(PYMNTS) - For those unfamiliar with the “random walk hypothesis,” it’s a theory that's been written about since the 1800s stating, essentially, that shifts in stock prices are largely arbitrary, and therefore can’t be accurately predicted by brokers, analysts or other prognosticators. Maybe that’s true — or maybe you just need a hamster.
Yes, we said “hamster.”
By far the most amusing financial news we’ve seen in a while is the story of Mr. Goxx, a hamster for whom human friends have built a high-tech “Goxx Box” outfitted with special wheels, sensors and tunnels that enable the rodent to buy and sell crypto and other stocks.
The thing is, he’s good at it. As BBC.com reported, Mr. Goxx “is making money, with his lifetime career performance up about 20% — beating many professional traders and funds.”
The idea of two university friends who wish to remain anonymous (in keeping with the nature of blockchain itself), they outfitted their “Goxx Box” with an “intention wheel,” which, after an exhilarating run by the furry trader, stops on a given cryptocurrency. Depending on which tunnel Mr. Goxx chooses after his spin on the wheel — buy or sell — the trade is made.
As we said, Mr. Goxx is beating the market, making him the smartest rat in crypto. That’s par for the course, actually, as lots of talented top-dollar traders are doing no better (and sometimes worse).
“It seems like most people from our generation see no other chance than throwing a lot of their savings on the crypto market, without having a clue what's going on there,” one of the anonymous humans behind Mr. Goxx told BBC.com. “We were joking about whether my hamster would be able to make smarter investment decisions than we humans do.”
Before building a connected toy mouse so that your cat can start picking cryptos for you — an idea we oppose on several levels — let’s dive into this seeming silliness in a bit more depth.
The Random Walk vs. ‘The Intention Wheel’
Returning to the “random walk hypothesis” for a moment, Mr. Goxx and his Goxx Box don't mark the first time people have set out to prove that sheer chance can outperform the picks of the so-called pros.
Back in 2008, the Oracle of Omaha himself, Warren Buffett, famously bet $1 million that index funds could outperform high-end hedge funds over a decade of trading. Protégé Partners took him up on it, only to concede defeat in 2017.
As The Wall Street Journal reported, “[Buffett’s] chosen index fund, the Vanguard 500 Index Fund Admiral Shares, climbed 66% from the start of the bet through the end of 2015, compared with a gain of 22% for a basket of hedge funds selected by asset manager Protégé Partners, including fees.”
It doesn’t stop there. In 2018, reporters from the WSJ’s Heard on the Street team revived their custom of throwing darts at stock listings and comparing their random choices to those of the sharpest minds — in this case, fund managers attending the prestigious Sohn Conference.
A year later, “The results were brutal,” WSJ reported. “The columnists’ eight long and two short picks beat the pros’ selections by a stinging 22 percentage points in the year through April 22. Only four of 12 of the Sohn picks even outperformed the S&P 500.”
In other words, fire your broker and drop your hedge fund, because throwing darts at stock listings pinned to the wall — or, if you prefer, hamsters in specially equipped habitats — seem to beat the experts embarrassingly anytime the “random walk hypothesis” is tested.
Hear that? It’s the sound of hedge fund managers buying all the hamsters in the entire world. They will soon be working on special trading wheels, picking stocks and nibbling on apple slices.
Human brokers need not apply. Unless they want to clean hamster cages.
Mr. Goxx Rocks
According to the two unnamed individuals backing Mr. Goxx, as told to BBC.com, “The first month was rough. Mr. Goxx started on 12 June with [the equivalent of $380], placing an order for Stellar (XLM). One month and 95 orders later, Goxx Capital was down 7.3%. But as of late September, the intrepid trader's career performance is up 19.41%.”
Before you start emailing, Goxx Capital is made up. We’re talking about a hamster, remember?
Of his performance, BBC.com added: “That beats not only the return on major stock markets such as the FTSE 100 or the Dow Jones, but also the performance of investing supremo Warren Buffett's company, Berkshire Hathaway, according to calculations by crypto news site Protos. And even in the crypto market itself, Mr. Goxx has at times come out slightly ahead of bitcoin, the biggest of the currencies.”
For the record, our money is still on accredited financial advisors, like all of those mentioned in recent PYMNTS coverage of staffing up by crypto investors worldwide as the trend widens.
See also: Fidelity Investments Aims to Expand Crypto Team by 70% This Year
Just in case, we’re experimenting with a dog that barks whenever we read the name of cryptocurrency in which we should invest. That’s going dismally, by the way. Maybe mice?
By PYMNTS
