A Cryptocurrency-Trading Hamster Beats Warren Buffett's Performance - and the S&P 500 (npr.org) 85
"What if we told you there was a hamster who has been trading cryptocurrencies since June — and recently was doing better than Warren Buffett and the S&P 500?" asks NPR:
Meet Mr. Goxx, a hamster who works out of what is possibly the most high-tech hamster cage in existence.
It's designed so that when Mr. Goxx runs on the hamster wheel, he can select among dozens of cryptocurrencies. Then, deciding between two tunnels, he chooses whether to buy or sell. According to the Twitch account for the hamster, his decision is sent over to a real trading platform — and yes, real money is involved.
Last Monday, after 100 days the hamster's portfolio was up 48%, reports one site, "before Bitcoin tumbled, which brought the rest of the crypto market down with it." But the hamster's portfolio is still up nearly 30% since he started trading in June, the article points out, "outperforming Bitcoin, the S&P 500, and even Warren Buffett's Berkshire Hathaway."
The hamster's business partner adds that profits aren't yet enough to cover the initial investment on Mr. Goxx's cage. And there's other issues...
"Since Mr. Goxx is an honorable business rodent, he must calculate with about 35% tax being subtracted on all his returns, so there is still some work left before he can really talk about making money."
It's designed so that when Mr. Goxx runs on the hamster wheel, he can select among dozens of cryptocurrencies. Then, deciding between two tunnels, he chooses whether to buy or sell. According to the Twitch account for the hamster, his decision is sent over to a real trading platform — and yes, real money is involved.
Last Monday, after 100 days the hamster's portfolio was up 48%, reports one site, "before Bitcoin tumbled, which brought the rest of the crypto market down with it." But the hamster's portfolio is still up nearly 30% since he started trading in June, the article points out, "outperforming Bitcoin, the S&P 500, and even Warren Buffett's Berkshire Hathaway."
The hamster's business partner adds that profits aren't yet enough to cover the initial investment on Mr. Goxx's cage. And there's other issues...
"Since Mr. Goxx is an honorable business rodent, he must calculate with about 35% tax being subtracted on all his returns, so there is still some work left before he can really talk about making money."
I would probably say it's pure luck (Score:5, Insightful)
If a hamster (or a psychic) can predict the movement of a commodity better than an analyst, it most likely means that there isn't anything to analyze and that you can as well just flip a coin.
The cynic in me would say that this is true for most analysts...
Re:I would probably say it's pure luck (Score:5, Insightful)
An even simpler explanation is that you can find a winning streak in any sufficiently large pile of random data.
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An even simpler explanation is that you can find a winning streak in any sufficiently large pile of random data.
Well, by that logic someone would win big money in every casino pretty much every day, how is it possible for them to stay in business up against those mad skills?
/s in case it’s not obvious.
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Because while that is true, there are a lot of people who are losing big money every day as well.
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Casinos "only" take about 10 to 20% of the money that's being played with, either as a form of commission or by means of chance. That means that most money will flow back to the players. Many games are set-up to be played to either win or loose big. Big winners are important marketing material for any casino, so yes, it does happen, yet there are by design, almost much more losers than winners.
While much of "Wall Street" is rigged like a casino, Warren Buffet isn't a casino player, he's a long-term investor
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Casinos "only" take about 10 to 20% of the money that's being played with, either as a form of commission or by means of chance. That means that most money will flow back to the players
Whelp then, have I got some good news! RobinHood only takes a few cents off each stock or derivative purchase by selling the order flow and I assure you, it’s a casino, not some shady back alley brokerage.
Not everything is pure luck (Score:5, Insightful)
An even simpler explanation is that you can find a winning streak in any sufficiently large pile of random data.
There's a third explanation: That human-evolved analysis for a particular category is worse than random chance, so that the random chance will *always* outperform the human analyst.
There are a fair number of human Cognitive Biases [wikipedia.org], and we don't train people away from them.
If the analysis happens to lean on one of more of these biases, the market will always be "surprising" to the human analyst but be beat by random investing.
We can actually put numbers to these predictions. What is the *likelyhood* of a random investor beating a human, over time and with a measurable set of data? It's the sort of things statisticians do all the time.
Not everything is pure luck.
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There's a third explanation: That human-evolved analysis for a particular category is worse than random chance
Yep. Some of these people making the decisions are too close to the trees to see the forest, or vice versa.
Either way their "knowledge" is actually working against them. biasing them into making poor choice after poor choice.
Like these hotshot, "golden boy" traders that are amazing and prescient and always pick the right stock...until they don't, and then they end up cratering. Maybe they 'learned' so much about trading that it ended up ruining them.
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That said, his powers seem to be winding diminishing [tradingninvestment.com].
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Buffet is the exception that proves the rule. There aren't many people out there with his track record. It's mostly a guessing game, possibly informed by experience or knowledge.
No one can tell you where the market will be this time tomorrow, or even in a few hours. The stock market is irrational.
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Buffet is the exception that proves the rule. There aren't many people out there with his track record. It's mostly a guessing game, possibly informed by experience or knowledge.
With Warren Buffet, it specifically isn't a guessing game. He buys companies for the express purpose of changing them. He buys controlling interests and then leverages that control into forcing the company to make the changes he wants. They have been profitable changes for him for decades.
Passive investors will always make less money than Buffet, because he isn't passive.
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Re:Not everything is pure luck (Score:4, Insightful)
The simplest explanation is that cryptos are just going up.
So the question I would ask is not if the hamster has outperformed WB, but if the hamster has outperformed buy & hold crypto investors.
My bet is it hasn't, but I'm too lazy to check.
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June was a local minimum for crypto. And, all the coins seem highly correlated, so hard to say what "trading" is supposed to do. So, iof course the hamster did well buying in a trough. If the hamster has started May 5th, I bet it would have done terrible.
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Given the number of possibilities at the range of "hamster investor", the pile does seem to have some breadth.
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It does lead one to question the mythos surrounding the financial types who claim skill and sharp insight on the way up and bad luck on the way down.
If they're really no better at it than a hamster, why again are their huge incomes justified?
Re:I would probably say it's pure luck (Score:4, Informative)
It does lead one to question the mythos surrounding the financial types who claim skill and sharp insight on the way up and bad luck on the way down.
If they're really no better at it than a hamster, why again are their huge incomes justified?
They're not better than a hamster, but they keep claiming they are. The infamous "Monkey throwing darts [automaticfinances.com]" scenrio shows that on average, throwing darts to pick stocks is just as effective, if not more so, than having a person selectively pick stocks. This has been continually repeated and the results are the same [marketwatch.com]. Random picking of stocks will lead to better returns than the professionals. Sometimes brutally so.
Over the long term, index funds will handily outperform actively managed funds [thebalance.com] not only in raw performace, but especially when fees are taken into consideration. Yes, you will get people such as Cathie Woods and her ARK investment fund doing spectacularly well (during a bull market), but on the whole, those who did well one year do not do well the following year.
To answer your question, their salaries are only justified due to marketing and the nature of the business. They have hundreds of millions, if not a few billion, of other people's money invested. How can they not be worth their salaries if all those people trust them with their money?
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Your post should of been appended to the summary. Especially this part.
Over the long term, index funds will handily outperform actively managed funds [thebalance.com] not only in raw performace, but especially when fees are taken into consideration.
But this of course doesn't make for nearly as interesting an article I suppose.
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For many years the Wall Street Journal ran stock picking contests using "experts".
Iirc, there were four professionals and it's own dart throwing team, each picking a single stock (or was it two).
The dart throwers consistently won more often. The top two humans were invited back for the next contest. (I forget how long the period of the contest was. I believe they had overlapping contests, reporting one each month or so).
But . . . and there's always a but . . . when humans *did* win, the wins were larger.
Re:I would probably say it's pure luck (Score:5, Insightful)
If they're really no better at it than a hamster, why again are their huge incomes justified?
The way they pull this off is well known:
1. Start 100 funds and invest randomly.
2. After a year, shut down the 50% that underperformed.
3. After another year, shutdown the half that underperformed that year.
4. Repeat again the next year.
5. Again.
6. Again.
7. You now have a few funds that have outperformed the market FIVE YEARS IN A ROW and produced juicy profits for investors. Advertise your track record as proof that you are a genius.
That's how it works.
Casinos work the same way. When someone wins, the slot machines clang and flash. When someone loses, they lose in silence.
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It's even simpler. (Score:3)
Warren Buffett is simply an inferior model of a hamster.
When was the last time anyone saw him on the wheel? Exactly.
Re: It's even simpler. (Score:2)
Buffett uses logic. Todayâ(TM)s markets are driven by psychology and bait and monetize. Itâ(TM)s like gravity is on hold, until something earthly happens.
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Also, there might be a hidden selection bias on something connected to winning. For example, the hamster might prefer to select companies that start with the letter A and it turns out that companies starting with the letter A do well because their name is listed first and they are easier to remember.
Re: I would probably say it's pure luck (Score:2)
The stock market and crypto are not random, and they're being flooded with money. The stock performed great through the recession, and even better through COVID. People that simply dumped everything into VTI, for example, are outperforming most active traders too. I'm confused why anyone needs to learn this through a hamster though, it's been reported on plenty, the stock market and other assets like crypto have been unhinged for years. I mean, duuuh, crypto speaks for itself here, but it's not the only
Re:I would probably say it's pure luck (Score:5, Insightful)
If a hamster (or a psychic) can predict the movement of a commodity better than an analyst, it most likely means that there isn't anything to analyze and that you can as well just flip a coin.
That's because there isn't anything to analyze with cryptocurrency. The value of a coin is based entirely on investors trying to out bluff each other, like a big game of poker. There's no actual scarcity of the underlying technology behind cryptocurrency (1. create new coin, 2. advertise ICO, 3. profit!!1), and functionally they're all pretty much identical (you run a wallet app which shows you how much magical fake money you have).
If there was any rationality to the market, all cryptocurrency would be worth $0. The entire concept of decentralized digital currency is horrendously inefficient and fundamentally flawed.
Re:I would probably say it's pure luck (Score:5, Insightful)
It's basically tulips all the way down.
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All this tells you is that the options the hamster had to choose from are all indirectly tied to bitcoin performance, and no matter what the hamster chose to do at a given point in time, it would keep tracking the bitcoin trend line. If you compare the trend line of the hamster's performance against bitcoin, they're almost identical.
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The cynic in me would say that this is true for most analysts...
The realist in me says you're right.
Re: I would probably say it's pure luck (Score:2)
it most likely means that there isn't anything to analyze
For Bitcoin anyway, or index funds the last few years. It's the volume of dumb money being thrown around the past several years. There's a bit of a paradox here, if someone is dumb enough to learn this lesson from a hamster, could they?
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This experiment was already done in the 90's, with chimpanzees versus analysts. Same results, the chimps performed better.
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The nature of randomness (Score:2)
Any random selection process will sometimes "outperform" the choices of an "expert." If you flip a coin enough times, you'll eventually get a string of 10 heads in a row. But you'll just as likely get a string of 10 tails in a row. This hamster won't keep outperforming the "experts" forever.
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Most of the experts work the same way. They're celebrated during the run of heads and forgotten during the run of tails.
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This is true of many, but not of the Warren Buffets of the world. People like Buffet invest for the long term, based on the soundness of the business fundamentals. That is a strategy that is likely to win more often than lose. The strategy of typical day traders, on the other hand, where they try to guess the fluctuations of the market, are usually worse than random chance.
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Warren Buffett is a unicorn.
That's not the real question (Score:4, Funny)
The real question is does he outperform Nancy Pelosi's husband?
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The real question is does he outperform Nancy Pelosi's husband?
Imagine if we had a database with every politician and their immediate family portfolios up against that warren buffet net of beating index funds over 10 years - Warren would actually lose for once.
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The $5.3 million [fortune.com] Nancy Pelosi's husband made pales in comparison to the $1.8 billion made by Trump insiders [marketwatch.com]
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Insider trading is wrong whether it's the Ds or the Rs doing it, but that article you linked about the Rs doing it was hardly conclusive.
Re: That's not the real question (Score:3)
Out of curiosity, would the aides that said the calls did not go the way Trump described them be the same aides that described the Ukraine call?
Re: That's not the real question (Score:2)
Nothing new here (Score:5, Insightful)
Yes, a trading hamster in a frothy market can show amazing returns--right up until reality catches up and the bottom drops out. Come back in five years and see where the hamster's porfolio is, except, of course, nobody will be paying him any attention any more, because they've moved on to the next hot thing. Buffet's been doing this consistently for seventy years. Talk to me when you have track record like that.
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Buffet is a unicorn.
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Come back in five years and see where the hamster's porfolio is
All depends if the fed is still stuffing the goose. As long as that keeps up, the portfolio will be very juicy.
Re: Nothing new here (Score:2)
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No, the fed is making foie gras. Be polite, don't reach across the tray
Re: Nothing new here (Score:2)
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Come back in five years and see where the hamster's porfolio is, except, of course, nobody will be paying him any attention any more, because they've moved on to the next hot thing.
Not sure about the portfolio. But the hamster is probably in a shoebox buried in the backyard. Since they only live a couple years. [google.com]
Spite (Score:2)
The reason why Bitcoin-peddles are using Warren Buffet as target, is that he is one of those people who have famously belittled cryptocurrencies, and Bitcoin in particular. He has called them a risky speculative bubble that is likely to be worthless in the long run, predicting that it will come to a "bad ending".
I don't think he is wrong. And I think there are much harsher things you can say about it.
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He has called them a risky speculative bubble that is likely to be worthless in the long run, predicting that it will come to a "bad ending".
I don't think he is wrong. And I think there are much harsher things you can say about it.
He's been pretty gracious about it when he could have said much, much worse. But Buffet is a fairly succinct guy and he crams a lot into a sentence.
"Since early June" (Score:2)
What if we told you there was a hamster who has been trading cryptocurrencies since June...
...then goes on to compare its performance with someone that's been doing finance their entire lifetime.
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High Frequency Hamsters to be deployed (Score:5, Funny)
Many different trading "institutions" are now looking at how to get hamsters closer to the market. /s
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Rumor has it feeding them a can of Coke works really well [1].
1: Over the Hedge, Dreamworks, 2006, Bonnie Arnold et al.
Hamsters make all my financial decisions (Score:2)
I have been breeding market-savvy hamsters for 20 years. All of my financial decisions are made by these hamsters. This has elevated me financially to the point where I am fully self-supporting with investments.
Even though I don't have to work, I am excited to be able to share these hamsters with the rest of the world so others can enjoy the benefits of an investment supported leisure lifestyle. For details, see milliondollarhamster.com.
Re: Hamsters make all my financial decisions (Score:2)
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No. I did check that it didn't lead anywhere obnoxious though.
How many hamsters? (Score:3)
Cryptocurrency trading is indistinguishable from gambling: what someone wins, someone else looses (and the exchange gets its part).
How many hamsters are involved in the gambling experiment? Probably Mr. Gaxx, Mr, Gexx and Mr, Gixx are losing lots of money, but they only mention Mr. Goxx.
With enough hamsters.. (Score:3)
If you had a thousand hamsters making random decisions, some of them will beat any given person probably. Usually meaningless.
Those are rookie numbers... (Score:1)
Take it for what it is (Score:1)
The point is: It's cool stuff like this is why we have the internet!.
Think about the octopus who was predicting the World Cup results... although, they are pretty smart - could you move 8 arms/legs and not trip over yourself?
Be warned, soon we will welcome our new Cephalopod Overlords.
Bitcoin is the new Tesla stock. (Score:2)
Survivor Bias. (Score:2)
What this shows (Score:2)
What this shows is that the stock market is irrational.
When the "best minds" of the financial industry do worse than random picks by any means (including "rodent-directed investing"), that proves that it's all a load of crap "driven" by forces no one really understands and that no one can consistently predict with any certainty, especially in the short run.
It's a worse bet than straight-up gambling where at least you know the rules. Factor in stock market "dark money" pools and microsecond, algorithm-based
Can't work (Score:3)
They should have used a hamster that was born rich.
So it's a random number generator (Score:2)
How much profit would have been made if Mr hamster didn't do anything?
Since June... (Score:2)
Here's what banks have been doing for the past 20+ years:
1) Create 1000 mutual funds with different focusses
2) Wait 20 years
3) Discard 999 mutual funds that weren't profitable
4) Advertise mutual fund that has been beating the markets for **20 YEARS**
Don't be so gullible people.
This is expected (Score:2)
There's 2 main strategies for trading... (Score:2)
Abomination. (Score:1)
I don't approve of this and I'm pretty sure God doesn't either.
This is why wallstreetbets... (Score:2)
...On reddit often refers to going "full retard" when investing, is sometimes just better than perceived knowledge.
This is more about the volatility of crypto (Score:1)
So, recently crypto has been outperforming stocks. Actually is has been - over the long term - for a while. It's not a like-for-like comparison. This will eventually stop.
If the hamster was choosing shares, it would be a much fairer comparison. And, yes, I imagine it would sti
What if I told you... (Score:2)
... That it's old news that investors are right less than a third of the time and that completely random bets do better than most hedge funds.
How many hamsters were there? (Score:2)
Hamsters don't read twitter (Score:1)
Crypto vs. stock market (Score:4, Insightful)
Looking at the graph, it's just because the hamster is only trading in cryptocurrency and it's being compared to the normal stock market.
The hamster's line is closely following bitcoin, the traders are closely following S&P.
Oranges performed differently from apples; nothing to see here.
taunt (Score:1)