Knowledge Share

Hey all,

I'm creating this thread for tips / learning methods that you have personally used to gain a better understanding of the market. Anyway, to start the goodwill I will share how I've gained my knowledge to date.

Firstly, I cannot recommend more the book "Principles" by Ray Dalio. The first 200 pages or so are very insightful on what it takes to be successful in the market, and just how much you must take into account. If you don't wish to read the book you will not benefit to the extent I have, but here are some of my key takeaways:

Principles

1. Always consider cause and effect relationships. The relationship of history, politics, and economics are very tightly related.
2. History repeats itself. Dalio amassed his 160Bil management fund (Known as Bridgewater) through 30 years of trial and error. He developed a system to judge the risk factor of the market given previous exposures of the stock exchange. A proper understanding requires the analysis of all previous crashes, what/why/who/how it happened.
3. Know the difference between Speculating and Investing. Most people are speculators and that is BAD. Don't throw money at something because you think its price will rise (Buffet also shares this thinking). Investing is throwing money at something because of its intrinsic value, its benefit to society, and its moat.
4. Here's a fun example of the detail (although I'm just summarizing) that Dalio went through to understand the Soybean market. He began by studying average crop yields, yearly rainfall, average acreage of a farm, and identifying all the major states that farms are in. He then read about the usage of soybeans and their importance in the animal feed industry. So thus, the population of the cows and pigs (some main animals) are highly indicative of the demand for soybeans. He further read into birthing periods of these animals, mortality rates, and what years were most fertile. He also considered corn yields and how much they were farmed because they are often a substitute depending on price of soybeans. Dalio then analyzed these cause and effect relationships for select periods of time throughout US history. By the time he reached his conclusion on the movement of soybeans in the foreseeable future, he was wrong. Everything pointed to yes, and as a young investor he was arrogant and believed he couldn't be wrong. This just goes to show, never assume you're correct. Let logic and history guide you towards solutions. What can be taken away is that, if you DO speculate, you better damn well do some research. Research is not a quick google search, it's not listening to other Redditors (although I have anyway), but grinding a few hours or so to consider as many cause effect relationships, and then logically come to a conclusion.
5. Don't give up. Dalio bankrupted hundreds of millions in his beginning, today Bridgewater (he retired last year) 160 Billion + dollars.

6. Converse with other intelligent people, respectfully disagree with them and work logically and calmly to come to a more inclusive conclusion. You can't both be right, don't let ego get in the way.

7. Act like an average investor, receive average results. Don't be a trend follower, don't invest because others do.

8. Cash rules.

- If a company doesn't generate cash it won't stay alive (notice Tesla's Elon Musk is a genius of boosting his stock without actually profiting through his brash and bold statements, he has kept this up for a year now since he missed his production numbers by 200,000. He's been manipulating his stock trying to squeeze shorters for almost a full year. If you check the rolling averages you will see the year average is flat, kept afloat by his statements.)

1. Invest in things you understand. If you don't understand biomedical or biotech, you probably shouldn't invest in it. You won't know what is truly beneficial or what its specialty is. You can only rely on interpretations of others (who probably tell you things so that you act how they want you to)

Thing's I've noticed (and probably many others) about the market currently.

1. Anyone worth anything knows about the PE Ratio and how it relates the stock price to the intrinsic value of a company. Please visit: http://www.multpl.com/shiller-pe/ for the history of market PE ratio since its inception. You will see the INSANE bubble the market is currently in.
2. The Fed has not raised interest rates even though we are experiencing major inflation. This has been going on since 2009, and now the problem is most likely unfix-able (once again, you are never sure). If fed raises the interest rates in the near future to combat inflation, expect a negative reaction from the market, as this often shrinks the economy (which is a good thing, but bad for stock prices and public opinion).
3. Warren Buffet currently has $110,000,000,000 sitting around in cash. I.E. he is not investing it because he knows the current state of the market is entirely overpriced. Don't pick up pennies in front of a steamroller.
4. This China vs USA trade war is over-hyped for now. 32 billion in tariffs is really nothing in comparison to multi trillion dollar nations. It's media hype which is negatively affecting many of the stock sectors. However, thats not to say the farmers haven't been effected, as we are releasing care packages (giving them money) to sustain higher pricing. It is worth considering that China also has been in economic turmoil, and can't afford to push out any other business. They also don't import enough from the USA in order to match our tariffs to 300 billion. (feel free to argue which side you believe is in a better position. back it up with facts, quite frankly I think the discussion would require another thread)

5. Don't get your news from major media sites. If you rely on Fox, Cnn, MSNBC, or any other of those brainwashing channels, you must be naive to trust their market analysis when the other 23 hours of the day they are showing Kardashians or complaining about Trump. Some sites I use:

   1. Zero Hedge
   2. Daily Observer (Bridgewater monthly economic condition report) If you read these articles you will understand just how deeply the big firms analyse market conditions.
   3. Seeking Alpha
   4. Bloomburg
   5. Kunstler
   6. Mishtalk
   7. (I will happily accept recommendations from y'all)

6. Learn how to properly read and analyse 10K filings and 10Q filings. This is a field I'm working on, I use last10k.com its pretty laggy, but its what I started with and I like it. I focus heavily on Consolidated Cash Flow Statements, and properly compare different quarters and years. I'm working (trying to find help) with creating a program which just grabs the info from companies of interest and throws it into an excel sheet so I can manipulate data and follow trends easier.

7. Get comfortable with all the functions of your online brokerage (Charles Schwab, Etrade, Ameritrade, etc). Understand the fees involved with transactions and the risks you take on.

8. Invest what you are willing to lose.

9. Read. Read. Read. Read. Read. There is so much information out there, so many people have already made mistakes, you don't need to make the same ones. Learn from others, and better yourself.

That's all that comes to mind for now. I'm happy to hear anything y'all have to offer and happy to listen to any refutes you have. At the end of the day, it's all about the money baby.

Submitted August 08, 2018 at 01:24PM by MiracleDreaming https://ift.tt/2McvrY0