Your view is pretty much consistent with the "efficient market theory" that on average, no one can do better or worse than the overall market over the long haul.
EMT says market prices contain all information regarding equities at any point in time. according to EMT, assets are always priced "efficiently", so there is no way to exploit inefficiencies.
that is different from what i said. i didn't say there were no inefficiencies (i would still be a working stiff if there were no inefficiencies). rather, i said SKILL IS NOT PERSISTENT. skill, such as could conceivably exist in investing, would be an ability to spot out inefficiencies and profit from them IN A CONSISTENT MANNER.
instead, what actually happens is that some people discover inefficiencies and profit from them for a while, but then the inefficiencies are discovered by others and go away. that leaves the would-be skillful players needing to find new inefficiencies.
which means would-be skillful players must FOREVER INVENT new inefficiency-discovery mechanisms. and there is no evidence that anybody can do this.
instead, what typically happens is people luck into one market inefficiency, profit from it, and keep expecting the goose to lay another golden egg. they are confused in thinking that the asset they happened to invest in is somehow intrinsically "great" or "magical". they may invoke the metaphors of stock gurus who use ridiculous, purple prose (which they mistakenly think is good writing) to strengthen their faith.
but of course the goose doesn't lay more golden eggs. instead, the market has now recognized its past inefficiency, and has repriced (perhaps even overpriced) the asset.
the great joke the market plays on investors is by rewarding some of them, some of the time. this leads them to develop overconfidence in their own abilities, so they make ever more concentrated bets. this hubris then usually (eventually) blows up in their face and they are back at square one. |
