Well written and thought provoking article. The market is changing faster than it used to. Just like a lot of other things good and bad. You are correct that adaptation is key. On a separate note, I wonder how AI will impact things including swing trading. I expect it will make dinosaurs out of a lot of people's strategies including some I use now. Happy Turkey Day! I look forward to reading your posts in 2025.
Hi Andrew great piece! I am currently struggling with this situation right now but your writing encouraged me to move away from dogma-like thinking which eventually leads to self-pity when things don't go your way. Charlie Munger once said that "all investing is value investing" and you your articles explains this well. Looking for value in different ways doesn't make you less of a value investor, instead we are trying to understand and analyze a company in various lenses.
Thanks for the article Andrew. This is re: PS section about AI taking over investments eventually. Whilst the tool / technology is definitely going to or rather already has percolated into the work flows of most investors, professional or individual - I am rather sanguine about the future as far as AI is concerned.
Firstly, as you have mentioned above, AI will likely be used in conjunction with humans so as to achieve a man-machine interface which will likely outperform either working in isolation. Second, assuming that AI takes over completely, one would need to be pragmatic to the fact that AI is and will likely be in the future developed and maintained by humans - each with their own biases, flaws, strengths and weaknesses. Now assuming we reach a stage where AI develops enough to become self-correcting - as far as markets are concerned, even the self correcting features are going to be written by humans, or at least the code will be written by AI developed by humans.
Thence, the key I think here is going to be the genesis of every technological cycle. Having engaged in a similar debate a few years ago with professional money managers, I believe having a fear of being replaced by machines is actually a positive sign, as it is an indicator of people worrying about their professional abilities to a healthy level (the same paranoia can be seen in almost every other industry - including programming). My take is that fundamental investing with a high touch (human touch i.e. ;) hehe ) is here to stay for the long run irrespective of developments otherwise. Will the speed of the markets and evolution increase? Yes, but then markets are inefficient and evolution not always perfect therefore, opportunities will always be aplenty!!
Thanks again for your regular notes and happy investing!!
I am a retail investor so take this with a grain of salt. The markets have changed but certain things like emotions in investing (greed + fear) are still the same.
A lot of the time, the efficient market hypothesis holds true and the speed at which prices reflect new fundamentals seems to be getting faster and faster. However, I think its still possible to make alpha in the markets because of the momentum effect and the fact that many investors still trade on narratives / stories.
Momentum Effect - I believe this effect was first written by Jagadeesh and Titman in 1993 and the basic premise that stocks that do well in the 1-year timeframe tend to continue going up and outperform still holds true today. Investors and traders these days seem to have supercharged the momentum effect which is why you see some stocks going parabolic sometimes. I wouldn't discount this effect and ignore stocks just because they go up. I would use price action as a signal to see which stocks may outperform later.
Narrative / Stories - I think even more than ever, retail and some professional investors rely on narratives to guide their investments. Currently, one of the latest narratives is that nuclear power is back due to AI power demand and so stocks with no fundamentals like SMR and OKLO are having huge rallies. Utilities such as CEG and NRG are also catching a bid. TSLA is overvalued by most fundamental metrics but most short sellers keep getting burned because retail is enamored by Elon Musk.
If you look at the crazy rally NVDA has had since Dec 2023, I think you have to look for stocks that exhibit the above categories to do well. NVDA started going up due to better fundamentals which was quickly reflected in the price on earnings reports. Momentum and the AI narrative helped to caused a huge rally (seems to have died down a bit recently) into 2024.
Ackman's Pershing Square trades under PSH in Amsterdam and as PSH (AEB) at huge discount to NAV. He announced he is moving from exchange because of antisemitism in Netherlands creating an even bigger discount. He will be buying stock over time or tendering to close discount. It is hard to find a better investment for his cash given the high valuations in stock market. Hugely accretive.
Well written and thought provoking article. The market is changing faster than it used to. Just like a lot of other things good and bad. You are correct that adaptation is key. On a separate note, I wonder how AI will impact things including swing trading. I expect it will make dinosaurs out of a lot of people's strategies including some I use now. Happy Turkey Day! I look forward to reading your posts in 2025.
Hi Andrew great piece! I am currently struggling with this situation right now but your writing encouraged me to move away from dogma-like thinking which eventually leads to self-pity when things don't go your way. Charlie Munger once said that "all investing is value investing" and you your articles explains this well. Looking for value in different ways doesn't make you less of a value investor, instead we are trying to understand and analyze a company in various lenses.
Thanks for the article Andrew. This is re: PS section about AI taking over investments eventually. Whilst the tool / technology is definitely going to or rather already has percolated into the work flows of most investors, professional or individual - I am rather sanguine about the future as far as AI is concerned.
Firstly, as you have mentioned above, AI will likely be used in conjunction with humans so as to achieve a man-machine interface which will likely outperform either working in isolation. Second, assuming that AI takes over completely, one would need to be pragmatic to the fact that AI is and will likely be in the future developed and maintained by humans - each with their own biases, flaws, strengths and weaknesses. Now assuming we reach a stage where AI develops enough to become self-correcting - as far as markets are concerned, even the self correcting features are going to be written by humans, or at least the code will be written by AI developed by humans.
Thence, the key I think here is going to be the genesis of every technological cycle. Having engaged in a similar debate a few years ago with professional money managers, I believe having a fear of being replaced by machines is actually a positive sign, as it is an indicator of people worrying about their professional abilities to a healthy level (the same paranoia can be seen in almost every other industry - including programming). My take is that fundamental investing with a high touch (human touch i.e. ;) hehe ) is here to stay for the long run irrespective of developments otherwise. Will the speed of the markets and evolution increase? Yes, but then markets are inefficient and evolution not always perfect therefore, opportunities will always be aplenty!!
Thanks again for your regular notes and happy investing!!
Warm Regards,
Sanket Karve
I am a retail investor so take this with a grain of salt. The markets have changed but certain things like emotions in investing (greed + fear) are still the same.
A lot of the time, the efficient market hypothesis holds true and the speed at which prices reflect new fundamentals seems to be getting faster and faster. However, I think its still possible to make alpha in the markets because of the momentum effect and the fact that many investors still trade on narratives / stories.
Momentum Effect - I believe this effect was first written by Jagadeesh and Titman in 1993 and the basic premise that stocks that do well in the 1-year timeframe tend to continue going up and outperform still holds true today. Investors and traders these days seem to have supercharged the momentum effect which is why you see some stocks going parabolic sometimes. I wouldn't discount this effect and ignore stocks just because they go up. I would use price action as a signal to see which stocks may outperform later.
Narrative / Stories - I think even more than ever, retail and some professional investors rely on narratives to guide their investments. Currently, one of the latest narratives is that nuclear power is back due to AI power demand and so stocks with no fundamentals like SMR and OKLO are having huge rallies. Utilities such as CEG and NRG are also catching a bid. TSLA is overvalued by most fundamental metrics but most short sellers keep getting burned because retail is enamored by Elon Musk.
If you look at the crazy rally NVDA has had since Dec 2023, I think you have to look for stocks that exhibit the above categories to do well. NVDA started going up due to better fundamentals which was quickly reflected in the price on earnings reports. Momentum and the AI narrative helped to caused a huge rally (seems to have died down a bit recently) into 2024.
Ackman's Pershing Square trades under PSH in Amsterdam and as PSH (AEB) at huge discount to NAV. He announced he is moving from exchange because of antisemitism in Netherlands creating an even bigger discount. He will be buying stock over time or tendering to close discount. It is hard to find a better investment for his cash given the high valuations in stock market. Hugely accretive.