[Mark1808]

Since the market is not static and in fact has shown a propensity to rise 10% a year on average those who bought a basket of stocks are going to come out ahead no matter which of the bookies they follow, although they would do better with the one who has a propensity to find stocks priced too low. There is no "settlment" at true value in stocks like there is with a sports bet.

There is no assurance that just because a stock is over priced today it won't be over priced tomorrow. Buffett said in the short run the market is a voting machine and some stocks can stay popular and over priced for years resulting in large losses on the stocks you choose to short even if those stocks are over priced by reasonsable measures. This explains why Buffett does not short stocks outside of arbitrage positions. If Buffett agreed with you why wouldn't he also take short positions in stock?

Your example works great where market prices are static and the true intrinsic value of a company will be determined and reflected in the market price shortly. In the market there is no gurantee stocks will gravitate towards intrinsic value and intrinsinc value is ever changing meaning its value may change drastically before the market price ever reacts to yesterdays value. Buffett's skill has been to find company's that are not just undervalued but increase in instrinsic value at a better than market rate due to a "competitive advantage". Even when he is off on the proper valuation this "competitive edge" more than makes up for it. In fact he said he made a big mistake buying Berkshire Hathaway, because although it represented quite a bargain based on assets and such it was in a lousy business. This is in fact one of Buffett's great quotes that directly relates to this issue, 'It is better to buy a great business at a fair price than a fair business at a great price'.