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Strategic Ignorance. Just for some balance.

For discussion of the practicalities of setting up and operating income-portfolios which follow the HYP Group Guidelines. READ Guidelines before posting
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moorfield
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Strategic Ignorance. Just for some balance.

#474532

Postby moorfield » January 19th, 2022, 6:17 pm

Have I missed something. What acquisition offer ?

Newroad
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Re: Strategic Ignorance. Just for some balance.

#474542

Postby Newroad » January 19th, 2022, 6:42 pm


MDW1954
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Re: Strategic Ignorance. Just for some balance.

#474557

Postby MDW1954 » January 19th, 2022, 7:46 pm



I think that the question was being asked in jest, albeit (arguably) mistakenly.

Strategic ignorance is about not trying to predict the future. It isn't about not reading the Sunday newspapers.

MDW1954

Lootman
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Re: Strategic Ignorance. Just for some balance.

#474558

Postby Lootman » January 19th, 2022, 7:50 pm

MDW1954 wrote:Strategic ignorance is about not trying to predict the future.

Isn't it really just a latter-day restatement of the efficient market hypothesis, in one of its forms?

The idea that you can try, try and try again and, despite being smart, educated and diligent, still under-perform the market?

Logically, a belief in strategic ignorance would skew one to invest only in an index fund. Because you would have no rational reason to believe that you could do better.

csearle
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Re: Strategic Ignorance. Just for some balance.

#474569

Postby csearle » January 19th, 2022, 8:41 pm

MDW1954 wrote:Strategic ignorance is about not trying to predict the future. It isn't about not reading the Sunday newspapers.
Nice. Will definitely be quoting this. C.

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Re: Strategic Ignorance. Just for some balance.

#474590

Postby Urbandreamer » January 19th, 2022, 9:48 pm

Lootman wrote:Isn't it really just a latter-day restatement of the efficient market hypothesis, in one of its forms?

The idea that you can try, try and try again and, despite being smart, educated and diligent, still under-perform the market?

Logically, a belief in strategic ignorance would skew one to invest only in an index fund. Because you would have no rational reason to believe that you could do better.


Not on this forum. I no longer run a HYP and hence can't comment upon how to run one.
However Pyad used the term when talking about running such a portfolio, AFTER choosing the shares to include in the portfolio.

In my opinion the germ of his argument is that over the expected life of the portfolio, things do not really change. Sure events happen, but on the whole they influence opinion rather than being systemic.

Let us remember HYP was originally described as an alternative for retired people. The life of the portfolio would be measured in their remaining life.
Others adopted it pre-retirement (like me) and others argued that such was not a bad idea. However, we can't use the term "strategic ignorance" on this board without reference to his original use or arguments.

"Strategic ignorance" is actually my main reason or argument for abandoning HYP. I do not accept that over the life of my portfolio things will not change radically. I believe that while there is a huge amount of noise, information about changes in the world should play a part in deciding to hold or replace portfolio components.

Take these examples.

Shell first traded in shells! It then, and to date, trades in oil. However it is now a electricity company and they have an electric car charging infrastructure. Arguably a reason to hold, but that is because they are doing something. If they were not, would it be a reason to sell? They were simply an oil company when I bought them for my HYP.
Go overseas, let us consider that famous pencil company Sharp. What, they now do TV's?
Then again, Lever. Sure they still do soap products, but I think that most of Unilever's profits come from food (including ice cream) these days.

I never owned Sharp, but Glaxo, Unilever and Shell have all been owned. I think not just by me, but by members of this board. Non without significant changes over a decade or two.

MDW1954
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Re: Strategic Ignorance. Just for some balance.

#474611

Postby MDW1954 » January 19th, 2022, 11:32 pm

Urbandreamer wrote:
Then again, Lever. Sure they still do soap products, but I think that most of Unilever's profits come from food (including ice cream) these days.



Interestingly, in their reportage of the Unilever/ GSK fiasco, the FT reported that Unilever's food businesses would likely be put up for sale, had the deal gone ahead. Liquid soaps etc (which is what we all seem to use these days, it seems) would have been retained!

MDW1954

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Re: Strategic Ignorance. Just for some balance.

#474640

Postby funduffer » January 20th, 2022, 8:33 am

Urbandreamer wrote:"Strategic ignorance" is actually my main reason or argument for abandoning HYP. I do not accept that over the life of my portfolio things will not change radically. I believe that while there is a huge amount of noise, information about changes in the world should play a part in deciding to hold or replace portfolio components.



I agree SI is fine whilst a large company operates in a sector where they have a moat and can generate profitable business over decades.

However, you are right, that the world throws up innovation and then those moats can suddenly run dry, and that reliable HYP company can suddenly face an existential threat through disruption to their sector. Then that company must change or die. Often they die because they are too slow to change and the disruptors take over (Eg Kodak).

You could argue the Oil and Gas sector is facing such disruption today.

High Street retailers also face disruption from online retailers (Eg M&S).

Disruption can happen very quickly. One wonders what AI will do to the financial services industry and insurance in the coming decade.

My view is that HYP as an idea for retirement living is fine, as the timescale is 30 years or so, and over that time sector diversification would probably insure you against the most damaging disruption. Tinkering, if you are any good at it, may also help.

For pot building - no. If you want to build a pot up to retirement and you want to be LTBH, use an index fund and start thinking about income when you are a couple of years from retirement.

FD

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Re: Strategic Ignorance. Just for some balance.

#475934

Postby Arborbridge » January 25th, 2022, 10:09 am

Lootman wrote:
MDW1954 wrote:Strategic ignorance is about not trying to predict the future.

Isn't it really just a latter-day restatement of the efficient market hypothesis, in one of its forms?

The idea that you can try, try and try again and, despite being smart, educated and diligent, still under-perform the market?

Logically, a belief in strategic ignorance would skew one to invest only in an index fund. Because you would have no rational reason to believe that you could do better.


I'd agree - if I could find an index fund which offerred what HYP does. i.e. a high and rising income, with a good chance of capital appreciation. Some would say it had to be equal weighted too.

Arb.

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Re: Strategic Ignorance. Just for some balance.

#475935

Postby Arborbridge » January 25th, 2022, 10:11 am

MDW1954 wrote:
Urbandreamer wrote:
Then again, Lever. Sure they still do soap products, but I think that most of Unilever's profits come from food (including ice cream) these days.



Interestingly, in their reportage of the Unilever/ GSK fiasco, the FT reported that Unilever's food businesses would likely be put up for sale, had the deal gone ahead. Liquid soaps etc (which is what we all seem to use these days, it seems) would have been retained!

MDW1954


Dove? My house is full of Dove :)

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Re: Strategic Ignorance. Just for some balance.

#475937

Postby Arborbridge » January 25th, 2022, 10:18 am

As regards the argument concerning SI, don't forget that another element which Pyad proposed, and which goes along with SI, was marketing trading. The companies mentioned from the past would presumably have been traded out, or morphed into something else, or disappeared. The HYPer would then recycle the cash into other suitable shares.

Isn't that how the portfolio changes over time? This is all, of course, dependant on the assertion that this method is better than the novice investor making many choices along the way reacting to events according to his rational and emotional state of mind - which could be up and down like a dog's hind leg.

Arb.

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Re: Strategic Ignorance. Just for some balance.

#475956

Postby Urbandreamer » January 25th, 2022, 10:49 am

Arborbridge wrote:As regards the argument concerning SI, don't forget that another element which Pyad proposed, and which goes along with SI, was marketing trading. The companies mentioned from the past would presumably have been traded out, or morphed into something else, or disappeared. The HYPer would then recycle the cash into other suitable shares.

Isn't that how the portfolio changes over time? This is all, of course, dependant on the assertion that this method is better than the novice investor making many choices along the way reacting to events according to his rational and emotional state of mind - which could be up and down like a dog's hind leg.

Arb.


Having owned a company that "disappeared", can I point out that when it happens, so does what you invested. You can't recycle cash from a company that went out of business. I would recommend "trading out" before that happens. However knowing to do so does, to some degree, requires not being ignorant about the company, what it does and it's market.

What did you mean by "market trading"? I thought that HYP was a Buy-n-hold stratergy. Possibly I misunderstood.
I confess that I thought Pyad was opposed to "tinkering", though I do know that many HYP'ers are more active than passive.

daveh
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Re: Strategic Ignorance. Just for some balance.

#475959

Postby daveh » January 25th, 2022, 11:09 am

Urbandreamer wrote:
Arborbridge wrote:As regards the argument concerning SI, don't forget that another element which Pyad proposed, and which goes along with SI, was marketing trading. The companies mentioned from the past would presumably have been traded out, or morphed into something else, or disappeared. The HYPer would then recycle the cash into other suitable shares.

Isn't that how the portfolio changes over time? This is all, of course, dependant on the assertion that this method is better than the novice investor making many choices along the way reacting to events according to his rational and emotional state of mind - which could be up and down like a dog's hind leg.

Arb.


Having owned a company that "disappeared", can I point out that when it happens, so does what you invested. You can't recycle cash from a company that went out of business. I would recommend "trading out" before that happens. However knowing to do so does, to some degree, requires not being ignorant about the company, what it does and it's market.

What did you mean by "market trading"? I thought that HYP was a Buy-n-hold stratergy. Possibly I misunderstood.
I confess that I thought Pyad was opposed to "tinkering", though I do know that many HYP'ers are more active than passive.


What is meant by market trading is when a company is bought from you by the market, so I have been forced to trade for cash the following companies:
BOC; BOOT; SCTN; SPW; SXC (split to IHG and MAB and then lots of specials); THUS; ARM*; WMH; AML; TSB. You then have to replace them and if they have done well it may be sensible to split the funds between more than one company to maintain balance and if they've done badly you may just use the limited cash to top up something you all ready own.

* ARM was definitely not a HYP share when I first bought it though there were a few periods after the dotcom crash and after it had started paying a dividend that it just about qualified.

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Re: Strategic Ignorance. Just for some balance.

#475962

Postby Arborbridge » January 25th, 2022, 11:18 am

Urbandreamer wrote:Having owned a company that "disappeared", can I point out that when it happens, so does what you invested. You can't recycle cash from a company that went out of business. I would recommend "trading out" before that happens. However knowing to do so does, to some degree, requires not being ignorant about the company, what it does and it's market.

What did you mean by "market trading"? I thought that HYP was a Buy-n-hold stratergy. Possibly I misunderstood.
I confess that I thought Pyad was opposed to "tinkering", though I do know that many HYP'ers are more active than passive.


I've owned several! Of course, that capital has gone up in a puff of smoke, but never-the-less, have no fear because it is the portfolio which is important, not an individual share. Naturally, trading out at the right time would have been better - if one is clever enough to do it. The portfolio effect, as I call it, means that such events are not so disastrous as they might seem at first sight, in the same way that a dividend cancellation sometimes gets lost amongst the various other changes. A portfolio of 20-35 shares can easily absorb an occasional failure, bit still function as was intended.

Incidentally, if I had stuck to the HYP method and not been tempted to go down market in size, I would not have had disasters such as Carillion or Interserve. My Bad, as Buffy would say. The mega companies tend to survive.

As regards market trading: this is part of buy and hold. One let's the market trade for you so you do not have to. Examples would be take overs (I've had several) or companies spinning off bits of themselves. It's still buy and hold, though isn't it?


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