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If you have been consistently beating the "average" (e.g. 12% return) over a 20 year span against the S&P500, does that mean you know more about economics than a guy getting a mere 1% return yearly?
If you have been consistently beating the "average" (e.g. 12% return) over a 20 year span against the S&P500, does that mean you know more about economics than a guy getting a mere 1% return yearly?
Not necessarily. "Economics" is an extremely broad field with many different aspects. That's why there are PhDs in economics.
Being able to beat the S&P 500 average over the long term means that you are probably a lot more knowledgeable about how the stock market works compared to most people.
Side comment. If you have beaten the S&P over the long term, you probably have been pretty active - spending lots of hours doing so. Now, if we're talking an overall portfolio of $5000, then your time might be worth $0.35 an hour. If we're talking $5M, then it was probably worth it.
I don't think it's economics per se. Traditional economics is not very good IMO, i.e...."efficient market hypothesis", rational man. Most of these things were badly discredited in 08.
It helps to know subsets of economic theory....like, complexity theory? Understanding "black swans". The fact that the market doesn't produce gains and losses on a normal bell curve. Having a good contrarian mind is also helpful. You need to be able to go in when other people go out and vice versa.
No. Results do NOT reflect understanding of economics.
Wealth cycles outperforms the Dow by 1,000 times from damn forget the guys starting point but 190X year where the Dow returned 11,000 dollars from 1 dollar, and wealth cycles, just swapping assets from dow to gold and gold to dow when the ratio turns would net 1 dollar to 11,000,000.
Ratio investing has outperformed the dow easily. you could even do small changes and still outperform.
I am doing a gold to oil ratio investing right now where I own GLD shares this second. I am playing the gld to oil ratio.
the problem I am having is finding an ETF or something that mimcs oil exactly. most decay over time and cannot keep pace with oil prices.
Since 2005, with all the rough moves we have had, if you swapped gold and oil ratio only.
so at goldil ratio of 14:1 or lower buy gold, 18:1 swap to oil and buy oil. swap these two back and fourth since 2005, you take $10,000 (gold in 2005 $450/oz). you own 22.22 ounces lets say. When oil hit 18:1 you purchased it in 22.2 *18:1 = 399.6 barrels of oil.
in time you would swap this many time from 2005.
Hold gold 2005
swap to oil 2009
gold 2010
oil 2010
gold 2011
oil 2011
gold 2013
IMO: Has more to do with gauging human emotion in beating the market year to year then knowing economics. Short term, the markets are irrational and driven by emotion.
IMO: Has more to do with gauging human emotion in beating the market year to year then knowing economics. Short term, the markets are irrational and driven by emotion.
My biggest problem investing is that I have been irrational and driven by emotion. Even when I do understand the economy.
You are in very good company too. Most of america has that problem.
That is why for decades i have used a newsletter to lay out my moves.
I can put together portfolios in my sleep and better than many pros can do.
But for 25 years letting the newsletter keep me from my own actions has worked great.
I don't go around always second guessing my self or planning my next move.
I used to go by the seat of my pants when i first started.
I would get some moves right but eventually i got more moves and bail outs wrong then i got right.
Human emotion has caused more financial suicides in investing than anything else.
My biggest problem investing is that I have been irrational and driven by emotion. Even when I do understand the economy.
One solution I've found: Don't look at your stock investments or even what the stock market is doing at all during the daytime trading hours. Simply tune it out and focus on other things. Only review what happened that day after the close.
There is no need to know what the stock market is doing during the day if you're investing for the long term.
I do not factor macroeconomics into my investment choices, so for me there is no connection.
What matters to me is what the business is worth, and what fraction of that did I pay for it.
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il ratio of 14:1 or lower buy gold, 18:1 swap to oil and buy oil. swap these two back and fourth since 2005, you take $10,000 (gold in 2005 $450/oz). you own 22.22 ounces lets say. When oil hit 18:1 you purchased it in 22.2 *18:1 = 399.6 barrels of oil. 
