 Am.
Identify the highest OI on puts and calls.
Check combined premium and put a stop on individual
@jigspatel1988 3/ Open Drive (Intraday)
This is an opening range breakout setup with a few conditions.
To be used when the market opens above yesterday's day high
or Below yesterday's day's
Collaborated with @niki_poojary
Here's what you'll learn in this thread:
1. Capture Overnight Theta Decay
2. Trading Opening Range Breakouts
3. Reversal Trading Setups
4. Selling strangles and straddles in Bank Nifty
6. NR4 + IB
7. NR 21-Vwap Strategy
Let's dive in ↓
1/ STBT option Selling (Positional Setup):
The setup uses price action to sell options for overnight theta decay.
Check Bank Nifty at 3:15 everyday.
Sell directional credit spreads with capped
A thread about STBT options selling,
— Jig's Patel (@jigspatel1988) July 17, 2021
The purpose is simple to capture overnight theta decay,
Generally, ppl sell ATM straddle with hedge or sell naked options,
But I am using Today\u2019s price action for selling options in STBT,
(1/n)
@jigspatel1988 2/ Selling Strangles in Bank Nifty based on Open Interest Data
Don't trade till 9:45 Am.
Identify the highest OI on puts and calls.
Check combined premium and put a stop on individual
Thread on
— Jig's Patel (@jigspatel1988) July 4, 2021
"Intraday Banknifty Strangle based on OI data"
(System already shared, today just share few examples)
(1/n)
@jigspatel1988 3/ Open Drive (Intraday)
This is an opening range breakout setup with a few conditions.
To be used when the market opens above yesterday's day high
or Below yesterday's day's
#OpenDrive#intradaySetup
— Pathik (@Pathik_Trader) April 16, 2019
Sharing one high probability trending setup for intraday.
Few conditions needs to be met
1. Opening should be above/below previous day high/low for buy/sell setup.
2. Open=low (for buy)
Open=high (for sell)
(1/n)
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1/ Some initial thoughts on personal moats:
Like company moats, your personal moat should be a competitive advantage that is not only durable—it should also compound over time.
Characteristics of a personal moat below:
2/ Like a company moat, you want to build career capital while you sleep.
As Andrew Chen noted:
3/ You don’t want to build a competitive advantage that is fleeting or that will get commoditized
Things that might get commoditized over time (some longer than
4/ Before the arrival of recorded music, what used to be scarce was the actual music itself — required an in-person artist.
After recorded music, the music itself became abundant and what became scarce was curation, distribution, and self space.
5/ Similarly, in careers, what used to be (more) scarce were things like ideas, money, and exclusive relationships.
In the internet economy, what has become scarce are things like specific knowledge, rare & valuable skills, and great reputations.
Like company moats, your personal moat should be a competitive advantage that is not only durable—it should also compound over time.
Characteristics of a personal moat below:
I'm increasingly interested in the idea of "personal moats" in the context of careers.
— Erik Torenberg (@eriktorenberg) November 22, 2018
Moats should be:
- Hard to learn and hard to do (but perhaps easier for you)
- Skills that are rare and valuable
- Legible
- Compounding over time
- Unique to your own talents & interests https://t.co/bB3k1YcH5b
2/ Like a company moat, you want to build career capital while you sleep.
As Andrew Chen noted:
People talk about \u201cpassive income\u201d a lot but not about \u201cpassive social capital\u201d or \u201cpassive networking\u201d or \u201cpassive knowledge gaining\u201d but that\u2019s what you can architect if you have a thing and it grows over time without intensive constant effort to sustain it
— Andrew Chen (@andrewchen) November 22, 2018
3/ You don’t want to build a competitive advantage that is fleeting or that will get commoditized
Things that might get commoditized over time (some longer than
Things that look like moats but likely aren\u2019t or may fade:
— Erik Torenberg (@eriktorenberg) November 22, 2018
- Proprietary networks
- Being something other than one of the best at any tournament style-game
- Many "awards"
- Twitter followers or general reach without "respect"
- Anything that depends on information asymmetry https://t.co/abjxesVIh9
4/ Before the arrival of recorded music, what used to be scarce was the actual music itself — required an in-person artist.
After recorded music, the music itself became abundant and what became scarce was curation, distribution, and self space.
5/ Similarly, in careers, what used to be (more) scarce were things like ideas, money, and exclusive relationships.
In the internet economy, what has become scarce are things like specific knowledge, rare & valuable skills, and great reputations.