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Monday, September 06, 2021

Warren Buffett performance from 14 to 83

Warren Buffett performance from 14 to 83

Boomers love to say "Warren Buffett made most of his money when he was old". Sorry but no, not really. They are mostly coping. They had 60+ years to do something with their lives, bit late to wake up all of a sudden if you ask me.

Was Warren Buffet lucky?
Considering the era he lived in he was UNLUCKY. His best years were during the worst market period. The market was strongest when he was a kid and an old man. Teens and twenties raging bull, thirties market slowing down, forties flat market, fifties to nineties mostly up up up.

Think performance matter? Think the market is efficient?

So the oracle of Omaha has always outperformed the market until his late 60s, and "on paper" his best was in his 30s, but in his 40s the market was flat and he still managed to produce very large returns. According to academic research on employees and scientists they peak in their late 30s, and chess sites also say the best players reached their peak ratings between 34 and 43. Coincidences? If you look at it relative of market returns, dividends reinvested, those are his performances:

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So even by looking at it this way, that seems more fair, his peak was still he 30s. This period where he "only" made 23% a year was the period that marked all these mindless boomers that have been saying for decades "put your money in the bank". Please do not give me advice you noobs. How are these boomers for real? In that skull of theirs, is it empty? Bank deposits used to return something stupid like 15% and now it's 1% or less, so why are they advising this? It blows my mind, they're actual parrots repeating something without knowing why or what it means.

Today meta is:
- There are zero no risk investments and on the flip side borrowing is free
- Stonks only go up (until they won't anymore), for years, with central banks that have unlimited "money" supporting the equity markets
- Forex is much harder (too difficult) for amateurs, and does not trend for long
- Day trading is incredibly stupid, it was a terrible way to get very poor returns 3 decades ago and negative returns today
- Bank deposits, day trading, mindless price action trend following: All haven't "worked" for over 30 years, amateurs still haven't figured it out

snapshot

Another great tip boomers and noobs give: "go sit in class and wait for time to pass that's rly important for ur future", "you don't have to have kids early you have time". Absolutely idiotic. Cool so by 35 you might know what you want to do, and it's already too late.

I've told people over the years "sorry but young people don't do great and even if they do they always end up blowing up", this should not be translated as "Get started when you start having grey hair". You start earlier you'll gain more experience. If people "natural" peak is at say 37 and they start at 35, you really think they will reach their peak in 2 years? Of course not. Especially with investing. Investors might learn fast by being complete one tricks but even that would take a few years to really get decent. You can't really be a complete OTP with everything correlated, and you'd still have to learn more than just 1 stock to make money unless you're really lucky or something.

The modern western zombie can't help but be wrong, they're imagining the "dynamic" 20 year olds and the "experienced" 60 year olds. No? Why are zombies like this? Are they actually trying to be wrong? They enjoy saying false things to look open minded? Or just dumb? "Dynamic" = excited. If you are excited in your investing you are doing it wrong. I am excited when my investment has been going up in a straight line for a year but not each time I enter a limit order. Even if you started investing at 5, at 20 your brain isn't even fully formed anyway.

Garry Kasparov and Magnus Carlsen did become chess world champions at 22 - MC learned to play at literally 5 and GK at 7 (or before) and he started going to a chess school at 10. And still they were far from their peaks. Now who starts investing at 5 years old? Plus honestly, it's much more complex and you take your decisions over days, weeks, months, not a few minutes (I think the average chess game is 40 moves for a total of 1-3 hours). Also in chess you do not get drowned in a sea BS info and peer pressure, and sorting through all this crap takes a lot of rational thinking, something that appears later on.

Now concerning this "experienced" 60 yos . These guys really think Warren Buffett was a mindless fool at 40? He'd been investing for 30 years boys way longer than you at your 60. How much more do you think you learn? There are obviously diminishing returns. I don't have any numbers but it got to be something like in the first 10 years you learn 100x, the next 10 you learn 15x, the next 10 you learn 5x, and so on. Also you need to keep up, a lot of things are changing, a lot of the "new things learned" will just replace the old ones that have changed. The majority of people can't even keep up with things as simple as "keeping your money at the bank does not pay anymore" or "day trading has always been bad but now it does not pay at all" after over 20 years...

snapshot

A last word, and it is soul crushing: I heard from a broker that they analysed the perf of the hundreds of thousands of clients they ever had and of the consistent losers (losing for 6 months) not a single one had turned into a winner (they're all short term, obviously you can't tell if someone is a winner or loser after just 6 months if they're long term and the market is in a downturn for 12). Not a single guy "learned" to be profitable. Out of hundreds of thousands. Not one. So hey, at least there is something positive here: you do not have to waste your time. You can actually know quite fast if you stand a chance or if it's best to quit. This is consistent with the french market authority (AMF) report as well as some academic papers showing that people do not "improve" over time and even lose more and more.

These academics and regulators are a bit dense so forgive them, not their fault, investors DO IMPROVE. The regulators and "scientists" simply struggle with words, what they are trying to say is that investors that lose do not start winning, ever. But they all improve! Winners improve at winning and win more, losers improve at losing and lose more. Scientifically proven.

In my personal opinion I think you don't even need 6 months to know if you'll make it. You know what brokers do? They mark some accounts as risk. It has nothing to do with years experience or account size. They look at 1 thing and 1 thing only. "Are this account winners bigger than its losers", if the answer is yes it gets marked as "risk" and the broker will hedge all of their positions in the market, if the answer is no the broker will just let it go to zero with a big smile on their face no need to hedge according to this broker there is literally 0 chance they will ever make money (makes sense, they close their winners before they can ever get dangerous).

It's crazy how simple it is. Proves how useless it is to repeat these things. No one doesn't hear the basic tips. On day 1 investors will hear the words "follow the trend, cut your losses, don't day trade" and on day 1 will be decided if they are losers or not. They either go in the right direction or the wrong one. If they didn't listen on day 1 they won't listen on day 600, no matter how much proof is shown, no matter how often it has been repeated to them. This is crazy, do humans (99.99%) even possess self-awareness? Or are they just mindless NPCS that repeat something over and over no matter what? Someone has sweaty hands, is all shaky, and incapable of cutting their losses: there is no hope for them.

There is a french expression (works with everything) "Pleutre un jour, pleutre toujours" (coward one day, coward every day/forever). People improve at all sorts of things but the hollywood wonderboy 180 story does not exist. There is an example of "Hollywood 180" story: Ryan Lochte is an American competitive swimmer and 12-time Olympic medalist. At 14 years old, his loss at the Junior Olympics changed his attitude. He later commented: "I suddenly said, 'I'm sick of losing'. After that I trained hard and I never lost there again.". Wow what a turnaround. He πŸ‘ was πŸ‘ already πŸ‘ competing πŸ‘ in πŸ‘ the πŸ‘ Olympics. Top 1% of the top 1%. He was competing in the Olympics without even training seriously. Duh. He didn't go from struggling kid bottom of the class that can't even beat some random average Joe to 12 olympic medals. "Boy is it hard I've been losing for 5 years I'm going to make it with the right indicators and the right course ok new years resolution" ye man sure good luck.


Great traders are born, not made, but it takes decades of practice and learning for them to reach their best.


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