It just might be the case that after all is said and done, the only real winner is the market.
Efficiency of a practically flawless kind may be reached naturally in the struggle for bread.
Joseph Conrad
The Mirror and the Sea, 1906
The more money you have, the harder it is to outperform the market, because the law of averages will mug you in the next alley.
We would never confuse a bull market with having brains.
The one thing the average retail customer has to realize is he will never, ever, ever beat the pit. That's why memberships go for a half million dollars.
The market preys on your weaknesses. It extracts every weakness you have and makes you pay for it.
Markets have got to a point where it's very difficult to make money by being a superior mathematician.
The thing that's great about what I do is that you try to forecast the market, which is a ridiculous job when you think about it.
The problem the market had is that, by having these big arbitage hedge funds out there, a lot of the original anomalies disappeared. They effectively made the market a lot more efficient. The consequence is that everybody was left scrabbling about for a single basis point. In this sense L[ong] T[erm] C[apital] M[anagement] was a victim of its own success.
Financial markets teach you humility. Two years ago, I made these related
forecasts. First I forecast the euro would strengthen as European economic
recovery picked up and the US economy slowed. Second, I forecast euro
strength would be augmented over the next five years by a reduction of Europe's
$100 billion to $150 billion of excess dollar reserves. Third, I forecast
that the authorities would be less concerned over exchange rates, would only
intervene after bigger exchange rate moves, and so exchange rate volatility
would rise. Interestingly, people still ask for my opinion.
Avinash Persaud
Managing director, Global Markets Analysis, State Street Bank
Risk, October, 2000, p. 29
Archaeologists and pathologists have nothing on market analysts: All
these professions are filled with people skilled at forming conclusions too
late for anything useful to come therefrom. Still, societies tolerate
these sorts in the vain hope that we can learn from the mistakes of the past.
At least market analysts get to work indoors and keep their hands
clean.
Howard Simons
Futures, Decmeber 2000, p. 46
Asking a fund manager about arbitrage opportunities is askin to asking a fisherman where his favorite fishing hole is. He will be glad to tell you a fish story from long ago, but he will not tell you where he caught the trout that in our analogy can be translated into millions of dollars, lest there will be hundreds of fisherman in his spot pulling in their own trout and reducing the inefficiency that made that arbitrage opportunity profitable in the first place.
Daniel P. Collins
Futures, December, 2001, p. 66
Blinded by greed and wishful thinking we often seem to believe that huge and growing market momentum is a strong signal that a pattern will continue. In fact, such momentum often creates the very conditions that produce a painful correction - so-called self-referential risk. The growth and eventual unraveling of the sub-prime mortgage market is just the latest example.
David Rowe
Executive Vice President, SunGuard
Risk, December 2008, p. 93
Last updated: January 9, 2011