From: Spike (spike66@attbi.com)
Date: Sun Jun 15 2003 - 11:25:30 MDT
Dossy wrote:
> I'm not interested in proving anything. The strategy of "buy a
> sweetheart, hold it until it goes up 10% and sell it" seems to work
> pretty well.
The problem is recognizing a sweetheart. If one in
ten of these sweethearts go all Enron on you, then
the 10% profit you made on the others average out
to nada.
My friend's experience in the market was an education
for me. He finished a PhD in physics at Stanford in
1996. He took up day trading, which he did more or
less full time for about 5 years. He set up a number
of different funds with different trading strategies.
The one he set up for his daughter went under the
reasoning that she would have plenty of time for
recovery before she would need the money for college
(at least 15-17 years) so he bought all risky stuff:
venture caps, startups, high fliers. That fund was
hammered worse than all the others, as nearly all of
those companies crashed.
His long term conclusion was similar to what gts has
been posting: that one cannot get ahead just from
being intelligent, from reading public domain news,
from any mathematical trend analysis or from just thinking.
The market is a chaotic system that cannot be modelled
using currently known techniques. In the long term
the law of averages does catch up.
There is a filter in place: people talk a lot more
about their winners than their losers, causing others
to think they are net winners. In fact the traders
may even fool themselves into thinking they have a
net gain, when careful bookkeeping would reveal they
are only breaking even or perhaps losing money compared
to the gutless prole (me) who drops his pennies into
a bank, a bond or real estate. Add this to the fact
that the day traders are not working a 9 to 5, and
you find few winners.
This explained something that puzzled me: why my fund
managers were achieving only market average over the
long haul, or actually not even market average. My
Dow index fund did better than my managed funds over
the period of 95-present.
Dammit.
spike
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