tag:blogger.com,1999:blog-1110014885778996459.post7838445366462106522..comments2024-03-28T11:48:09.419-07:00Comments on Idiosyncratic Whisk: Stock picking vs. diversificationKevin Erdmannhttp://www.blogger.com/profile/07431566729667544886noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-1110014885778996459.post-781388720924216332017-03-31T12:32:49.855-07:002017-03-31T12:32:49.855-07:00He has some great stuff, doesn't he? (Looong ...He has some great stuff, doesn't he? (Looong posts, though.)<br /><br />Here, I just mean, in the broadest sense, active investment leads to innovations that improve our lives. The early VCs in Google earned huge returns. Passive investors have captured some of those returns as Google became part of the broad market basket of diversified assets. But, mostly, the value of that investment has gone to consumers.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-32856836041401836782017-03-30T06:44:54.398-07:002017-03-30T06:44:54.398-07:00I'm not aware of too much "hard" aca...I'm not aware of too much "hard" academic study, but there is some interesting work here: http://www.philosophicaleconomics.com/ if you don't already know it.<br /><br />PS - I'm curious what you mean in this context by "consumer surplus"?Anonymoushttps://www.blogger.com/profile/06234426239124672535noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-80244315255929604502017-03-28T10:56:00.761-07:002017-03-28T10:56:00.761-07:00Seems like we're in a 2+2 world, at best, does...Seems like we're in a 2+2 world, at best, doesn't it?<br /><br />In some ways, I think we can think of returns to passive investing as a sort of positive externality of active investing (in the broadest sense, including, VC, new firms, etc.). It could be that gains to active investors are generally small, on net, because in liquid markets they are largely captured as consumer surplus and as gains by passive investors.<br /><br />In an extreme thought experiment, imagine that you are the only active investor. Apple sells for $150, and you decide it's worth $200. But, all others are passive, so there is no seller to buy shares from. In the extreme, you might buy one share for $200, but the passive population simply holds their shares as the price reflects the new allocation. Or, maybe, seeing your limit order at $200, the passive market shifts its sell order up to $200 and you never buy a share. The passive market internalizes the gain.<br /><br />The transfers and externalities between active and passive investors are a fascinating topic to me. Does anyone know of any papers that have been done on this idea?Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-55766291185101616972017-03-28T04:38:07.805-07:002017-03-28T04:38:07.805-07:00Great article - captures much of the paradox that ...Great article - captures much of the paradox that swirls around investment approaches. There's also some equilibrium factors I think - if everyone is indexing then active may become more profitable, or when active is greater then passive avoids overpaying and captures some upside - passive aggressive you might say!<br />Either way I wonder sometimes if folks actually are active because in a 2% inflation + 2% interest rates world then 5-10% in the stock market is quite good - but in a 4+4 world it's perhaps not so good if you see what I mean.<br />Are we still in a 2+2 world? I need to know.Anonymoushttps://www.blogger.com/profile/06234426239124672535noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-25039985105397604742017-03-27T20:12:59.471-07:002017-03-27T20:12:59.471-07:00I echo bill's sentiments.
I had a great idea ...I echo bill's sentiments.<br /><br />I had a great idea when oil was at $125 a barrel and oil tankers were full and berthed in Malta, nowhere to offload. Short oil!<br /><br />The market went to $147 and I got murdered. Sure, the market was manipulated, but as an investor you have to play the reality, not the theory. <br /><br />I am happy to say, buying land in L.A. has been a (perhaps lucky) turkey shoot, though I am out of that game now. <br /><br />The big lesson: Make sure you are on the side of the manipulators! <br /><br />Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-23589699330964479392017-03-27T13:36:03.574-07:002017-03-27T13:36:03.574-07:00And smart! That's clearly the prudent course....And smart! That's clearly the prudent course.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-17886921843633650902017-03-27T13:26:53.522-07:002017-03-27T13:26:53.522-07:00I'm wimpy and lazy. Sticking with a Wilshire ...I'm wimpy and lazy. Sticking with a Wilshire 5000 Index, bond index and foreign stock index. I'm the Vanguard prototype. billnoreply@blogger.com