Hi everyone.
My name is Eric and I have been ardently perusing the archives on this site. I am 26 years old.
While my long-term goal is ERE, I am more interested in financial independence in the sense that I can direct time to my passions and interests while having the freedom to dictate where, when, and how much I work.
I do have a college degree. I fortunately do not harbor the bitterness present in those who went into massive debt to finance their educations, mostly because I had very little. I do, however, recognize the opportunity cost associated with only part-time work and no saving during those years.
My primary form of employment has been as a waiter and in the catering business. I managed to stash away a fair sum of cash while living in Yosemite National Park for very little money and working full-time for about 18 months. I rock climbed a lot, too.
I've traveled all over the world, but my main priorities now are climbing, health, reading, and cultivating the important relationships in life. India was my favorite place and I learned a lot about what one really needs. Even though I got funded research as an undergraduate (for a project in India), I didn't go the graduate school route that my profs encouraged.
I never really went down "the path" all that far in terms of standard American life; buying fancy cars, heavy student debt, the house, dogs, kids, etc. So I don't really have all that much to purge. I'm just happy and excited to work less and live more. It is amazing when you realize that you don't need to change all that much with regard to your current living standard, that you really don't need much $$$. I don't mind s little work, just not a lot.
I do have a strong and active interest in investing, which I intend to use to build greater FI. I have a couple methods for selecting stocks, but I primarily invest in low-float momentum/growth companies in strong sectors. I also look for explosive first-stage breakouts after a stock and sector has endured a long correction and shows technical and fundamental strength and signs of accumulation. I use a few tools for this. My methods are based on a couple enduring edges based on market structure and documented by research. Momentum is an enduring edge in the market that is structural. I am actively studying market breadth, as it is a key component for knowing high-risk and low-risk zones for buying and employing certain methods.
Anyway, I've been spending a lot of time on here and am really glad to get more great ideas and inspiration.
Best,
Eric
Hello from SLC
-
RightClawSouth
- Posts: 123
- Joined: Wed Jul 28, 2010 3:15 am
Welcome!
How were you living in Yosemite for 18 months? Was this an RV / tent living kinda deal?
So you're not an EMH fan, I take it? How do these edges endure? Are people generally unaware? I always wonder why someone hasn't taken advantage of the situation if it really does exist. There are so many really smart people who are paid a lot money to look for (and use up) these edges, I just wonder how they can possibly have missed them...
How were you living in Yosemite for 18 months? Was this an RV / tent living kinda deal?
So you're not an EMH fan, I take it? How do these edges endure? Are people generally unaware? I always wonder why someone hasn't taken advantage of the situation if it really does exist. There are so many really smart people who are paid a lot money to look for (and use up) these edges, I just wonder how they can possibly have missed them...
Thanks for the welcome.
I lived in employee housing for 18 dollars a week deducted from my paycheck. After my first season, this consisted of a one room cabin, commonly referred to as a "wob," with shared facilities. My ex-girlfriend and I shared one for a quite a while, and it was a good setup at the time, not to mention a valuable exercise in small living. All concession employees belong to a union, which was also insightful and afforded a higher wage then what one might otherwise expect.
Thanks for the market-related questions.
I don't believe in EMH.
The edges that I refer to are structural - such edges are based on the very structure of the market. A well documented anomaly is known as Post-Earnings Announcement Drift (PEAD). Another anomaly is momentum. Another anomaly is mean-reversion, which works in the presence of momentum. Momentum is very important to understand and something that I study.
Hedge funds, institutions, and individual traders take advantage of such anomalies all the time. You will find that many of the most successful investors/traders utilize earnings and price momentum as part of their strategy.
I don't believe people have missed these strategies. Some strategies based on market edges work best under certain market conditions. So it is good to know when a strategy is most likely to work. For example, employing a value strategy 4 years into a bull market is likely to be less successful than employing a value strategy after a 20-50% decline. Likewise, growth/momentum strategies generally work best when supported by strong institutional demand for shares and in the early to mid part of an earnings cycle. Tops of earnings cycles are characterized by blow-offs. Then people wonder why commodity companies with 6 p/e's lose 80% of their value (since commodity companies typically are not valued on their p/e). Things like market breadth + sentiment can be tools for assessing the general probabilities for various strategies - so can historical precedent. When it comes down to it, no strategy makes money without momentum, so it makes sense to understand momentum.
If you study the momentum anomaly and various research related to it, you will find: (courtest of stockbee.blogspot.com)
1. Jegadeesh and Titman (1993) showed that there is substantial evidence that indicates that stocks that perform the best (worst) over a three to 12 month period tend to continue to perform well (poorly) over the subsequent three to 12 months. Momentum trading strategies that exploit this phenomenon have been consistently profitable in the United States and in most developed markets.
2. Moskowitz and Grinblatt (1999) found evidence of momentum in industry returns. They found that high momentum industries outperform low momentum industries in the next six-months.
3. Momentum profit reverse post 2 year holding periods.
4. Firms that are followed by fewer stock analysts exhibit greater momentum.
5. Like price momentum, stocks with high earnings momentum outperform stocks with low earnings momentum.
6. A momentum strategy that buys stock near their 52 week high is profitable.
7. Momentum effect is more pronounced in small stocks.
Refer to this link for further discussion of PEAD: http://stockbee.blogspot.com/2010/01/ea ... ategy.html
The primary idea is that the very structure of the market causes such edges to persist. Low float stocks have fewer shares available to the public, which is why many big stock market winners also had relatively low floats at the start of their advances. It takes a long time for institutions to establish meaningful positions in such companies. Many of these winners also have a large range expansion after a period of low volatility/correction. It would therefore make sense to look for stocks making large one-day moves and develop a way to evaluate the context of such moves.
The key is to recognize such anomalies and aim to build a method based on these edges. That doesn't mean 100% guarantees, but that a method based on market structure and persistent anomalies has potential to outperform no method based on no edge.
A very useful resource with many free articles can be found at stockbee.blogspot.com There is much discussion about methods, mental models, and self-efficacy. This is where I really started my learning.
Best,
Eric
I lived in employee housing for 18 dollars a week deducted from my paycheck. After my first season, this consisted of a one room cabin, commonly referred to as a "wob," with shared facilities. My ex-girlfriend and I shared one for a quite a while, and it was a good setup at the time, not to mention a valuable exercise in small living. All concession employees belong to a union, which was also insightful and afforded a higher wage then what one might otherwise expect.
Thanks for the market-related questions.
I don't believe in EMH.
The edges that I refer to are structural - such edges are based on the very structure of the market. A well documented anomaly is known as Post-Earnings Announcement Drift (PEAD). Another anomaly is momentum. Another anomaly is mean-reversion, which works in the presence of momentum. Momentum is very important to understand and something that I study.
Hedge funds, institutions, and individual traders take advantage of such anomalies all the time. You will find that many of the most successful investors/traders utilize earnings and price momentum as part of their strategy.
I don't believe people have missed these strategies. Some strategies based on market edges work best under certain market conditions. So it is good to know when a strategy is most likely to work. For example, employing a value strategy 4 years into a bull market is likely to be less successful than employing a value strategy after a 20-50% decline. Likewise, growth/momentum strategies generally work best when supported by strong institutional demand for shares and in the early to mid part of an earnings cycle. Tops of earnings cycles are characterized by blow-offs. Then people wonder why commodity companies with 6 p/e's lose 80% of their value (since commodity companies typically are not valued on their p/e). Things like market breadth + sentiment can be tools for assessing the general probabilities for various strategies - so can historical precedent. When it comes down to it, no strategy makes money without momentum, so it makes sense to understand momentum.
If you study the momentum anomaly and various research related to it, you will find: (courtest of stockbee.blogspot.com)
1. Jegadeesh and Titman (1993) showed that there is substantial evidence that indicates that stocks that perform the best (worst) over a three to 12 month period tend to continue to perform well (poorly) over the subsequent three to 12 months. Momentum trading strategies that exploit this phenomenon have been consistently profitable in the United States and in most developed markets.
2. Moskowitz and Grinblatt (1999) found evidence of momentum in industry returns. They found that high momentum industries outperform low momentum industries in the next six-months.
3. Momentum profit reverse post 2 year holding periods.
4. Firms that are followed by fewer stock analysts exhibit greater momentum.
5. Like price momentum, stocks with high earnings momentum outperform stocks with low earnings momentum.
6. A momentum strategy that buys stock near their 52 week high is profitable.
7. Momentum effect is more pronounced in small stocks.
Refer to this link for further discussion of PEAD: http://stockbee.blogspot.com/2010/01/ea ... ategy.html
The primary idea is that the very structure of the market causes such edges to persist. Low float stocks have fewer shares available to the public, which is why many big stock market winners also had relatively low floats at the start of their advances. It takes a long time for institutions to establish meaningful positions in such companies. Many of these winners also have a large range expansion after a period of low volatility/correction. It would therefore make sense to look for stocks making large one-day moves and develop a way to evaluate the context of such moves.
The key is to recognize such anomalies and aim to build a method based on these edges. That doesn't mean 100% guarantees, but that a method based on market structure and persistent anomalies has potential to outperform no method based on no edge.
A very useful resource with many free articles can be found at stockbee.blogspot.com There is much discussion about methods, mental models, and self-efficacy. This is where I really started my learning.
Best,
Eric