[IAmWorried]

It's less that I'm glad the market is crashing, and more that I'm glad that the insufferable crypto bros are finally getting a punch to the mouth. Seriously, these people are the worst. Your average "crypto investor" has no skills, no mathematical foundations, nothing. Except for pure stupid luck, and the ability to spew inane crypto babble 24/7. And yes, they think they are much smarter than you, because they achieved better financial results than you did while only doing 1/1000 of the work to get there. I truly hate the fact that these people are so rich. It makes me want to move to Alaska and just try to ignore society for the rest of my days.

This came off as pretty bitter. I apologize, but I am bitter, and I'm having a shit couple weeks.

[UnpossibleJim]

I will preface this statement by stating that I know nothing about the stock market and let my retirement account be handled by an investor...

What real math is involved in predicting the stock market? I understand there is a lot of theory behind TRYING to predict it, just as there is a lot of study in trying to predict trends in the stock market, which is why you are better off investing in groups of stocks as opposed to a singled stock (there you go, that's the grand total of what I know about the stock market). But so far as shorting stocks (betting that they'll fall) and buying stocks (betting that they'll rise), there isn't much real math, is there? Isn't it all just a gamble? Not even a statistical gamble, like dice or cards, but a public market analysis with the uncertainty of public trading and public sentiment thrown in, not to mention the hope of government bailouts on occasion?

I don't see a huge amount of difference in crypto except for physical assets, which don't cover the stock price for public companies, generally.

Now, how horribly wrong am I? I'm willing to admit I missed the mark, entirely as I don't understand trading. That's what my broker does.

[MattyMc]

> What real math is involved in predicting the stock market?

I have a MSC in Statistics, studied quantitative finance. Generally I'd agree with you. For general investing there's often little math involved other than some simple ratios and comparisons. Three numbers I look at most often are the Price-to-Sales ratio, Gross Profit %, and annual revenue growth. There's no complex math involved here at all.

Where investing does get mathy is in calculating risk. When constructing a portfolio, generally the aim is to maximize returns while minimizing risk below some threshold. There is some very interesting and fun maths involved in this process that is beyond the scope of general investing.

[skrtskrt]

The math that most investors (not traders) use isn't necessarily about trying to predict the market, at least in the short term - but to get signals like "this company is over/undervalued compared to competitors or compared to the size of market its targeting" etc.

These types of analysis don't necessarily predict anything on their own especially in the short term, though they likely do have value in the long term when you stack up lots of these signals.

The problem with applying math to crypto investing (not trading) is that there's no market, no sales, no cash burn rate, no actual accounting going on to base a longer term thesis on.

[epolanski]

> What real math is involved in predicting the stock market?

Are we really comparing the two markets?

Owning a stock means owning a piece of a business. If you have all the stock in the world, you seized all means of production, good job.

If you own all the UnpossibleJimCoins in the world what exactly has changed? Oh but that coin is not insert another coin, it doesn't have the consensus/cult.

[FabHK]

> What real math is involved in predicting the stock market?

1. Stock market valuation has a fairly tidy theoretical foundation that is not too much use in practice for prediction. (It is used for IPOs etc. in some form, when a market price hasn't been established yet.) It involves basic algebra, along the lines of sum_t=1^infty D/(1+r)^t = D/r, etc.

Fisher Black (of Black-Scholes fame) memorably wrote: "An efficient market is one in which price is within a factor 2 of value", where price = market price, and value = true value, as determined by that tidy formula assuming you had all the correct inputs, which you don't.

2. Similar for FX and Rates, though there is a bit more to it.

3. In derivatives, you have much more sophisticated maths (stochastic processes, Ito calculus, PDEs, Monte Carlo). Its focus is not so much prediction of the future, but a) deducing the true current state of the market from observable prices, and then b) from that true state deduce the price of derivative products, and c) computing risks (partial derivatives), which then lets you d) synthesise these derivative products. But that's not very relevant here.

4. Trying to predict the market is a whole other ballgame. You can work with time series analysis, regression and more sophisticated statistical methods and ML, and use any number of inputs: price history, company fundamentals, macro fundamentals, text/sentiment analysis, order book (market micro structure), etc.

Funny thing about this business is that there's a lot written about it, but those that have figured it out use it to make money, and don't write about it.

5. Now, cryptography involves real maths, but entirely different again, mostly number theory (such as n^p = n (mod p), for p prime).

GP might have been complaining that many vociferous crypto bros lack the basics to understand the mathematical foundations of cryptography. Though, I must say, I think one can understand e.g. hash functions and asymmetric encryption etc. quite well from their functionality alone, without needing to understand the math behind it (just as you don't need to understand transistors to understand what a NAND gate does).

[logifail]

> What real math is involved in predicting the stock market?

Given the apparently inability of active funds to routinely outperform passive funds[0], "not much" would be my response.

One could be really cynical and reduce it to: some people get lucky, some of the time. That's all.

[0] https://www.ft.com/content/06317e0e-b6bf-4fdc-9255-cf664cb92... ( https://archive.ph/NumMp )

[DeathArrow]

>I don't see a huge amount of difference in crypto except for physical assets, which don't cover the stock price for public companies, generally.

Stocks represent part of real businesses which produce real goods or real services. So they are tangible.

Crypto are just some bits somewhere. They don't represent anything meaningful.

[throw1234651234]

It's important to understand that your average Series 6,7,63-licensed "investment advisor" knows less about the stock market than your average crypto bro. They just follow a script of "invest into retirement-target fund over the long term". None of them adjust anything based on market conditions unless you get into "family office" territory at (at the very least) over 100 million in assets. A lot of people make the mistake thinking "investment advisor" bros know anything.

- former "investment advisor" with all those licenses, CFA, etc

[nurettin]

I write execution systems for hedge funds. Don't have fancy quantstatistician titles.

Stock market has something called "fundamentals" which gives you insights into the real value of stocks. If a company invests $1bn to develop their business, their value will go up. Major oil producer goes to war? Crude oil futures will go up. 100% every time. It is not rocket science, and no astrology is involved.

It is what people do that turns it into a gambling machine. They try to predict tomorrow's price by looking at chicken entrails and they get cocky and confident during bull runs. This behavior is not restricted to the crypto space.

[dragontamer]

> But so far as shorting stocks (betting that they'll fall) and buying stocks (betting that they'll rise), there isn't much real math, is there?

A lot of the math is automated these days. PE ratios, SMA (simple moving average), etc. etc.

The basis of most stock analysis is price per earnings, or also known as "How much does $1 of profits cost?". Ex: PE of 20 means that it costs $20 to buy $1/year of profits. PE of 100 means it costs $100 to buy $1/year of profits.

Using this as a baseline, you can estimate the future performance of many stocks. You then correct for public sentiment, bailouts, supply changes (are chips getting rarer and/or more expensive?), and try to predict _future_ profits, not just historical profits.

The company with the most profits, at the lowest price, wins in the long run. Buying $100/year worth of profits for just $1000 investment is better than buying $100/year worth of profits for $50,000.

But the "math" is easy. You just take the profits from last year, then divide it by the #shares * $value of the shares. You can also try to be "forward-PE" by predicting next year's profits and dividing it with today's #shares * $value of shares.

-------

The #shares changes over time. Companies can make new shares or "buyback" shares at any time. That is why when you hear about company "share buybacks", the stock goes up (fewer shares means lower PE, meaning the people who are buying the remaining shares get more $profits per $investment).

-----

EDIT: Note that under this theory, it doesn't "matter" what the company does with its profits. Profits can go back to the investors through dividends. Or, profits can be spent back on the same company through Capital-Expenditures (ie: building bigger factories or larger systems). "Growth" companies issue no dividends, because they "recycle" all profits into growing. Or the company can buy another company with the profits. Etc. etc.

While "Value" companies tend to return the money as dividends to the share holders.

Shareholders don't really care. If the profits are given to the shareholders, then shareholders can buy up more of the stock (growing their %ownership, and they themselves get more % of the profits next cycle).

If the profits are invested into itself, then shareholder value goes up as appropriate (instead of $1-million worth of factories, next year the company is doing everything with $1.1-million worth of factories and gets 10% higher profits all around).

If another company was bought, same thing, except the factories are separated by different names / locations.

Of course, the "details matter". Some industries are better suited for growth than others. But the fundamental assumption is "control more profits for fewer dollars".

-------

EDIT2: Anyway, what ends up happening is that the math-part is easy. Its the prediction part that's hard.

[dionidium]

I'm not gloating just yet. If you bought Bitcoin at literally any other time than the two peaks that have occurred over the last year, then you're still way, way, way up. Bitcoin was last at its current price between those two peaks, a little less than one year ago. Of course, NFTs and all that were just so obviously nonsense that I don't even think it's worth commenting on.

[joecot]

As soon as it was clear that Bitcoin was going to be a commodity instead of a currency (why use it as a currency to buy a pizza this week when it could buy you a car next week?), it was clear it was now a pyramid scheme. That's why I didn't invest in it. What I hadn't counted on was how gullible people were for pyramid schemes.

[pessimizer]

Of course those peaks were a function of demand being high, so more people bought in then than at other times.

[id]

There are also those of us who played with Bitcoin when it emerged, found it promising and mined it or bought some. Who took some profits along the way and never promoted it. Who still think it's a useful concept, _despite_ the hype that gets too much at times.

For what it's worth, you seem consumed by your envy. Accept that crypto investors, even the most stupid ones, took a risk you didn't take and were rewarded handsomely.

[noduerme]

When I launched a home built casino in 2011, I bought 5000 BTC to initially bank it. I didn't want to take BTC, I wanted to get licensure in Malta and take credit cards. But I didn't have any investment, or $500k to buy a license. I just had good software, so I launched it in BTC as a proof of concept and to try to earn enough to bootstrap the cost of licensing.

Long story short: That project is long gone. I viewed BTC as an interesting payment method that might have some inherent value as an efficient and anonymous means of transfer, which it's not anymore. I never trusted it and I didn't want to gamble on its fluctuations since the casino was denominated in USD and I was already exposing my savings to literal gambling risk (albeit playing as the house - still scary). So eventually I took to just getting rid of BTC daily, trading out the day's rake, and only buying it to do payouts. Closed the casino in 2013 and never saw any major profit, stakes being as low as they were.

I'm a middle aged working coder with a net worth short of $1m. I've thought a lot about what my life could have been like if I hadn't done ANYTHING except hold that initial 5000 BTC instead of getting out of it. And you know what? I'm not sorry about it. I did what seemed smartest to me at the time: I got rid of what I thought was a bad investment. And by then I knew plenty more about Bitcoin than most of the people who've bought into crypto since. Under the same set of conditions, where that was a meaningful chunk of my savings, I'd do the same again every time.

You're absolutely right that there is nothing healthy about being bitter or angry towards people who strike it rich - even, or perhaps especially, if they do so by pure luck.

Life is a casino. Envy gets you nowhere, and it's not a good look. Show a little class and you might get comped for the show.

[edited for readability]

[mjburgess]

Transfers of wealth from productive to unproductive industries arent risks worth rewarding, neither economically or with praise. It's slothful both as a personal vice, and as an economic activity.

[nathanvanfleet]

"Who still think it's a useful concept"

Narrator: It wasn't

[Layke1123]

This to me reads as such.

"Hey, look, just take risks, because if you don't, you'll be poor AND bitter."

[colesantiago]

> This came off as pretty bitter. I apologize, but I am bitter, and I'm having a shit couple weeks.

You shouldn't be, these cryptobros have been orchestrating general scams, rugpulls, hype scams, pump and dumps and all this having an effect on normal people's lives.

Do not be sorry.

[jeffreyrogers]

The majority of people I know who are into crypto buy the hype and believe their own bullshit. The cynical opportunists seem to be a minority.

[TekMol]

    crypto bros are finally getting a punch to the mouth

Finally? Bitcoin has been losing 50% of its value 4 times during the last 10 years. It even lost 80% of its value multiple times.

[faraggi]

You failed to mention that despite those falls, it is still up 100s of times its initial value. This comment is worse than the media trying to portray a specific story by presenting data partially.

[gsibble]

This. I cannot stand the modern crypto bro. I've met some truly insufferable people. The term "New Money" doesn't even do enough justice to how horrible these people behave.

[cwkoss]

I think how the SV techbros in this thread view cryptobros is probably fairly similar to how most of society views SV techbros.

[papito]

Oh, you mean the very pleasant "enjoy being poor" characters?

[jdmoreira]

I'm not disagreeing with you but I don't think this is healthy. This shouldn't be eating you from the inside.

"What good is envy? It’s the one sin you can’t have any fun at." - Charlie Munger

[anotheracctfo]

I'm not sure I'd take a billionaire's view on envy. It always comes off as "Let them eat cake" to me.

I'd rather listen to someone closer to the bottom, who actually had to sacrifice for that viewpoint, like Jesus or a well adjusted homeless person.

[philosopher1234]

Who are you to tell him that feeling hate and bitterness is unhealthy? Bitterness is useful, it helps us protect our values and helps prevent anti social behavior.

[uoaei]

I don't know about OP but I definitely don't feel envy toward these people. I try to imagine myself in their shoes and just can't imagine myself spewing the same garbage or being the same kind of chauvinistic dick about something like this.

[kodah]

Imagine this same statement but about people that own houses. Houses also serve as an investment to the layperson and in certain places have contributed to a higher barrier to entry for others.

> It's less that I'm glad the market is crashing, and more that I'm glad that the insufferable homeowners are finally getting a punch to the mouth. Seriously, these people are the worst. Your average "home investor" has no skills, no mathematical foundations, nothing. Except for pure stupid luck, and the ability to spew inane economic babble 24/7. And yes, they think they are much smarter than you, because they achieved better financial results than you did while only doing 1/1000 of the work to get there. I truly hate the fact that these people are so rich. It makes me want to move to Alaska and just try to ignore society for the rest of my days.

> This came off as pretty bitter. I apologize, but I am bitter, and I'm having a shit couple weeks.

Not trying to criticize you too much; I'm more reflecting on this text because this is how I catch myself feeling about people who have participated in the inflation in the bay area with respect to homes.

[jpgvm]

Hey man. Hope things get better for you.

The crypto stuff is just another bubble, sticking to fundamentals will still lead you to (well earned) success. Bubbles come and go, skills and financial acumen are forever.

[cryptica]

This is true, but it also applies to the tech sector as a whole. The engineers of big tech companies tend to look down on all other engineers on the basis that they happen to work for financially successful companies which have market monopolies (and are propped up by easy money from government money printers via huge contracts and exposure to public markets).

Never mind that their processes are a bureaucratic hell and it takes 100 of their engineers to implement the same thing which just 1 really good engineer working for a startup could implement in the same amount of time - Look at Whatsapp as an example; before they were acquired, they had hundreds of millions of users and only 55 engineers in total... Facebook has over 10K of them and gets a lot less done...

Talent outside of big tech is not unusual; it is the norm, but most startups which are full of talented engineers don't go on to become Whatsapp because the market doesn't care about technical talent above a certain (rather low) threshold.

Everything is a lottery. Any appearance of meritocracy is an illusion crafted by media and PR firms in an effort to keep the system from falling apart. Only extremely lucky, delusional outliers think that the narratives make sense nowadays.... Through a lot of people who know that the narratives don't make sense still pretend that they do.

[Aunche]

Unfortunately, cryptobros probably bought in early enough where they are unlikely to be punished. The people who are punished are those who were told that cryptocurrency is a good way to diversify your portfolio.

[mouzogu]

crypto dude bros are irritating, just stay off social media,

what sickens me more is all these companies jumping on the crypto.nft.metaverse bandwagon, like f off seriously.

[MarcelOlsz]

>just stay off social media,

What do you do when literally everyone you know IRL is into it? Everyones brain has been warped by speculation.

[calibas]

I've seen a few "insufferable crypto bros" that are overjoyed to see the markets crashing. Just like any other investment, there's a subset of people who don't want to see stable prices and steady increases. They want extreme volatility because that means a chance for extreme profits (and loses).

[hindsightbias]

Alaska is overcrowded with all the people who fled the dot.com era.

[Inviz]

Can you share how are these two things related?

[munificent]

Here is my weird tin foil hat theory that explains, like, a lot of what's been going in the world in the past twenty years.

A significant fraction of young single men feel a deep compulsion to indulge in risky behavior with a potential high reward in order to make a name for themselves or earn their place in society. I don't know if it's genetic, cultural, both. But for many young dudes, it's not enough to simply work a good job and enjoy their leisure time.

Men like this are the free radicals of society. If the society can't find a healthy productive outlet for their drive to compete, take risks, and seek fame and adventure, then they will just do outright dangerous shit with potentially large collateral damage.

For most of human society, hunting, exploring, dangerous jobs, and war were significant outlets for this. They gave men a way of doing something courageous that their culture held in high esteem.

But today, we have domesticated animals, explored every square inch of the Earth, automated all of the risky manufacturing and resource-gathering jobs, avoided large-scale war outbreaks (and used technology to reduce military casualties and fatalities). There are simply less paths available for a young man who feels like he has nothing to take pride in unless he succeeds in some bold risky adventurer.

For a while, videogames functioned as a simulated output for that impulse. I think that's why many gamers flipped the fuck out during Gamergate when they felt that their avenue to satisfy that urge was being invadaded and taken from them.

It was, I think, a driver of the rise of the alt-right, doomsday preppers, and Trumpism. This impulse elect a wildcard as President, burn it out down and start over because in a world of chaos, there is maybe an opportunity for the bold.

And now, I believe, much of the crypto world is driven by that exact same impulse. Young, overwhelmingly male, "crypto bros" desperately looking for some unexplored frontier where they can build something new and forge an identity for themselves.

The problem is that there is no there there. It's all a house of cards. No actual new value is being created, so it's just crypto bros competing with other crypto bros in what will likely end up being a zero sum game (except for all the unfortunate other investors who get sucked in).

Even if crypto all collapses, the core problem will remain. These dudes will just find something new to slake their thirst for risk. Hopefully it will be on something less destructive to society.

[camillomiller]

I like this theory. Probably oversimplifying a lot of elements, but it can walk at least a bit. Kudos.

[jcpham2]

There's also this new-fangled social media anxiety pressure whereby most people only share and put out the AMAZING GAINS and HOW AWESOME their lives are.

I feel like social media ups the ante on a lot of borderline or negative human traits because instead of CONNECTING us it's actually pushing us further apart.

It's a tangential thought I know but the fact that there exist people bragging/boasting/ saying LOOK AT ME LOOK AT ME LOOK HOW EASY IT IS - this creates a pretty unhealthy feedback loop and like you said, there's no value there.

I have smaller kids and I fear for their mental well being because of the pressures of the internet and how it's bleeding into reality in weird new ways that aren't exactly healthy.

[timtas]

> No actual new value is being created

That's your whole theory, and there's nothing weird about it. Everyone knows young men take risks to make their fortune and gain esteem. It's just window dressing for a claim you threw out there without any supporting argument.

[naravara]

I think it's simpler than that. The ideology of the post-90s/post-Reagan neoliberal era inculcated a set of hyper-capitalist values that posited humanity as "homo economicus" and operated as if we are little more than producing, consuming animals who exist to mechanically produce generic "economic output" and consume "utility."

This is a deeply unsatisfying and spiritually empty existence. This leads to all the behaviors you mentioned as a form of rebellion and/or attempt at escaping the bonds of that kind of life. This sentiment has been catalogued in a variety of movies, including "Fight Club," the ur-text of Gen X anomie.

[EVa5I7bHFq9mnYK]

There are a lot of people with no skills that are richer than you. Are you hating all the people who inherited money? Should any person born in poor country hate people born in rich countries?

[timtas]

Best reply. Envy is gross. Such a socially destructive vice.

[la_fayette]

I think this is a dump discussion here... look at the stock price of amazon, apple or what not. In perspective of the stock market, it is nothing special when u look at the crypto assets...

[jeffbee]

And they are out there right now trying to destroy America with their campaign funding, because they believe their lottery winnings validate their insane politics.

[carlsborg]

Another view : Curiosity is profitable. If you spent some time digging into the technologies and trying them out, you ended up buying a bunch of tokens/coins to play with, and sometimes they just handed out early users money. It isn’t all jpegs and cheaters- lots of interesting technology problems.. read some of the white papers you will find skill and mathematics in loads.

[cinntaile]

That's apparently how the human psyche works. You attribute to skill what was dumb luck. Very common in the stock market too.

[29athrowaway]

If someone is making money, good for them.

My dislike of bitcoin is mostly due to its enormous energy usage. And the scarcity of GPUs.

[api]

I have no problem with people winning the lotto. It happens. People get lucky. What I hate is people who win the damn lottery pretending they're geniuses who are on the right side of history changing the world. That's what much of the crypto ecosystem sounds like. Fxxk off. You won the lottery.

[annoyingnoob]

Don't sweat it. People win the lottery too, but that does not make it an 'investment'. I've always thought of the lottery as a tax on people with bad math skills. You could win but you might have a better chance of getting struck by lightning.

[koonsolo]

I upvoted your comment. Not because I like it, or I agree with it, but because it validates my assumption on why HN hates crypto so much.

I senserely hope your weeks will get better.

[timtas]

You should probably get your burning envy under control before you realize this is just a buying opportunity and it fully consumes you.

[LZ_Khan]

Keep in mind that for every one of the rich crypto babblers, there's probably 5 that got in at the wrong time and are penniless.

[philistine]

Living North will not allow you to ignore society more easily. Quite the contrary. I know, I've lived it.

[JSavageOne]

I'm sick of this meaningless word "bro" being tossed around to condemn every kind of stereotypical archetype. Crypto bro. Tech bro. These phrases are completely meaningless and sexist.

> I truly hate the fact that these people are so rich.

Envy is fairly toxic

Amazing that this is the top comment on this thread. HN is so anti-crypto now it's almost comical

[2ICofafireteam]

If you don't know who Dick Proenneke is, look him up....wonderful daydream fuel.

[seydor]

this came off as sincere, so congrats. Most of the things that offer us value are not paid for that. Most of the internet runs on PHP

[tOUSSia]

you are correct about the bitter part. Maybe, just don't focus on things you can't do anything about.

[noxer]

There is a word for this, jealous.

[maerF0x0]

you say

> pure stupid luck

I say

> A bigger idiot

[kobasa]

https://www.bitcoinisdead.org/ - have fun staying poor, cope, etc..