Are you claiming that there is literally no way of using this information to reliably extract money from the stock market? This surprises me.
I’ll reuse my example: if you knew for certain that Facebook would be as huge as it was, what stocks, exactly, would you have invested in, pre-IPO, to capture gains from its growth? Remember, you don’t know anything else, like that Google will go up from its IPO, you don’t know anything about Apple being a huge success—all you know is that some social network will some day exist and will grow hugely. The best I can think of would be to sell any Murdoch stock you owned when you heard they were buying MySpace, but offhand I’m not sure that Murdoch didn’t just stagnate rather than drop as MySpace increasingly turned out to be a writeoff. In the hypothetical that you didn’t know the name of the company, you might’ve bought up a bunch of Google stock hoping that Orkut would be the winner, but while that would’ve been a decent investment (yay!) it would have had nothing to do with Orkut (awww!); illustrating the problem with highly illiquid markets in some areas...
Would you expect Vaniver’s indexing to at least reliably turn a profit? Would you expect it to turn a large profit?
Depends on the specifics. Suppose the home robotic growth were concentrated in a single private company which exploded into the billions of annual revenue and took away the market share of all the others, forcing them to go bankrupt or merge or shrink. Home robotics will have increased—keikaku doori! - yet Vaniver’s fund suffered huge losses or gone bankrupt (reindex when one of the robotics companies suffers share price collapses? Reindex into what, exactly? Another one of the doomed firms?). Then after the time period elapses and your special knowledge has become public knowledge, the robotics company goes public, and by EMH shares become a normal gamble where you could lose money as easily as make it.
(Is this an impossibly rare scenario? Well, it sounds a lot like Facebook, actually! They grew fast, roflstomped a bunch of other social networks, there was no way to invest in them or related businesses before the IPO, and post-IPO, I believe investors have done the opposite of profit.)
In case it’s not clear: I’m not trying to contradict you; I am trying to get advice from you.
Suppose that you got a mysterious note from the future telling you that the demand for home-robotics will increase tenfold in the next decade, and you know this note to be totally reliable. You know nothing else that is not publicly known. What would you do next?
Do more research. Is this even nonpublic knowledge at all? The world economy grows at something like 2% a year, labor costs generally seem to go up, prices of computers and robotics usually falls… Do industry projections expect to grow their sales by <25% a year?
If so, I might spend some of my hypothetical money on whatever the best approximation to a robotics index fund I can find, as the best of a bunch of bad choices. (Checking a few random entries in Wikipedia, maybe a fifth of the companies are publicly traded, so… that will be a pretty small index.) But I wouldn’t be really surprised if in 10 years, I had not outperformed the general market.
I’d advise finding a market bottleneck, like ColTan mining. You’ll see any technology that can replace tantalum capacitors from further away than you’ll manage to see software or design shifts.
By “you know this note to be totally reliable” I assume you mean you have a fair idea how it got there (eg you just built a time portal. with the intention of sending through financial advice, and a hand, bearing the same tattoo you have, pushed through with the note) and not that you’re psychic and literally know things with 100% certainty? IOW you have a high probability estimate that it’s genuine, but not an infinitely high one (seems more realistic and applicable if nothing else.)
I’ll reuse my example: if you knew for certain that Facebook would be as huge as it was, what stocks, exactly, would you have invested in, pre-IPO, to capture gains from its growth? Remember, you don’t know anything else, like that Google will go up from its IPO, you don’t know anything about Apple being a huge success—all you know is that some social network will some day exist and will grow hugely. The best I can think of would be to sell any Murdoch stock you owned when you heard they were buying MySpace, but offhand I’m not sure that Murdoch didn’t just stagnate rather than drop as MySpace increasingly turned out to be a writeoff. In the hypothetical that you didn’t know the name of the company, you might’ve bought up a bunch of Google stock hoping that Orkut would be the winner, but while that would’ve been a decent investment (yay!) it would have had nothing to do with Orkut (awww!); illustrating the problem with highly illiquid markets in some areas...
Depends on the specifics. Suppose the home robotic growth were concentrated in a single private company which exploded into the billions of annual revenue and took away the market share of all the others, forcing them to go bankrupt or merge or shrink. Home robotics will have increased—keikaku doori! - yet Vaniver’s fund suffered huge losses or gone bankrupt (reindex when one of the robotics companies suffers share price collapses? Reindex into what, exactly? Another one of the doomed firms?). Then after the time period elapses and your special knowledge has become public knowledge, the robotics company goes public, and by EMH shares become a normal gamble where you could lose money as easily as make it.
(Is this an impossibly rare scenario? Well, it sounds a lot like Facebook, actually! They grew fast, roflstomped a bunch of other social networks, there was no way to invest in them or related businesses before the IPO, and post-IPO, I believe investors have done the opposite of profit.)
In case it’s not clear: I’m not trying to contradict you; I am trying to get advice from you.
Suppose that you got a mysterious note from the future telling you that the demand for home-robotics will increase tenfold in the next decade, and you know this note to be totally reliable. You know nothing else that is not publicly known. What would you do next?
Do more research. Is this even nonpublic knowledge at all? The world economy grows at something like 2% a year, labor costs generally seem to go up, prices of computers and robotics usually falls… Do industry projections expect to grow their sales by <25% a year?
If so, I might spend some of my hypothetical money on whatever the best approximation to a robotics index fund I can find, as the best of a bunch of bad choices. (Checking a few random entries in Wikipedia, maybe a fifth of the companies are publicly traded, so… that will be a pretty small index.) But I wouldn’t be really surprised if in 10 years, I had not outperformed the general market.
I’d advise finding a market bottleneck, like ColTan mining. You’ll see any technology that can replace tantalum capacitors from further away than you’ll manage to see software or design shifts.
By “you know this note to be totally reliable” I assume you mean you have a fair idea how it got there (eg you just built a time portal. with the intention of sending through financial advice, and a hand, bearing the same tattoo you have, pushed through with the note) and not that you’re psychic and literally know things with 100% certainty? IOW you have a high probability estimate that it’s genuine, but not an infinitely high one (seems more realistic and applicable if nothing else.)