RE: Investing

From: gts (gts_2000@yahoo.com)
Date: Sun Jun 15 2003 - 19:33:59 MDT

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    Dossy wrote:

    > gts may very well be right. However, he cannot deny that there are
    > some people who can produce a reasonable income (I consider 6 figures
    > reasonable for any occupation) solely by buying and selling stock.

    The question is whether that person's income exceeded the buy and hold
    market return after adjusting for risk, and if so then whether it can be
    duplicated.

    I don't deny, either, that we can find some people who bet on the outcome of
    a coin flip ten times and won each time.

    In a world of coin-flip bettors that coin-flip bettor will become famous. He
    will write books on the proper way to predict coin-flips. Like Warren Buffet
    and Peter Lynch, he will become a folk hero among hopeful coin-flip betters
    everywhere who want so desperately to believe they have the power to predict
    coin-flips.

    Here is another way to look at this question:

    There are a small handful of people in this world, namely Buffet and Lynch,
    whose performance over time was so extraordinary that it is tempting to say
    they really have skill. But the number of people who have this alleged skill
    is so small that it becomes irrational to assume that just anyone can have
    it or obtain it. These gifted people, assuming they really exist, appear to
    belong to a different species of humans.

    In this way the arguments for the existence of market skill are much like
    arguments for the existence of telepathy. There are some tantalizing stories
    that seem to be convincing evidence that telepathy is a real phenomenon.
    However parapsychologists have been unable to prove its existence under
    controlled conditions. An honest parapsychologist can say only that
    telepathy might exist, but if it exists then its existence is so rare that
    it doesn't show up on the radar screen. It would be irrational therefore to
    assume that one is telepathic.

    -gts



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