There were I believe only three major equities being traded back then—Bank of England, and a couple of others (can’t recall—East India Company maybe), plus the South Sea Company soon after. The stock market continued to consist of a smallish number of large monopoly companies until the 19th century, when many more companies were listed.
True. Which? magazine (the UK product review magazine) did a test of mattresses a while back in which the most expensive mattress was one of the least comfortable, and the most comfortable was one of the cheapest.
OK, well out of interest I’ve just done you a chart with grey lines averaging crashes before & after Bretton Woods. (‘After’ includes 2020 on this one.)
Not sure whether the difference is significant. The post-Bretton (dashed) line shows a bounce back for the first few weeks, but by year end they’re much the same.
UK from Global Financial Data (paid), US from Yahoo Finance (free).
Global Financial Data now provide *daily* FTSE 100 data from 1692 - remarkable. (The 1696 & 1720 lines above were from their earlier monthly data.)
Indeed this analysis would be interesting, though I don’t know if long-term enough data (e.g. a century’s worth) is available in this level of detail.
I assume there might indeed be clearer patterns in how individual companies’ prices react, perhaps depending on their size and liquidity. Though again I expect most, if not all, of any predictability has disappeared in recent decades.
I once heard excellent advice: spare no expense on buying the most comfortable shoes, chairs (eg work chair), and bed/mattress you can find. Because you spend almost 100% of your life standing, sitting, or lying down.
In World War II the UK government banned commercial bakers from making white bread, and required them to use national flour to bake ‘the National Loaf’. This was particularly unappetising and unpopular. I think that as in World War I it had to be sold stale; or in any case, it went stale quickly. I suspect in part it was intended to be unappetising to limit consumption.
It’s probably taken about a year’s full-time work (since 2006). Though I could have spent much less time by using a simpler albeit less effective version of what I do (as indeed I did initially) - just that I like improving it and investigating new things that might work. It is kind of a hobby, but involving a sufficiently serious amount of time and money and risk to be rather more than that.
I think it probably has been worth it, as I reckon the value of my edge is rather bigger than my time cost in salary equivalent, though it is hard to be sure because of the large variability in returns (not least because of two big crashes since I started).
But actually I wouldn’t encourage others to try. There can’t be many opportunities to beat the market, not many people can risk big enough bets to justify the time taken finding them, and there’s a lot to be said for adopting a simple mechanical system that takes little time; maybe just buy & hold (though maybe a bit fancier than that). Not sure it’s worth trying to pick stocks (I almost never do that) - just buy an index; though there is some fun to be had doing so, like picking horses, and kidding yourself you have special insight!
I see your point re reduced productivity growth affecting future generations. Though how much difference that will make to the present generation’s vs future generation’s wellbeing isn’t clear.
Indeed I hadn’t thought of the family point, and will add it.
I discovered a year ago something that substantially improves my mood and energy. In the shower each morning, I rub the sole of each foot for just a few seconds with a flannel (or anything slightly rough would do). This produces a buzz (kinda endorphins + caffeine) that lasts all day, without wearing off as it is renewed by standing or walking. It hasn’t diminished over time. It’s an amazing free lunch. Not just making life 0.1% better, I’d genuinely say 30% better.
Perhaps I have particularly sensitive feet. But presumably this works for some other people, they just haven’t tried it; after all, it took me decades to discover it.
Likewise, including weekends. Going to bed at roughly the same time also helps, but it’s waking up time that’s crucial.
Thanks, good post.
Three anecdotes about having an edge but only in illiquid markets where the derivable value is limited:
1. Back in 1991 a friend of mine had the following market-beating insight. He was watching Freddie Mercury on TV a few months before he died; at this point it was not publicly known he was ill with AIDS (nor even, bizarrely, that he was gay—I think all was only revealed just before he died).
My friend said “He’s not looking well...” and then made a brilliant inference: ”...so Bohemian Rhapsody will be the Christmas No. 1 record this year, then”. (In the UK anyway, a big deal is/was made about which single would chart at no. 1 on Christmas Day, and you could even place bets on it.) And so it came to pass—Freddie Mercury unexpectedly died a few weeks before Christmas, Bohemian Rhapsody (dating from 1975) unexpectedly went to no. 1, and my friend kicked himself forever more about not placing a bet on it—bookmakers would have offered odds of 100-1 or even 1000-1.
The catch though, from a couple of times I’ve tried placing big bets on unlikely events, is that (most) bookmakers don’t seem to accept them. They might accept a $100 bet but not a $1000 one on such odds. They suspect you have inside information. (The same happens I’ve heard if you repeatedly win at roulette in some casinos. Goons appear and instruct you firmly that you may only bet on the low-stakes tables from now on.)
Freddie Mercury’s unhealthy appearance was public information. If the market in bets on Christmas no. 1 records were liquid enough, thousands of others would be considering the third-order consequences of such information & making similar inferences, the odds would be rapidly changing, and my friend would have lost his edge by the time he placed his bet.
So while he could have beaten the illiquid market, he wouldn’t have made much in expectation—maybe not enough to justify the time & risk—and conversely he couldn’t have beaten a liquid market which would accept big enough bets.
2. Similarly, another friend of mine worked for a while with a tech startup that was arbitraging between betting exchanges (like Betfair) on which ordinary people can lay odds as well as place bets. As a result of which, different exchanges often show somewhat different odds on the same event. After much development and testing, the startup realised that though they could reliably identify & arbitrage these odds differences, they could only make dollars per hour doing so, not thousands. There wasn’t enough liquidity on the betting exchanges. The wronger the odds someone was laying, the smaller the bet they’d accept. So the startup closed down.
3. I’ve been trading equities since 2006 on various index derivatives, in very large amounts. I have expertise on one niche area, involving a lot of data & programming, and beat the market for some years with it, until the effect in question went away (as it was already known about, albeit quite obscure).
Recently I’ve found a derivative of a particular index that seems to have excess risk-adjusted returns in certain bets on it, so have been trading it for a while. Again I’ve had to source and estimate and crunch large amounts of hard-to-obtain historical data, writing my own software to manipulate it. But the inefficiency is probably only because this derivative is quite illiquid. Some days I’m doing a significant fraction (even a quarter or a third!) of the whole day’s trading on it! (Though I am betting very large amounts.)
So I reckon I probably am beating the market, but only because I’ve found a sweet spot where there’s extra money to be made, but not enough for more than a few others to do so too. I’m grabbing a large part of the edge to be had, by using kinda public but hard-to-get information. If the derivative were more liquid, others would be finding similar things to me. If it were less liquid (like Christmas no. 1 bets) I couldn’t place big enough trades to be worthwhile.
(There is also extra risk from the limited liquidity (e.g. of slippage when stopped out) which might reduce returns a lot in an extreme situation—though I suspect not enough to remove my overall edge. The risk needs very careful handling.)
Thanks for this.
I’m not a geographer/economist, but I assume the historical productivity benefit of cities has all boiled down to proximity, hence transport—people close enough that they can work together, trade, etc. People who choose to de-urbanize will explicitly take into account these effects in their decision—can they still conveniently get to work (if they need to visit an office once a week, say), see friends, get to a cinema/mall, etc. If they find the rural life too quiet (i.e. too far from places they want to be) they won’t move, or will move back to a town/city.
So I assume people will choose their own optimum; leaving only the problem of externalities, primarily indeed climate change. I can see de-urbanization would increase at least some driving, e.g. further to get to stores (though online shopping will increase), and thereby have a climate effect. So I’ve added a mention of that.
If climate change is dealt with in a suitable way, e.g. carbon taxes, that would however internalize this externality and so people would respond in an appropriate way—e.g. by cutting down on unnecessary trips to the mall.
UBI—the +/- indicates the uncertainty. But there is certainty of *calls* for UBI (which is how I worded it) - already happening!
Exercise—fair point, maybe there will be a fall-off in exercise even after lockdown. So I’ve reworded. I reckon a lot of gyms will go bust, because their business model relies on automatic renewals of membership subscriptions even though many people don’t go very often. Presumably subscriptions have all stopped, and after lockdown I think a lot of people won’t restart them, having figured out how to exercise without a gym; or become couch potatoes.
Indeed the mental health harms will be big, but as the post was intended to list only benefits, I was focussing on the long-term upsides. I reckon there will be big short- to medium-term harms (e.g. from isolation, anxiety, then unemployment) but also benefits from recognition of the harms; e.g. better recognition of mental health problems, less stigma, more healthcare funding. Which may well be permanent. Anyway I’ll reword to make it a bit clearer.
Re relationships—point taken, so I’ll change that to say ‘Some relationships’. Indeed there’s been a big upswing in domestic violence etc., and no doubt break-ups and divorces will rise too. But also people learning to live better together, spend more time together etc.
Yes I’m unsure about redistribution of wealth too, hence the +/-.
With the big exception of the reduced existential risk, I’m not claiming an overall net benefit. Though even existential risk aside, perhaps there is one (would need to do the calculations). E.g. it seems to me the long-term changes in work and work-life balance could be a huge permanent benefit; such as reductions in commuting and office usage, which seem a vast waste of time & money. It’s a shame it takes a disaster like this to make it happen, but that seems to be the way the world works. The status quo has to be stretched to breaking point.
Also not all the destruction is bad in itself - ‘creative destruction’ is a real thing. Some organisations really are just a waste of time & money, and are better off closed down so people & capital can find more productive use. Many were in a ‘zombie’ state before coronavirus. The UK department store chain Debenhams for example, which went bankrupt last month only a year after the previous time it had gone bust and been rescued. An outdated retail model for which there is no longer enough demand.
I also know lots of classical musicians who barely scrape a living, and really there are too many chasing too little work. It can take decades for people to realise they’re fighting a losing battle; a crisis can accelerate that.
I thought I read Ord give the 600 year figure, but maybe I’m mistaken. Anyway that would presumably be a correct extrapolation if we continue ‘business as usual’ - i.e. without taking steps that would reduce the risk. (Not least as the risks are otherwise increasing, due to e.g. it getting easier and easier to create deadly bioweapons.)
I don’t see anything wrong in using current population forecasts, since I don’t think anyone’s suggesting they would be far wrong AFAIK? Give or take a few billion. (Unless we leave earth and set up massive space colonies elsewhere, which I suppose could happen in a few centuries perhaps, but even then seems unlikely to produce very many billions more people that quickly.)
Ok—I see the analogy. Though not sure it points to a clear solution to the paradox.
Thanks, good points.
All are intended to be net benefits anyway, or possibly so (hence ?s).
Which do you particularly disagree with?