Comment by bee_rider
3 days ago
I see this form of argument sometimes here but I really don’t get it.
Lots of people don’t play the stock market or just invest in funds. It seems like just a way of challenging somebody that looks vaguely clever, or calls them out in a “put your money where your mouth is” sense, but actually presents no argument.
Anyway, if you want to short Nvidia you have to know when their bubble is going to pop to get much benefit out of it, right? The market can remain stupid for longer than you can remain solvent or whatever.
Spot on on the timing being important. I don't think you need to fine-tune it that much; short and hold until the pop happens. If you hold off for a the pop could happen at an indefinite time; maybe very far from now, then I think that invalidates the individual prediction.
One frustrating aspect of investing is that confident information is tough to come by. It's my take that if you have any (I personally rarely do), you should act on it. So, when someone claims confidently (e.g. with adjectives that imply confidence) that something's going to happen, then that's better than the default.
I don't have the insight the claimer does; my thought is: "I am jealous. I with I could be that confident about a stock's trajectory. I would act on it."
What you're describing is what Nassim Taleb calls "tawkers." People like economists, journalists, pundits, etc. who talk big but don't have any skin in the game for being wrong or irrelevant (time is a great example). Since there is no feedback loop to punish bad or irrelevant takes, they can continue tawking for a long time.
When I have similarly strong opinions, I do act on it because I enjoy seeing how right or wrong I was. Markets are a harsh, expensive teacher. You either learn a trick or two about uncertainty, overconfidence, humility, etc, or you run out of money.
I think you're better at it than you're letting on even if you decided to not play. You already understand the properties of the game.
I was a student up until 2009; watching people talk about buying houses for 50K and selling them for 100K, everyone talking about easy money.
I knew things were bad when a friend of my sister was complaining that her father(a building framer) was not able to get a loan for a 500K house, something that his colleagues had been able to get. It took another 6 months before the collapse started to hit and the banks when up.
Timing is hard.
You can short over any period of time. You just pay interest for borrowing the stock.
Basically, its a really good question to ask, because even in the case that the person doesn't have investments because they don't play the stock market, it shows that they are not motivated enough to actually go short the security, which means that they truly aren't that sure.
I agree with most everything you said, but the timing doesn't have to be exact and you don't have to short the stock to profit on its downfall. You can buy long-dated puts. Alas, they're not cheap because the risk is very real.