[DesertCat]

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Pig4bill,

I still feel like I am correct in the sense that you can run well in the stockmarket and run poorly as well. Sure you may have a great investment idea but just like in poker there are many things you cant control so variance comes into play. Fpr example, that sector of the economy heats up, the government passes some new legislation ect. ect. There are many things that can happen that will make you look like a genius or an idiot but a smart person realizes he is somewhere in between

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Long Term Capital Management was formed by the smartest people in the investment business including Nobel Peace prize winners. Initially they raked up returns approaching 40% per year using bond arbitrage strategies. The Russian Financial crisis led to a flight to quality and their arbitrage positions rather than converging, actually diverged. Exacerbated by heavy leverage huge losses ensued and the fund eventually failed.

These guys were very smart until the unforeseen (variance) happened.

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Dcifrthis explained it very well, I think LTCM was just way overleveraged. But let me make it clear that Buffetts guarantee likely involves little to zero leverage. My record was done without leverage, unless you count my home equity line (about 1/8th of my account balances) and the fact that I have a loan against my wifes car instead of paying cash. Lately I have started using margin, to the tune of about 5% of account balances but only for short periods.

As an aside, I also qualified for a $50k business credit card from Capital One but couldn't bring myself to use it as the interest rate was 12% and it seemed too much hassle for the excess returns. But I wonder why a professional player wouldn't use something like that to help ride out bankroll swings and move up faster.