@awealthofcs@Ritholtz Is there any notable research that analyzes 5-10 year forward returns for stocks that grow to these concentrated levels? Probably out there somewhere, just curious if you’ve seen something specific. Would be interesting to see forward returns after reaching these weightings.
@ValueStockGeek Seems like that concentration piece could create a better opportunity for *gpod* active management going foreward if Goldman is right. But as John Galbraith put it “The only function of economic forecasting is to make astrology look respectable.”
@ValueStockGeek While you’re right that nothing guarantees an active strategy will do better than the market, keep in mind that Goldman’s report was forecasting a 3% return for the S&P 500 specifically, not the overall market. They’re careful to highlight this in the paper.
@ValueStockGeek They’re also careful to highlight that the main variable driving forecasted returns lower is the historic level of concentration within the index (~35% in the top 10 stocks). Without that factor in their calculation, they got something closer to 6-7% annualized.
@jbryanporter Great thread. It’s the most meaningful exhaustion, with their purity of thought, discovery of boundaries, and genuine curiosity. Learning how much they crave structure and a fairway helps keep the tantrums in perspective. What a blessed, short period we get to experience.
“Crowds” are either super-wise or dangerously dumb.
The key variable is whether the crowd is made up of independent decision makers (think “poll the crowd” in Who Wants to Be A Millionaire) or coordinated (think about a mob with pitchforks and torches).
Social media, and the internet in general, has made it much easier for coordination to occur.
You do the math.