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A few years ago cost structures for managing one's investment portfolios were also significantly higher than today!

There's an even better alternative for someone willing to put in the leg work:

(1) Figure out your investment horizon. For many people, this is way shorter than suggested by generic advice, which makes some diversification beyond "stonks go up" meaningful.

(2) Figure out what costs you'll incur by rebalancing etc.

(3) Write a short script that optimises the amount of activity in portfolio management that improves performance over your investment horizon, given your costs.

Unsurprisingly, the result can vary a lot between people. The result is most likely going to involve a very low level of activity, but the process of finding it out is very informative.

What I've found out (and this is replicated also by more authoritative people like Carver) is that for almost everyone, mixing in some 10--20 % of a safer asset like 10 year bonds and rebalancing yearly outperforms a pure equity portfolio over most realistic investment horizons.

Doing nothing saves trading costs which are a major drag.

The standard advice for equities investors (at least in the UK) has been to invest in tracker funds for a very long time.

it is possible to beat the market. Many years ago I double my money in approx an year - but I invested heavily in I had been covering as a analyst (one of my previous careers) until immediately before. I am more cautious now.

Just yesterday it was announced that Bitfinex will be returned the 95,000 bitcoin that were lost in a 2016 hack. These coins will be returned to the account holders which were affected by the hack.

At the time the bitcoins were lost, they were worth ~$575 each.

Today those returned tokens are worth close to $100,0000 each.

I doubt anyone who was affected by that hack realized they just got involuntarily forced into the best investment of their lives.

This doesn’t surprise me in the slightest.

Most of my investing is just in passive S&P index funds, but I do occasionally buy individual shares.

Sometimes I make decent money, sometimes I lose money…turns out I consistently do worse than the S&P long term.

I treat buying individual shares as yuppie gambling at this point. It can be fun, but it’s usually a bad strategy.

The conventional wisdom is to sell your profitable stocks, to "lock in your gains", and sell your losers to "cut your losses."

I call that "minimizing your gains" and "locking in your losses", and just hold instead. If I "locked in the gains" I would have missed out on 10x returns.

Of course, I did ride Enron all the way to zero (!), but it didn't matter. Think of it this way - buy 10 stocks. 3 go to zero. 6 have modest returns. 1 is a 10x winner, that more than makes up for the failures, and becomes the tentpole for your assets.

This reminds me of that Mythbusters episode in which they test what is the fastest strategy in a traffic jam or congestion - switching lanes or keeping your lane. IIRC the result was that it's the same, but zigzagging makes you feel it's faster

So invest in s&p 500 and do nothing, right? That's a good strategy for someone young, because it makes sense to be risk tolerant then. As you age you want more and more of your portfolio in bonds/cash, because you want the reduced fluctuation in purchasing power (i.e. comfort) that that brings you. These are the bare fundamentals of portfolio management.

Did they include the Monkeys?

"Most successful chimpanzee on Wall Street" - https://www.guinnessworldrecords.com/world-records/most-succ...

How can I use the 'dead man strategy' if I've just started investing and don't own any stocks?

Because if I already need to have some stocks, than this being the #1 strategy feels like those advice that you get on the internet where if you want to be rich just get born into a wealthy family.

Statistically probably true, but not really doable. :/

I feel like you can only do the 'dead man strategy' when your already dead, since before that it's probably better to keep adding money into the portfolio.

This is the same for cryptocurrency. The people who lost accessa and subsequently regained it usually made more than those with ready access who sold earlier or played the market.

> turns out that doing nothing with your stock investments is (statistically) the best strategy

The only thing a small investor can control are fees. Minimising transactions minimises fees.

I can think of at least one situation, like expiring options, that you wouldn't want to have happening during your "court frozen" period...

P.S. I'm not a financial advisor. Make your own decisions.

Do you have a link to that article?

That's worked for me, for well over 30 years.

True. Small frauds are common. I know people that have gotten away with pump-dumps. I know people that have raised obscene money for terrible ideas. I even helped close one customer while at one company, and then when I moved to another company, I had to meet the same buyer and he chewed me out in front of my rep because of the shady deal from my last company. And I even had a customer that kinda defrauded us! And when I was younger, I saw a lot of tiny behaviors that might be considered fraudulent if looked at from the angle of a transaction. I had to stop working for a while because it was destroying my soul. Nate says there was no danger or specific reason to close, but I very much doubt this.

zombie companies suck all the oxygen out of the room and away from productive companies, the victim is society and civilization at large and the damage is measured in lost exponential progress of unbound time axis, potentially millennia. Medical technology, longevity, scientific advances that we could have had but will not for another 10^N years - all retarded by malinvestment and misallocation. Theworldif.jpg

Some shareholders seek fraud as it has the potential for the highest short term returns. The sooner we exile those folks the better.

You're not going crazy, they are. But even once things start falling apart, inertia alone can give the appearance of productive movement for years to come.

This is probably why when somebody looks to try to find the cause for e.g. the collapse of the Roman Empire there were a surprisingly large number of potentially serious issues all happening simultaneously.

The reason is that the empire probably collapsed decades before its fall and so the stupid decisions and actions all continued to pile up, seemingly without consequence. All until the inertia finally ran out and suddenly the entire house of cards came crashing down.

By all accounts it was like this at the end in the USSR too: infinite nepotism, no accountability, crashing standard of living near the median, deaths of despair attached to crazy levels of dangerous substance use.

This is what happens when bad people capture the levers of power.

https://youtu.be/IUJMyTJ9gyI

It's not about pretending. Truth is the first casualty of war. If someone is trying to deceive you, they are actively exposing you to some kind of risk, usually for their own benefit, which is a hostile act.

We've kicked the can down the road for a while, but no worries, we will pick it up soon and recycle it ;)

> Which also means being careful of short selling.

There are a number of businesses I know are badly run and will eventually fail, but I cannot find a way to monetize that safely without knowing the timeline for failure.

> It can put you at unlimited risk even if you are absolutely right.

The risk is in borrowing, not short selling. How many momo jockies out there think about the "unlimited risk" from buying Tesla on margin? In that case, you're shorting USD, but no one talks about that because it always will be fashionable to short USD.

Just like it always will be fashionable to short JPY, for carry and more. Until it's not.

I hear what you’re saying, but it feels a bit too cynical to expand it to all business. Did you tell your boss you’d finish some task today? If something comes up, as often does at work, and you don’t finish, did you lie? Predicting the future is hard even as soon as what will happen today, now do that for the next quarter or 4 quarters. Of course there are fraudsters out there, but I view most founders as rampant optimists instead of liars. And you kind of have to be an over top optimist to be founder.

Isn’t that virtually every (mobile) subscription app in existence…?

Money grants you the power to influence others' lives. You take that from people illegally, and give it to yourself, you're creating an extreme negative effect on economic efficiency that should not be taken lightly and should be heavily discouraged.

Bill Hwang had settled insider trading charges a decade or so before he caused 30 billion dollars of liquidations after engaging in multiple forms of financial fraud. His insider trading punishment was likely lax and he committed crimes again, causing even more economic damage.

18 years in prison is nowhere near the amount of economic damage he caused. He amassed a net worth of 10-15 billion dollars. That's ten thousand average lifetimes worth of average American work. The punishment should reflect that. The expected value of fraud should be negative so that not even a degenerate gambler would consider it.

Can you explain your views as to why incentives to harm the economy massively via fraud to benefit yourself need to exist?

Some people think it’s just a number but the reality on the ground is that money is literally lifetime.

People don't invest because they think a company is competent. They invest because they are looking for a return.

The mistake CrowdStrike made will likely have little to no effect on their revenue. Since the stock dropped a bit (emotional investors getting out) it became a good value proposition, so people bought it cheap.

The reasons companies use CrowdStrike haven't gone away. Existing contracts can't just be terminated. By the time it comes up for renewal few will remember the incident, fewer still will care.

What you see as "levels of incompetence" others see as "made a mistake". You don't fire suppliers for a mistake- that's experience to them, and they're unlikely to make that mistake again anytime soon.

Plus of course, replacing anything like that at scale is a lot of work, expensive, and career-risky. Who, in the enterprise, is taking on that task? Who is advocating for it?

The market is forgiving because the outlook remains strong. The outlook remains strong because the business fundamentals remain strong.

Has anyone actually fired Crowdstrike over the incident? Heck, did Delta fire Crowdstrike?

I think the stock market is accurately realizing that it takes a lot of effort to fire a company embedded in your security infrastructure and that the incident probably won't change sales.

Equifax should not be in business anymore

Not to take a position on those particular accusations but a problem with activist shorting in general is the people running the companies in question are often pissed of and aggressive and will try to take legal and PR action against the shorters.

That article says nothing that suggests Hindenburg is "part of the problem", only that they had received requests for information in line with an investigation.

That's not even close to comparable. You vote for elected officials to pass bills that are attempted and sometimes failed. And often failed projects produce things of value to society so I'm not sure how you would factor that in, for example if you'd like a refund on the Challenger explosion. You don't vote for criminals to take your money.

That isn't guaranteed, because if so you can always do the opposite of what you think and you will overperform. Even if you think you know something, you are, at best, still being random. Anything perceived decrease in return from taking actions is itself just chance (and confirmation bias), because otherwise you could inverse it.

> Short sellers taking positions and then putting out report and marketing to bring a company’s price down can also be perceived as market manipulation.

Sure, in the same sense that releasing a 10-K can be perceived as market manipulation. In fact, if we define "market manipulation" to mean anything that might affect the market, many things can be perceived as market manipulation!

The question I think is more important is, is it bad? Sharing investment information you believe to be true and material to investors seems good to me.

The first line of that article is

"New financial and accounting executives will be appointed, as recommended by the investigation committee"

I agree that harm is possible when short selling and lying about it.

1. Naked short selling basically doesn't happen anymore. To the extent that it does happen it's a mere technicality and the borrow is found after a couple of days.

2. There is very little money in shorting. Pumping and dumping by making up positive news is much more lucrative. "to the moon" has been a trope for years, and there is no equivalent on the short side. Even the world's most successful short seller Jim Chanos was successful because the short portfolio functioned as a hedge that enabled a leveraged long position on broad indices. It's pretty hard make money net short when the market goes up for two straight decades.

3. The authorities don't have the resources nor the dogged inclination to hunt down fraudsters. The authorities can't and shouldn't base an exhaustive investigation on vaguely shifty CEO behavior. Short sellers can and do start their investigation based on gut feeling.

Truly perverse incentives such as one the one you linked aside I think it's mostly fine. Naked short selling is already illegal and the deck is heavily stacked against short sellers to begin with. A position betting on growth is by far and away the safest investment, the market directly incentivizes "irrationality" on the side of prices not going down, and it's infeasible to hold a short position for very long making it (mostly) noise to long term investors which are the ones we typically care about.

I completely agree about the dangers and am disgusted by the story you shared and others like it.

In an ideal world nobody would commit a crime. Sadly we're far from an ideal world, and the US authorities in my experience are not well funded enough to adequately cover the ground they're responsible for. We also have a populace that voted for a felon who hates the IRS and has cronies who have floated dismantling the Consumer Financial Protection Bureau, so short sellers will have to do.

And the betting markets like Polymarket are worse. They had bets as to whether the fires in LA would be contained by certain dates. You can imagine the perverse incentives that creates.

I suspect he saw Hindenburg as "his" and didn't want to run it but also didn't want anyone else to.

And in that same vein it makes sense not to sell because if they ever see another great idea 5-10 years down the line I'd assume they might want to get back together under the same name and publish again. Selling would preclude them from doing that under the same name.

And all the bespoke vibes and thoughts that go with that. Remove the people and what is there to sell?

and very fairly, talks about sharing all the knowledge further so that more such organisations can crop up

They have a well-known brand with a large audience and reputation.

[dead]

” relatively unusual.”

Hindenburg was anything but usual IMO so fits the picture.

There is a type of person who needs to re-invent themselves over and over.

> And recently Supermicro’s independent auditors didn’t find the same issues Hindenburg claimed.

What are you on about? Their Big 4 auditor resigned and said that nobody should trust anything that the company's board says. Are you referring to the one (1) person they hired and paid to clear themselves of wrongdoing?

>The coming political climate looks to be one where money is more important than the rule of law (even more so than usual), which might be bad news for a business like that.

I think this is the correct answer for explaining the timing of this announcement at least. It's one thing to use your media to fight your short sellers, it's another thing when you become the government and start fighting your shortsellers with the entire political and "judicial" apparatus in order to keep the market irrational. Or force it to accept the new reality.

The statement by Nate Anderson does not contain any explicit or implicit connection to Elon Musk, Donald Trump, or the political climate. It's disappointing that you believe "money in power" is a new phenomenon uniquely exemplified by Elon's burgeoning interest in politics. Cuomo's monologue during the DNC about the falseness of "grass roots political power" in the United States is right on the mark. Biden's warning about "oligarchs" was awkward and insincere.

https://youtu.be/mBGNOSWkrAU?si=Y5dlAFi1hTtut4Xr

I'll just pipe in as a reply to your comment that, despite never having known this org until now (unfortunately for me, they seem cool as hell), the statement reads as a bit inexplicable.

The first connection my brain made was to the moderator of /r/IAMA who, thirteen years ago, in the midst of its massive success, randomly and unilaterally decided to shut it down [1] (although on a retrospective reading, I actually understand their reasoning more than Hindenbergs).

[1] https://old.reddit.com/r/IAmA/comments/ju5cf/goodbye_iama_it...

The right music at the right time can be transformative.

Ha I guess that's fair. Were you expecting a DJ set?

Ok, I listened to half of the set and it's not my style. This is what I like: https://www.youtube.com/watch?v=n_LcVqqHSY8

Cercle is a gift to the world. For anyone that didn't receive the gift yet - they're organizing great DJ sets in special locations. Multiple times I've put something to listen to, and found myself watching the whole show.

He only uses that one when he's getting short squeezed

Absolutely, it's well known that Jane Street and other major traders draw heavily on the former WWW stable for their short staffing.

It seemed to very positively react to the shutdown though

I'm assuming when he says "governments taking a look at" he means like the Indian government and it's more of a Mafia-type "taking a look at" than a serious inquiry with any actual merit. A strongarm type thing

They interview people involved with these companies, then based on these interviews write report that is privately distributed and take out coordinated short positions.

That’s almost the definition of insider trading. Almost. Now afaik what they are doing is nominally above board, but they are walking a very fine line.

In less than a week a president will take power whose chief advisor has a really big grudge against short sellers.

Getting out now is on point for Hindenburg.

Supermicro stock is down 40% from the publishing of the report, hardly a damp squib.

Looks like the jury is still out on Adani.

Only failed Adani because they misunderstood how deep the Indian government would go to join in the cover-up, instead of actually investigating it.

The Big 4 auditor for Supermicro literally quit, citing concerns. It's the SEC's job to do the investigating (and it's failed badly and likely to fail more with the coming admin).

https://en.wikipedia.org/wiki/Hindenburg_Research

I'd really recommend Matt Levine's various columns on this. Here's one [0] - it's paywalled, but if you sub to the newsletter you get the full texts for free. Not sure if you can get historical ones, but I'm guessing he'll talk about it again in the next issue this or next week. I added the excerpt here [1] too. Very entertaining and informative take on most things finance.

[0] https://www.bloomberg.com/opinion/articles/2024-07-02/people... [1] https://telegra.ph/Hindenburg-01-16

People have this idea that short sellers are market manipulators who conspire to wipe out innocent day traders' life savings and trigger mass layoffs with the stroke of a pen (hence the term "financial terrorism," which is absolutely comical in its hyperbole but used with complete sincerity by the anti-short crowd), but like tines said, it's a risky business that requires lots of research that frequently goes nowhere with limited upside and uncapped potential losses. The amount of times they and other short sellers publish damning evidence on a company only for the stock to shoot back as soon as the company releases a "nothing to see here" non-response really shows the difficulty in making money in the space (and how much people want to bury their heads in the sand).

Given the regulatory environment we are heading into, I expect short selling will become an even riskier business since the SEC isn't going to be prosecuting fraud anymore (or rather, they'll be doing even less than they are now), making it much easier to sic the lawyers on firms like Hindenburg. Even though this isn't their stated reason for bowing out, I wouldn't be surprised or hold it against them if it was a factor.

Matt Levine always has the good stuff, but he had commentary on a profile of Jim Chanos (the lesson not necessarily being specific to Chanos) that always sticks with me. The profile that discussed the idea that the real sort of 'secret sauce' was that the combination of Chanos' main funds were like 190% long, and then 90% the short stuff he wan known for.

On its surface, nothing crazy for long/short funds, the notable part was that basically all the effort was on the short side, and the long side was implied to be very humdrum. And the short book had like negative returns over a long period. It just struck me as a really elegant (if extreme) example of what uncorrelated returns can do if you do somehow have some edge over time.

And I'm not sure what Hindenburg's holistic picture is, but whether rightly or wrongly now I usually assume most of the kind of very public shorts operate similarly. I was never really on board with the "short sellers are evil" train of thought, but I did believe, "oh these very public short sellers only short things, they just go around all the time thinking everything is awful". And my assumption now is that they are like, kind of really theatric long/short funds.

Matt had some line like if you extremely good at something, you can get rich doing it, even if it loses money. As long as it's not correlated.

I’d wager a big part of how they make money is as SEC whistleblowers. It’s not as huge of money as shorting is - but it’s typically a single digit percentage of the recovered fines. Considering these guys nailed a company that defrauded people of $3 BILLION dollars, they’d net $30 mil from turning that company in even if the payout is only 1%.

The SEC has a policy of paying out part of recovered fines as bounties to whistleblowers to align incentives. If your company is doing something sketchy, you get a payout by doing the right thing.

I’m not a lawyer but I think that mechanism works just as well if you’re an external reporter of fraud. SEC makes money and pays you for your diligent forensic auditing.

> Shorting tends to be intrinsically harder because the market goes up over time and Americans are generally optimists

Also, with shorting the best you can do is double your money (if the stock goes to 0), while you can lose an unlimited amount (as there’s no cap on a rising stock); whereas with going long, you can only lose all your money (again, if it goes to 0), but you can gain an unlimited amount.

> Shorting tends to be intrinsically harder because the market goes up over time and Americans are generally optimists.

... and the market can stay irrational longer than you can stay solvent.

I remember once I tried shorting a stock, of a market leader in my area. I knew the field well enough to see that they were trying to fudge some numbers and their quarter was _not_ as good as they had claimed it to be.

But sadly the market didn't see this and the stock went up. E*Trade started pushing me to cover my positions, and eventually I ended up losing a 5-figure sum (nothing earth-shattering, but still a good chunk of my cash).

After I had bought it all back, slowly the market realized what I had seen and the stock dropped as I had expected. Unfortunately I did not have the deep pockets to stick around long enough; all I was left with was a hole in the wallet and a hard lesson learned.

Who were pretty much right about Ginkgo Bioworks (DNA)

which is all good, because it is better to let 9 guilty men free, than to wrongfully imprison 1 innocent.

And those German short-sellers (and to a lesser extent their British counterparts) were aggressively bullied by their local government market regulators https://www.reuters.com/article/technology/germanys-long-lon...

Usually big established companies that've been unfairly beaten down and financials don't have any red flags. I look at social chat/analyst chat also but mostly only to see if/how many people/bots are talking not really to see what they are saying.

For example, I hold oversized bags of Boeing, Pfizer, and Google right now (these are new-ish positions ~3-4m in)

If I'm wrong, I try to get out asap. If I'm right, I try to never sell.

Apropos user name ;)

Damn thats clever.

I missed that news. Could you pay some links to the DOJ and SEC investigations into Hindenburg?

'X has been happening for a long time' is an old tactic to hide bad things behind some undefined excuse of inevitability, and discourage any action. Corruption has been happening for a long time, but that doesn't mean it can't get much worse or, through our action, much better.

What does it even mean? What does it matter if it's been 'going on for a long time'?

Um, yes.

Starting next week, it's open season on suckers. It's going to be like the glory days of the Tel Aviv binary options scammers, who at one time were 40% of the Israeli finance sector and had good political connections.[1] Crypto deregulation is coming. No more CFPB enforcement! No more SEC enforcement!

There are still people who haven't lost money in crypto yet who can be targeted. They're all little people. No one will help them. Just pay off some influencers and start up your scam.[2]

[1] https://www.timesofisrael.com/topic/binary-options-fraud/

[2] https://www.reddit.com/r/memecoins/

Musk famously hates short sellers, the Trump Social CEO has done the "blame the short sellers" bit, Eric Trump is hyping crypto coins, Trump himself is eager to take credit whenever the market goes up... I think it's almost guaranteed that they'll target short sellers specifically at some point. They're a easy target to blame, and divert attention from the the fact that they are actually fleecing investors right at this moment.

Soon the only crime will be exposing fraud.

I don't think Hindenburg is scared of being sued, otherwise they wouldn't have been in the business in the first place. Their investigations are extremely thorough, with everything fully documented, mostly from public records, for the specific purpose that if/when they show up in court, they can be confident of the basis of their findings.

https://www.reuters.com/legal/government/adani-group-threate...

P.S. where did you see Block suing Hindenburg? The closest thing I can find is 'Block said it intended to “explore legal action” against Hindenburg, who sought to “deceive and confuse” Block investors to “profit from a declined stock price.”' which is just PR speak

Would that really be a factor? It's hard to call it slander when you agree to pay the fine.

Adani Group which was charged in November by the SEC for bribery?

https://www.hindustantimes.com/business/adani-group-shares-p...

It is interesting that their 'About' page mentions a lot of their work but no mention of Adani - which would have arguably been their biggest.