I like Patrick's restatement of the Practically Efficient Market Hypothesis:

You are astoundingly unlikely to know more about any stock from reading the newspaper, seeing their chart on Google Finance, or consuming their quarterly reports than a team of PhDs who did nothing but study that stock for the last year, and accordingly are vanishingly unlikely to trade stocks in such a fashion that you do better than the market once you account for fees and tax impact.

It gets to why these comment threads can sometimes have people talking past each other. Someone will say "You can't time the market", and mean 'you' in the same way Patrick does, but someone else will come along and think the statement meant "no one can time the market". Then the discussion goes off into a whole rabbit hole about quant hedge funds and the like.

Relating this back to techie-problems, perhaps we need the moderate Practically Secure Crypto Hypothesis:

"You are astoundingly unlikely to create something better and more-secure from seeing a blog-post, reading some Wikipedia articles, etc. than a team of PhDs who did nothing but study mathematical theory, cryptography, and code-breaking for the last few years, and accordingly are vanishingly unlikely to create a new scheme which is more secure than existing standards once you account for performance and maintenance."

Except that security standards are mostly driven by compatibility with all sorts of edge cases (ancient versions of software! COBOL-bound CAs! tiny smart cards! huge distributed systems!) that are probably not relevant to your case and create big random security holes.

If you have a reasonable way of distributing software updates, signed-DH with an AES-based AEAD with termination detection for transport authentication, and a signed hash tree for data authentication, is going to be more secure than RANDOM_SECURITY_STANDARD.

Thankfully, there are some good well-written implementations of that (https://www.tarsnap.com/spiped.html, https://nacl.cr.yp.to), but picking a standard randomly will not get you them.

I don't think that's always a case of people talking past each other. I will often reply to someone (in much the same way you just did) with a clarification about how some people do predict the market successfully, because even if I charitably assume they understand this implicitly, I want to make sure the literal idea that no one is capable doing it is not spread around like a gospel for other readers.

> There will likely be people that reply to this comment with various comments saying I am wrong. You can judge those comments for yourself.

This is the comment equivalent of a loaded question. Or it's like those people who dismiss those arguing against them because of who they are rather than what their argument is.

Good point, I edited that out.

While "If they believe they can predict the market, they don't know what they are talking about" is a cute adage, I think it lumps a bunch of us into a category that we don't deserve to be in?

for example, I'm heavily invested in the market but recent events are leading me to consider halfing my investment rate to be more cautious. I'm not going to take any money out or stop investing but by your def I'm "timing" the market, but really I'm "timing" my life. I don't feel confident that I can afford the risk, and I'm lowering my exposure rate.

If you are permanently lowering your exposure, you are not timing the market. If you are deciding that now the market is too hot and you don't like the risk, but plan on being invested later, you are timing the market.

I don't understand why I have to be permanently lowering my risk exposure. If Trump wins the election, the market will tank. Everyone knows this so lets say a 20% risk of him winning thus causing a 40% drop is currently priced in - the market right now is ~8% lower because of the risk of a Trump presidency. I am not willing to expose myself to that risk so just yesterday I moved my 401k out of the market. If Trump loses, the market will probably pop up but I am willing to forgo that gain to not expose myself to the downside.

The important point I haven't seen mentioned is that the money you put in the market should not be needed for 10 years. Not money you plan to buy a house in about 5 years, or maybe use to get married about 10 years from now. From 1929 to 1933 the DJIA went down 88% before starting to recover. Ten years is really too short a time horizon, you should have a 20 year perspective or longer. If you had invested the day before the 1929 crash and kept your money in the whole time you would not have broken even, adjusting for inflation, until 1957 - 28 years later.

You are market timing.

Yes I am. Trump will probably lose and I will have lower returns this year.

Would I be market timing if instead of moving out of the market to avoid the Trump winning risk, I borrowed money to buy shares in an election market?

https://iemweb.biz.uiowa.edu/quotes/Pres16_quotes.html

If Trump wins, I triple the money I put into election shares but lose in my 401k. If Trump loses, the increase in my 401k will cover my loss in the election market.

I don't think you understand the basics of investing.

I laid out two strategies to hedge a specific, finite duration risk. Instead of an ad hominem attack, do you have any comments on either strategy?

What if trump loses and the market goes down?

What if trump wins and the market goes up, too? Things that "everyone knows" are already priced in.

Yup, exactly

There is something very off putting about your comment regarding how you preemptively dismiss anyone who would dare argue with you.

Time in the market beats timing the market - the adage is as old as time itself. Not sure that knowing it makes you understand the markets especially well. Similarly, not sure that not knowing it says anything about you either.

Knowing that adage doesn't mean you understand markets especially well, but not knowing it definitely means you don't understand markets.

I had a friend in college who played World of Warcraft. When the first expansion was announced, he invested $10,000 in Blizzard stock. His reasoning? "It's going to be awesome and sell a lot of copies!"

He didn't understand that the stock price at the time he made the purchase already reflected that information (that there was an expansion coming out soon).

Point taken. I edited it out.

And... just to go a step further. My comment included the word 'easiest' to describe how to find out someone doesn't know what they are talking about. IMO, if someone starts talking about timing the market, I know right away that they do not know what they are talking about.

Other indicators are much harder to diagnose. A self proclaimed market timer is just the easiest to identify.

So, if there was a massive crash in the stock market, you wouldn't be tempted to buy some shares at low prices?

I wouldn't think "in the market" meant only in stocks. When the stock market falls, other markets (like bond markets) tend to rise, which makes the bonds look like a poorer value and stocks look like a better value, therefore you would re-balance your exposure by selling some bonds and investing in the stocks

That's not always the case, just making the point that rebalancing a portfolio is not necessarily the same thing as trying to time a particular market.

Rebalancing the portfolio to other asset classes smells a lot like timing the market. The question still remains: When would you move to other asset classes?

You could see cash as a specific kind of market as well with your definition. I'm sure there were time periods when holding cash was your best option.

> Rebalancing the portfolio to other asset classes smells a lot like timing the market.

Rebalancing is not timing the market, unless you're changing your ratios.

Let's say I want 80% equities and 20% cash. The market bombs, and now I have 50% equities and 50% cash. If I thought all the information was already priced into the market, then reallocating to get back to 80/20 makes sense. Not rebalancing would be more like timing the market, because I would be assuming that the current value doesn't represent some "true value" of the market.

> The question still remains: When would you move to other asset classes?

Somewhat regularly, but not constantly because that takes time and has transaction costs. The specific time doesn't matter.

> I'm sure there were time periods when holding cash was your best option.

Definitely, it's just very very hard to identify which periods they are until after they've happened.

(Home currency) cash is essentially an ultra-short duration, zero yield (home government) bond.

Edit: Clarified that both are local.

No it's not. Currencies move against one another all the time. Your yield is only zero against the same currency, but it doesn't mean your yield is zero in terms of actual global buying power.

FOREX movement doesn't factor here? I'm talking about a single currency.

>The easiest way to tell if someone understands financial markets is to find out whether they believe they can time the market.

People also unwittingly imply have actions where, if you asked them, they'd say they couldn't predict the market, but they'll say things like "I'm waiting for the market to cool off"

I believe you can make money in trying to "time" the market, given you have good risk management in place. Nobody can predict the future all the time perfectly, but some educated predictions do come true sometimes. If the aim is to make money and not just trying to hold on to what you've got, you must take risks and that invariably comes down to "timing" the market.