He wasn't bragging about it. He was just mentioning it because it had a side-effect of bringing the SEC onto him.

"If your strategy in trading microelectronics stock (largely hype-based and that you have an intuitive understanding of) is so good even though you didn't actually claim it as being all that, why don't you run the same strategy in trading pork (no one has ever gotten hyped about pork)?"

I interpreted the story as humble bragging. Too many HN stories-of-convenience are nothing more than humble bragging. It would have been a much more impactful comment if he spent the second half talking about serious losses and learning a lesson.

Every time I post about how I'm bad as something or made a mistake, then learned a lesson, it is followed by a bunch of humble braggers telling stories-of-convenience about how they avoided such an "obvious" mistake.

Finally, let me share yet another of my lifetime fails: During 2008/2009, I was convinced everyone was wrong about risk management at huge investment banks -- subprime mortgages and synthetic CDO^2! I was thought they were infallible, filled with financial maths geniuses would could navigate any financial storm. I was dead wrong. I was shocked when Goldman's legendary Global Alpha fund CLOSED after massive losses. Could. not. believe. it. It's still a bit shocking to write, because their record of outperforming the S&P 500 using partner money was the stuff of legend. And, yes, I lost so much money against Bear, Stearns & Co. and Lehman Brothers. Ouch!

It wouldn't have been a better comment. It would have been an off-topic comment, because the topic was the SEC going after people for insider trading.

Agreed they weren't bragging about it, but it is worth pointing out it's a horrible strategy and will probably produce a net loss over time unless you happen to be incredibly lucky.

>it's a horrible strategy and will probably produce a net loss over time

I dunno. Too many variables to dismiss as horrible out of hand. For one, it depends on the actual companies involved.

Also depends on exactly how he executed it. If the stocks followed the typical average of 10% YoY gains as the rest of the market, then there's a way to execute this strategy wherein he wouldn't lose by definition. For instance, he might set a mark on the sell side to ensure he's not selling at a loss vs. his last buy.

Now, he might get stuck holding the stock for some time (especially after a big downturn) and that might incur him some opportunity cost. But, that wouldn't mean a net loss if he was willing to wait. And, that'd be no different a risk than, say, a typical buy and hold strategy.

> will probably produce a net loss over time unless you happen to be incredibly lucky

"Buying tech stocks" is probably the lucky bit. If the stocks are cyclic but there is a upward trend it probably works pretty well.

> I find it hard to believe this strategy works with any kind of long term horizon.

You are correct, to an extent.

It breaks when the stocks in question continue to go down. I happen to be a really conservative investor (I tend buy and hold, never got into the whole day trading thing during the dot com rush). Given that each 'up' blip was essentially a 10% gain on my investment (approximately) the cash gain would be banked[1] when it sold and there was a 20% stop loss[2] sale as well. But with a very cyclical stocks the returns were pretty steady.

I added the stop loss after I found myself holding stock that just became more and more worthless after the dot com crash. (when you buy on the dip and the dip keeps right on going :-). It is also the reason I had Agilent stock for a while in that I was holding HP stock when they spun off Agilent, the HP sold when it continued to tank and there were no instructions on the Agilent. So between 1990 and 2005 when I had this in place I think the annual rate of return on that part of my portfolio was about 8%? The crash wiped out a lot of gains that took a while to undo (I think if I had sold off what I was holding in 2001 it would have been like 2% annualized gain over the 10 years.

Note, I have never been, nor aspired to be, an "elite" trader. It was in 1990 when I had about $1500 in my brokerage account that was just sitting there in cash and I wanted to something more interesting with it than put it into a bank CD. Hence my foray into "algorithmic" trading :-).

[1] That cash was taken out of the pool, it wouldn't be re-invested on the next dip.

[2] Stop loss -- a 'good til cancelled order to sell a stock at the market price if it's price falls below a set value.

For the same time period, if you had put all your money in an ultra low fee ETF that tracks S&P 500... I bet a lot of money the ETF strategy would easily outperform.

Twenty years ago, I used to closely read articles like ... <<<Miller's Legg Mason Fund Beats S&P 500 for 15th Year in a Row>>> Before I understood more about "finding alpha", I assumed you could find an active manager as a retail investor that could beat S&P 500. With age & experience, I no longer believe it true. Legg Mason beat the S&P 500 for a long, long time... but if you look closely, they only beat by a little bit. Then one year they got crushed and gave back all their winnings and trailed S&P 500. Plus you paid active management fees for 20 years. In the end, investors didn't beat S&P 500 over the long term.

It was crushing for me when I put all the pieces together. For so long, I believed I could outsmart the market as a retail trader by finding the right active manager. After that, I never looked back -- 100% ultra low cost passive index trackers against WIDE, well-established indexes, so I'm not "stock picking" by another name.

FWIW I went through a similar "education." For roughly 3 months in 1999 I had a combined restricted stock (already granted with an 83b election filed but vesting over time) and incentive stock (fixed strike price, 1 year cliff, .25%/yr thereafter) options in a single stock that in 2003 (4 years later) if the stock was trading at the same price as it was in 1999 ($120) was "worth" $12,000,000.

In 2001 that stock was trading for $0.83/share[1]. And while I didn't have any opportunity to sell it, being an employee and all, what really pissed me off was that I had Sun stock that I could sell that would have been worth $360,000 after taxes (which would have paid off my mortgage). Instead I rode that stock down to about $9000 when Oracle bought them.

Similarly my 401k savings account, that I had put in the max amount every year for decades, had under-performed the S&P500 and even some lousy mutual funds.

So yes, I've had my share of ups and downs, and yes if I had put all of the money I ever had in my brokerage account into an SPX ETF I might have more in it now than I do.

But here is the thing for me, and perhaps spending my teen years in Las Vegas warped my perception of money enough to make this possible, I recognize that the equities market is essentially "random" and various studies have born that understanding out in the large view. As a result it doesn't "feel" to me like I somehow lost money through my own actions, it feels like the bet I made didn't pay off. That is a different approach than getting emotionally invested in the financial outcome of investment decisions. When I came to understand that I was not going to spend all of my time reading financial reports and resumes of senior management like my Dad's ex-swiss banker friend does to get an "edge" I had two choices, go the ETF route or let my financial manager manage some of my assets.

[1] At $0.83 that was about $40,000 in the restricted stock (nobody exercises their incentive stock options that are underwater :-), And yes, I recognize that $40,000 is way better than nothing, and because of my 83b election I have a long term capital gains loss that I can claim for $3,000 a year on my tax return every year and that will continue for the next 75+ years if I were to live that long (I won't).

Like most strategies it works until it doesn’t. If you’re on margin it will stop working more quickly. However it’s more likely a stock with the right beta will oscillate like this fairly often and let you make your small gains. But you also miss out on the big gains and also are left holding the bag when the stock drops 50% overnight on some news.

It’s a classic “picking up nickles in front of a steam roller” strategy. But it could work for a really long time. Until it doesn’t.

<<<picking up nickles in front of a steam roller>>>

This! I see so many "options trading strategies" for retail traders that are exactly this.

> And do you run the same strategy for oil, natural gas, soybeans, and pork belly futures?

Some commodities have exactly the right kind of volatility and timing for these sort of trades.