When you say "now," are you referring to the period from when financial markets were discovered until the present? Or some more specific period? As far as I knew, boom and bust are not exactly new developments.
In general, the market can stay irrational much longer than you can stay solvent. To win, you basically need more information (in the shannon information theoretic sense) than the market, on average, does. And when you actually compute it, "50% drop every 7-10 years, and not even with 95% certainty" is negligible information.
Shorts and short equivalents are either effectively marked to market (e.g. futures are marked daily, short-sales are effectively as well through margin adjustment) or have a limited time horizon (liquid puts are 3m-6m, illiquid ones can be a couple of years, but with a ridiculously large premium).
Let's say a drop of 50% happens over 1 year - then your 3m/6m "50% drop" puts don't actually net you any money, because it only drops 30% in 6 months. But they keep costing you all the time.
And if you use futures/forwards/short-sales, you might (and often will) get margin called and squeezed on earlier appreciations. Unless you have a really large margin, which -- when you actually earn some money, if ever -- significantly reduces your earning in percentage terms.
Vanguard actively moves clients from their baseline funds to the lower cost/higher minimum Admiral versions.
I just don't see moral hazard in Vanguard, compared to other financial firms with remotely similar capabilities and offerings.
The expense ratio of Admiral Index 500 is .05%, not .2%. So even better than I'd remembered.
The fees for VTI, which is Vanguard's Total Stock Market Fund is 0.05%.
On top of that, in Canada, most brokers will allow you to buy ETFs in a RRSP or TFSA account for no fees. Very cost efficient.
So beat the day traders, quants on their own game. You dont have to trade daily, just buy stock of a good company at a reasonable price and sit back. Once you have invested in a good company then the next step is not to do anything foolish, like selling your shares just because the company had a bad quarter.
Have you read Ben Graham's Intelligent investor, if not, you should.
And so does everyone else who tracks the markets, exactly because markets exhibit inherently cyclic behavior and because they haven't been down in a while. An easy-peasy prediction to make.
What would be more compelling would be a screen shot of his portfolio that shows that he is much more invested in short positions than longs, or has moved his investment into something besides equity markets.
What would be downright highly profitable for him, is if he could show over a long series of years that his ability to "imagine" future market conditions outperformed a strategy of just buying the market over the highs and lows and averaging the return.
The movie Trading Places nailed this, albeit in the context of commodities rather than stocks. But the principle is the same:
Mortimer Duke: Tell him the good part.
Randolph Duke: The good part, William, is that,
no matter whether our clients make money or
lose money, Duke & Duke get the commissions.
Mortimer Duke: Well? What do you think,
Valentine?
Billy Ray: Sounds to me like you guys a
couple of bookies.
Randolph Duke: [chuckling, patting Billy Ray
on the back] I told you he'd understand.It's as frivolous as asking why the executives of Nike have millions but the majority of people who buy Nikes don't.
Asset managers are supposed to be in the business of increasing their customers' wealth. However, most customer don't get as wealthy as the asset managers themselves.
I also believe that the stock market is a game, not an investment vehicle. The nature of the market has transformed every since the day trader, quants and HFT have entered the markets. As long as you understand this, then putting money in the markets is fine. If you don't want to be a part of the game, then regular people should buy bonds (not bond funds, but actual bonds that pay interest).
My opinion is that Wall Street has shifted focus since the 80s to trying to convince people to dump their money, all their money, into mutual funds. Then these massive fund managers take their 1-3% in various fees and just move money back and forth. I don't trust Vanguard any more than I trust any of these other large mutual fund companies, and I happen to know a lot of people that work at various asset management companies in the Bay Area. They print money without ever beating the SP500, instead they try to change the equation by claiming they beat the SP500 on a risk-weighted basis, etc. The entire thing is a sham, and as the OP remarked, why do the mutual fund managers have yachts but none of the clients do? It's because they make their money from the hundreds of billions of dollars they skim off the top of their customer funds.