All of tryactions's Comments + Replies

You can replace "best guess at a stock's future price" with "best guess at a stock's future price, time-discounted using a risk free rate" and the essential question still remains.  This is Wikipedia's framing of the equity premium puzzle.

For those who are:

• Mathematically literate, but
• Not familiar with this particular analogy (of proofs <-> agents)

Do you know of a good reference for how to interpret discussions like this?

For example: "$A$ tries to prove that $A\to B$, and $B$ tries to prove $A$" -- If A and B are propositions, what does it mean for a proposition to try and prove another proposition?

(There might be more language that needs interpreting, but I got stuck there.)

As a follow-up: I did this for a while, but I've become convinced there are a couple effects that make this not as good as it sounds:

• Futures have taxes paid in the year gains are made, which significantly reduces returns in simulations I've run.  In an ETF or mutual fund, you can instead let those gains ride.
• Futures have an implicit financing cost, and portfolio performance is very sensitive to this cost if you're using a lot of leverage (e.g. for intermediate term bonds).
• Leveraged ETFs fluctuate a lot, and need to be rebalanced with the rest of your

I've got no attachment to the phrase, I meant it in the sense of (From Wikipedia):

In simple terms, a negative externality is anything that causes an indirect cost to individuals.

I think e.g. paying for labor increases the demand for labor, thus increasing the price everyone else pays.  That's an indirect cost to them.  I didn't intend to make any claims about rights.

I disagree that believing there's a negative externality of production leads to the position you're arguing against -- for instance, I might think the negative externality is very small compared to the positive gains from trade.  But I appreciate you pointing out exactly where you disagree with my framing.

The part that is missing from your question is, in a parallel reality where you didn't buy the PS5, how did you spend the extra money

Correct, and intentionally so.  This is why I compare to setting the money on fire instead.  Maybe I have the wrong framing, but it seems valuable to me to look at the marginal value of a single spending act in isolation.  I might do many things with the money (like invest, spend, or donate it in various ways), and it would be interesting to know each of their values independently so I could compare them on eve... (read more)

I strong downvoted this, because it doesn't answer the question and instead seems to me to be making a political point.

Insanity Wolf would tell you you're absolutely right.

About what?  I don't think I believe any of the things you're arguing against.  I'm just wanting to get a quantitative sense, whether it supports or opposes the political point you're trying to make.

Thanks for this post, these kinds of details seem very useful for anyone wanting to attempt this path!

A worry I have: there are people who long for the imagined lifestyle and self-description of being an independent AI alignment/agency researcher.  I would categorize some of my past selves this way.

For many such people, trying to follow this path too enthusiastically would be bad for them -- but they might not have the memetic immunities that protect them from those bad decisions.  For instance, their social safety net might be insufficient for t... (read more)

This is mentioned in the "don't screw up" section.  By market cap, crypto was 1.7% as big as the world stock market, and Bitcoin 1% as big, so those seem like good starting points -- adjust from there for your desired level of risk vs reward.

IMO, self picked stocks are dumb.  You give up diversification benefit for no reason, unless you think you know better than the market (which you don't).

Great point; I agree.  Also a great example of missing an obvious risk; I hadn't noticed that before linking.

The calculator here allows simulating withdrawal rates by asset allocation, although it only has data back to 1970 so is a bit limited.  I get the same safe withdrawal rate (4.3%) for 30 year retirees using either 100% US or 50/50 US/ex-US over that time frame.  100% Japan had a 1.5% safe withdrawal rate.

Learning about the existence of state guaranty associations has decreased my sense of how big I think the counter-party risk is; thanks for sharing this.

Re: running out of money, I've added a section on the risks of retiring too early to address this concern in more detail.  I now agree that annuities might be a good idea to address this if you are old enough, and I was probably overly worried about counter-party risk.  

Re: the 4% rule, it is indeed more of a guideline than a guarantee.  More details are available here: https://thepoorswiss.... (read more)

I would worry about the counter-party risk with annuities; if a single company goes out of business, you might be bust.  Even if you distribute across many companies, I'd think it's more likely that the whole sector goes bust than that your portfolio devalues to 0 in some other way.

For that reason I'd lean toward not putting too much of my assets in annuities -- but maybe it works out so that the counter-party risk is smaller than the risk of running out of money otherwise.

For posterity's sake: I became convinced this is practically doable (using either treasury futures, leveraged ETFs like NTSX, or maybe options which I don't understand as well) and probably a good idea/not very dangerous if done correctly.  I think that fact is slightly info-hazardous for a couple reasons:

• You shouldn't trust most people to correctly advise you on financial products, to not be delusional, or to have your best interests at heart.  So it's hard to figure out exactly what to do.  Index funds overcome this problem through the she

After reading around for half an hour, I think there's a decent chance that some form of leveraged investing via e.g. ETFs might be a good idea.  The basic idea makes sense to me.

This is currently completely out-weighed by my "being too clever in markets is a great way to lose all of your money" prior.  But I'll probably look into it more and see how convincing I find the numbers and historical evidence.  If I'm pretty convinced I could see myself allocating 10-20% of my investments in a leveraged strategy at some point in the future.

A cursory look at box spreads makes me think it's the kind of thing with so many caveats that I'd never feel certain I'd eliminated enough tail risk from it.

Re 1: This is a good point; I did the math on this at some point for myself and ended up still landing on traditional by a large margin (even though I wanted it to turn out pure Roth for simplicity).  But it'll be dependent on your expected tax rates, opportunities for low-tax conversion, and your retirement timeline (more tax-advantaged money dominates on longer timelines).

Also yeah, I skipped backdoor and mega-backdoor to keep things simple.  The goal was to give people a linkable 90/10.  The outcome I was aiming for is that people read, g... (read more)

The intent isn't to neglect these advantages; rather, I (probably wrongly) assume that everyone is familiar with these advantages -- this is my intent in noting the psychological difficulty of dropping from a 500k home to a $1k/month apartment.

The intent is instead to bring to attention the nature of the financial trade-off.  I use a pretty simple model, but you can dive into the counterfactual yourself: what's the price you're paying for owning your home instead of owning an index fund and renting?  How low could you go on rent, and what would b... (read more)

I roughly agree with this.  My biggest concerns around buying housing are:

1. The transactional friction of buying/selling homes causes opportunity costs.
2. People tend to buy too much due to low-interest credit.

But you correctly point out upsides that I don't dive into.

Skimming that link, I think it shows backtesting; have you actually beaten the index yourself with real money?  For what time period / amount of assets?

I mostly avoided leverage in this post because I don't use it and kind of don't trust it.  But if I had to give a better defense of avoiding it, it would be because 1. it's really easy to lose a bunch of money if you use it wrong and 2. I'm not sure there's a reliable way to borrow money at low enough rates to get good results.  Most of what I've read about leverage pretends the interest rate... (read more)

Re: 1., I'm personally unwilling to move outside the U.S. but agree it could make sense if you can make it work for you while maintaining a high salary.

Re: 2 and 3, I completely agree.  I think in particular about longevity medicine as a potential future expense.  You can certainly build up support for higher-than-current expense levels to address these risks.  You might also retire to less profitable or more risky activities that you find more enjoyable (but that supply >0 income), or simply stay in your current profession -- but with the advantage of having higher option value.

I agree the company's current price should be lower than $10 million.  But if it starts at price P and I expect it to go up at the risk free rate r, then at a time T later the company's price should be $P{r}^T$ in expectation.  At some point, that'll be substantially more than the $10 million I expect it to pay out.

• I'd be interested for both 100% growth and 100% dividend stocks -- I'm not sure why they'd behave differently w.r.t. to this.
• By underlying value, I'm not sure.  Something like the real dollar value of all of its capital -- or the real dollar price someone would pay to own it in its entirety?
• By price, I mean what you can buy the stock for on the market.

Let me try clarifying: The volatility argument seems formal rather than empirical, so I'm wondering what we formally need to assume to make it go through.

I'd summarize the argument as "since stock prices... (read more)

Question: say I have a company whose underlying value is volatile, but whose expected underlying value after any time span is the same as today's value.  Both of the above arguments seem to suggest I should expect the company's price to increase over time, but wouldn't this unanchor the company's price from its underlying value?

This makes sense!

Do you know anything about the state of evidence re: to what extent this is happening and/or driving stock returns?  I'm not sure how you'd pick this apart from other causes of currency devaluation.

Rephrase attempt: If you were to buy and hold a company's stock, and you don't expect to know better than the market, then your anticipated gains over time are independent of what you think the company's underlying value will do (since the market has already priced that in).  But you should still anticipate gains over time due to volatility's effect on pricing.

Fixed.

Ok, so the argument would go:

• Stocks' expected values (in terms of time-discounted dividends or similar) have volatility, from things like business decisions, technology development, and capital re-investment.
• A stocks expected value serves as an anchor point for its current price (kind of?)
• A stock's price will change around that anchor until it has expected returns that justify the volatility risk.
• Thus a stock price will increase when either its expected value goes up, or its volatility goes down (without changing expected value).
• In an efficient market, kno

You may have to hold my hand on this one: I can agree the value of the stock (in the time-discounted future dividends sense) will go up after 10 years due to time-discounting -- the technology would enable value production that "comes into scope" as it gets closer in time.

But is there any reason other than time-discounting that the PRICE won't go up immediately?  For instance, if I expect the time-discounted dividend value of the stock is $50 today and will be $5,000 ten years from now, and the rest of the market prices it at $50 today, then I could earn insane expected returns by investing at $50 today.  Thus, I don't think the market would price it at $50 today.

Is this the same as positing "the market is continually surprised by the pace of technology"?

E.g., say I value company X's stock at $100.  Then I learn a new fact that there's a 50% independent chance the company will discover a technology that doubles its value by 1 year from today.  If I ignore all other factors, my estimate of the company's value 1 year from today should then be $150.  If the company discovers the technology, I'll value it at $200, and if not, I'll value it at $100.

For the market to trend upward as it does, it seems like ... (read more)

For growth stocks, why is the expected future growth not already priced in?  If I know the company will be re-investing into future growth later, why not invest now?

There may be uncertainty, but if stocks on average trend upwards, doesn't it mean that the market continuously underestimates the amount that companies will re-invest?

Stock prices go up even in the absence of technological advancement because stocks are tied to the bond market via arbitrage.

If I'm understanding correctly, you're suggesting they should go up at least at the bond market nomi... (read more)

For anyone like me: it's easy to read this advice as "if you're not curious, you're therefore bad/doing something bad", which might suggest attempting to brute force an emotional state of curiosity. I think that's probably emotionally harmful.

It can be the case that:

• Curiosity is very useful for being a good listener
• You are not curious about (this person) in (this situation)

From there, you could:

• Hide your current lack of curiosity and go through the motions as best you can. I think this is the best option quite often!
• Tell them your honest feelings

No worries, was worth clarifying. I edited the post to link this comment thread.

Yes, I understand this point. I was saying that we'd expect it to get 0% if its algorithm is "guess yes for anything in the training set and no for anything outside of it".

It continues to be surprising (to me) even though we expect that it's trying to follow that algorithm but can't do so exactly. Presumably the generator is able to emulate the features that it's using for inexactly matching the training set. In this case, if those features were "looks like something from the training/test distribution", we'd expect it to guess closer to 100% on the tes

Thanks for sharing thoughts and links: discriminator ranking, SimCLR, CR, and BCR are all interesting and I hadn't run into them yet. My naive thought was that you'd have to use differentiable augmenters to fit in generator augmentation.

You can ask him on Twitter.

I'm averse to using Twitter, but I will consider being motivated enough to sign-up and ask. Thanks for pointing this out.

"compression" is not a helpful concept here because every single generative model trained in any way is "compressing"

I am definitely using this concept too vaguely, al