

The biggest bet on longbets.com: $1,000,000 - JustinSeriously
http://www.longbets.org/362

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hugh3
Personally, I'm willing to bet anyone a billion dollars that we won't have
hyperinflation in the next ten years.

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khafra
They have bets there over whether the LHC will destroy the earth, which is an
even bigger asymmetrical devaluation of the winnings.

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Groxx
Well, as we all know, there are only two possibilities. Either it does, or it
doesn't. That means it's a 50/50 chance for it destroying the earth.

[http://www.thedailyshow.com/watch/thu-april-30-2009/large-
ha...](http://www.thedailyshow.com/watch/thu-april-30-2009/large-hadron-
collider)

When you've got ominously rounded corridors like that, _you're up to no good_.

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eru
> That means it's a 50/50 chance for it destroying the earth.

You are joking, are you?

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Groxx
Watch the video ;)

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Eliezer
> Their opposites, passive investors, will by definition do about average. In
> aggregate their positions will more or less approximate those of an index
> fund. Therefore the balance of the universe the active investors must do
> about average as well.

Am I missing something or is this obviously wrong as a mathematical argument?
There could be a group of active investors who do well, a group of passive
investors who do poorly, and the average would be in the middle.

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MichaelSalib
Most (all?) passive investors buy index funds which perform about as well as
the market but are more robust because of their diversity. I suppose it is
possible for a passive investor to put their money in very carefully chosen
index funds that perform poorly, but the whole point of passive investing is
that you believe that you're unlikely to be able to make those sorts of
allocations correctly and consistently.

There certainly are active investors who do very well, but I'm not sure if
there are any that significantly beat the market over a long enough time
frame.

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jbooth
Buffett's argument wasn't just that active investors don't beat the market
over a long enough timeframe (I think some do, he prob agrees).

His argument was that those active investors, _minus the fees they charge_ ,
won't beat the market over a long timeframe. I agree with him there as well.

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pascalchristian
I agree with Protege that this is an apple to orange comparison. The exact
hedge fund is not specified, it could probably invest in anything other than
most US large caps represented in S&P500. Heck, it could probably consists of
Chinese index funds, which would definitely outperform the S&P if the US
spirals into an economic crisis within the 10 years or so.

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MichaelSalib
If the US spirals into an economic crisis, I don't see how China could avoid
one. China's economy relies on US demand; if Americans aren't buying Chinese
goods, then Chinese factories are closing and Chinese exports will crumble. I
don't think anyone knows how to raise non-US or internal Chinese demand for
Chinese goods fast enough to compensate for a major shock to the US economy.

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ivankirigin
For those who don't know, longbets sends all the funds for any bets to
charity.

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aquateen
In the poker world, Tom Dwan bet $1M that Phil Ivey couldn't be a vegetarian
for one year. Ivey settled after three weeks for $150k.

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Devilboy
I wonder what a $150k steak tastes like

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mkramlich
I'd never know. I'd enjoy the taste of a $50 steak and wine, and put the rest
into a Tesla Roadster. :)

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jrockway
A better bet is, "will the hedge fund have a profitable year in which the
market overall is down". If you invest in the market as a whole, you need to
be prepared to be in for 30+ years, especially with the levels of volatility
we have seen in the last 10-20 years.

A hedge fund can make trades that don't depend on the direction of the market,
which means you can access your invested capital even in a down year. Buying
an index fund doesn't afford you that opportunity -- if you bought the S&P500
index before the whole mortgage meltdown, you would be out a lot of money now.
In 30 years, you probably will have made your 10% per year, though.

(One thing to note, though, is that as an average investor, the trades that
make hedge funds / investment banks a lot of money are really not available to
you. To make any non-directional money these days, you need cheap capital, and
nobody's going to give that to you. I know what sorts of trades pay my salary
at an investment bank, and if I made them myself, I would lose money. That's
the reality.)

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sireat
This article:
[http://money.cnn.com/2008/06/04/news/newsmakers/buffett_bet....](http://money.cnn.com/2008/06/04/news/newsmakers/buffett_bet.fortune/index.htm)
provides more information.

Previously, I thought that it was a sure thing for Buffett to win, because I
thought portfolio implied maybe 20+ hedge funds, but standing opposite S&P500
are only 5 hedge funds(preapproved by both Buffett and Protege).

Protege has a chance (if i was a betting man, I'd give 1:5 odds they would
win).

However, Buffett's bet was smarter, because it also wins if something negative
happens to the hedge fund industry as a whole politically and we can see that
happening already. Nobody is going to nerf S&P 500.

Also from the article, each side contributed 320k and put the money into zero
coupon bonds with maturity in 10 years(ie 640k now -> 1mil in ten years),
which will go to winner's charity.

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mkramlich
Rule of thumb: in the absence of having strong, trustable reasons to do
otherwise, always bet the way Mr. Buffet bets.

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mbateman
I don't understand how this bet proves anything either way if we can't see the
adjudication methodology.

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keytweetlouie
What if you die before then does the money come out of the loser's estate?

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whatwhatwhat
I'm from Omaha... and my money is on Buffet

