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"When it comes to investments, there is no alternative to stocks.

Paul,

Your claim is total bullsh*t. Even on an absolute-returns basis --meaning, 'RISK' is totally ignored-- there are plenty of ways even a retail investor can beat the putative returns of stocks.

Why are stocks so wildly popular among the mathematically naive? For the same reason they buy lottery tickets. They're gambling on getting "the big score", but totally ignoring their downsides.
The next time you're near a university library, ask for a stack pass, and spend a couple afternoons working your way through some of the articles in the professional journals that deal with investing and portfolio management. What you'll discover is that the myths told to dumb money are just that, not sound strategies for growing wealth in a responsible manner. Or if that approach doesn't appeal to you, ask why and how rafters or climbers rate river or cliff faces the way they do. RISK MATTERS. It can't be spend at the grocery store or gas pump. But ignoring it --or downplaying its role-- might mean having no money at all, because you got yourself thrown out of the game.

In one of his earlier books, Talib asks this question: "Who's richer? A janitor who just won a $10 million-dollar lottery, or some dentist drilling teeth?" The answer is obvious, right? Do a Monte Carlo Simulation and run the events of those two lives another 10,000 times. In every one of them, the janitor will be pushing his broom. But the dentist will be buying a house in mid-class suburbs and sending his kids to college. The janitor happened a rare windfall. The dentist can always build wealth

Investing --trading/gambling/speculating. Call it what you will-- is a game of probabilities in which bets are made about an unknowable future. They're just guesses --based on imperfect evidence and often worse reasoning-- you hope/think will work out. If the downside of a bet is more. catastrophic than is tolerable, the bet can't/shouldn't be made. But that isn't what Wall Street pitches, and they have made their pitch believable to the naive due to regulatory capture. Think back to '98 and the blowup of LTCM. Greenie bailed out his buddies, the counter-parties to LTCM's leveraged bets. Bernanke did in '08 with sub-primes. The current Fed/Treas cartel is bailing out the whole economy, especially financial assets, especially stocks, which they don't understand aren't a leading indicator. When things blow up --and they will-- them who gambled in the equity markets without hedging their risks or even acknowledging they exist will look pretty stupid.

RISK MATTERS, and the arbs always step in to make adjustments, because they have the means and need to do so. Lastly this thought. 'Risk' and reward' aren't reflexive. If you got the 'reward', you took the 'risk', no matter that it might not be apparent. In that sense, markets are efficient". However, taking the 'risk' doesn't necessarily bring the 'reward'. Why does TMF pimp the risky stocks they do? Because they're reckless speculators who make their money from subscription fees, not from trading for their own accounts. If they tried to pull crap they do at a prop firm, they'd be fired.



Arindam
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