The Market Isn't As Smart As You Think It Is
(Edited)
Many feel the market is something to be overwhelmed by. They are intimidated by the "intelligence" of it. To be honest, the market is filled with people who aren't as smart as they think they are.
In this video I discuss how most money managers cannot be the S&P. At the same time, the financial services industry is full of people who really don't carry high degrees of smarts. Sure there are some high intellectual people involved with quant funds and things of that nature; ones who IQs are off the charts. However, that is not the bulk of the financial industry.
▶️ 3Speak
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Nice. I also have the perception that the people who do trading or manages a fund for a living are geniuses or gods.
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When I learned about how many of them underperform, I realized I might as well find out a way to invest myself. I completely agree about the short-term outset by most of the crowd. I feel like the new investors who got in during the March bottom and keeps putting everything into short-dated options will lose all their gains eventually. I prefer to buy based on certain conditions and generally buy closer to support as I lose less when I am wrong. If you have a plan and you follow it, you should do well on your own.
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Most of the stuff is done by AI now as far as I know and the guys we saw on films in these big rooms sitting behind the computers will disappear. I enjoy trading as that is the only way to learn and is something I will study over the next 5 years as knowledge and understanding with the most important part of insight can go a long way.
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markets are a bunch of people chasing around fads, like that episode of Ed Edd and Eddy ( I'm like the three Edds in this analogy )
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Summary:
In this video, the speaker discusses the intelligence level of participants in the market, emphasizing that the market is primarily composed of individuals who may not possess high IQ levels or extensive financial knowledge. He points out that many people in the market, including individual investors, corporate buyers, and even some money managers, may lack the necessary understanding of how the market works. He argues that successful investors like Warren Buffett and Charlie Munger approach the market differently from the majority, focusing on analysis and staying rational amidst the fears and greed that often drive market actions. The speaker suggests that being a contrarian and thinking independently can be advantageous in navigating the market. He also mentions the rise of automated trading and passive investing, highlighting the prevalence of technical analysis-based trading and the influence of emotions on market trends.
Detailed Article:
The speaker delves into the topic of market intelligence by asserting that the majority of participants in the market may not possess high levels of intellect. He distinguishes between the select few individuals, such as those at hedge funds or institutional investors, who exhibit exceptional intelligence and expertise in the financial realm, and the average participants who make up the bulk of the market. He paints a picture of a landscape where many individuals, including corporate buyers and even some money managers, lack the financial acumen needed to comprehend the intricacies of the market.
Moreover, the speaker draws attention to the behavior of the average investor, particularly in the context of workplace scenarios where discussions about retirement plans, like 401k programs, often leave many participants perplexed. He highlights the herd mentality that dominates the market, driven by emotions of fear and greed. The speaker contrasts this behavior with that of successful investors like Warren Buffett and Charlie Munger, portraying them as individuals who approach the market with analytical rigor and emotional detachment.
The speaker advocates for independent thinking and contrarian approaches to investing, emphasizing the benefits of standing apart from the crowd and making informed decisions based on thorough analysis. He criticizes the prevalence of sales-focused individuals in the financial industry, noting the limited success of many money managers in beating the market, especially the S&P 500. The speaker discusses the shift towards automated trading, where technical analysis-based strategies dominate a significant portion of market activity, driven by predefined buy and sell levels.
Furthermore, the speaker touches on the rise of passive investing and the diminishing role of traditional financial services professionals, predicting a potential overhaul in the industry as technology, such as robo-advisors, becomes more prevalent. He encourages viewers not to be intimidated by the market, stressing the importance of conducting personal research and maintaining a rational approach amidst market fluctuations. Ultimately, he underscores the dynamic and unpredictable nature of the market, cautioning against blindly following trends and advocating for a calculated and independent investment strategy.