[David Sklansky]

[ QUOTE ]
David,

I've read your response and believe I understand it fully, but let me point out that in no way does it directly rebut my points. If your scenario is true, then you should be able to describe why mine is false. Unfortunately the converse is not true, I can't yet rebut your scenario, and I will actually be working all week so I might not come up anything soon.

Is it time for a letter to Buffett?

[/ QUOTE ]

If my scenario is true but still doesn't rebut the points you are trying to make, then I don't understand what those points are. In any case this discussion has drifted into an irrelevant area regarding randomness, neutral EV, etc. You appear to be confused about some of it but it is not worth getting into. It isn't the essence of what we wanted to ask Buffett about. (Said differently, it is the words below this paragraph that matter. It just so happens that those words, I contend, generally equate to "Even an expert should realize that his opinion when it differs from the market, will be wrong, on average. And the true value of the stock is between those two numbers." You are arguing that they don't equate. And you are wrong. But it is an irrelevant side issue.)

The important point is that it isn't only fulcrum stocks that are susceptible to information that routine, expert stock analysis, will mishandle. So it is valuable to to have a good idea why a stock's price is what it is. If the answer is simply "well the public usually values stocks in this industry, with this particular information, in about this way" you should be willing to bet on your disagreement if you have better insight than the public, even if your discrepancy with their price is fairly small. If you, on the other hand, think the price is screwy, you need a bigger discrepancy to bet.

However if you expected a big discrepancy and an unexpected price makes the discrepancy smaller, this is the best of both worlds. Don't pass on the bet just because the discrepancy fell below your normal threshold.

It is possible you can even make money taking this further by betting against your own opinion when you expected no discrpency and you find a moderate one you can't explain. That guess of mine Buffett need not know about.

Buffett would also be turned off by the idea that you can make money by isolating a particular aspect of a stock that you realize the public will misevaluate and making a bet without knowing anything else about the company. That method must win. But a non lazy approach would do better so he would be appalled by the lazier approach.

So please write the letter but don't mention the ideas in the two above paragraphs.