Four Ways To Use My Ideas

[Foghatlive]

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3.As to horse racing...many consider the CLOSING price to be the "TRUE line,after everythings factored in(read below)

In simple terms paramutual wagering(which is technically diff, from sports betting) is a function of bettors picking their horses,the track then TAKING out its HUGE percentage from each respective betting pool(WPS wagering,exotics,DD's,exactas,trifectas,superfecta s,etc).So the TRUE odds are anything BUT.
For example after the tracks 20%+ take on any given pool.....the favorite going off at 2-1 paying $6 to win....when in actuallity it would be 7-2 with no track-take out.This is why BEATING the horses not ONE race is so difficult,as the TRUE odds of each race dont = the pool.

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Perhaps I'm misunderstanding the way the tracks skim the takeout, but I don't see why it affects the odds.

Say there are 5 horses in the race and the total pool is $100.

Before the takeout, of let's say 20%, the fav has $50 on it, and the other 4 all have $12.50. After the takeout, the fav has $40 on it, and the others all have $10.

The favorite still has the same percentage of the total pool on it, as do all the other horses.

My problem with David's horse racing example is that it's not possible to execute because the odds can change dramatically after the betting is closed. So, you're basically guessing whether or not the bet meets the criteria.

[pig4bill]

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i've always felt that the "fundamental analysis" that is taught in books and stuff is a crock because when i find a stock that seems to be mispriced significantly, i'm always going to wonder if that's because there's someone that knows something that i don't. but for some reason i've never considered that trading in the opposite direction of what FA suggests might be a good strategy...


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The OP was tl;dr but whether someone knows something you don't doesn't really matter. Look at CROX - beat guidance, forward guidance was great, stock got pummelled anyway. It doesn't matter if they "know something", the main thing is, it got sold. Hard. You just don't want to walk in front of a moving train.

[tippy]

Interesting article Sklansky.

1. I think Fabricand has alot more "expertise" than he realizes or admits. The guy analyzed thousands of races and has the expertise to know all of the factors that may make horses similiar or different and to an exact degree. Maybe this affected his results, maybe not. But he certainly would have done better at the track than an average Joe.

2. Fabricand goes to the track for race 1, analyzes all 8 horses and picks his favorite and assigns odds. The Joe's also show up for race one analyze the situation and come to one of two conclusions: 1) Fabricands horse is the favorite and they decide to bet on that horse with him or 2) they like other longer odds horses better and they decide to bet on subquality horses that have an "inherent disadvantage".

Given the two choices above, Fabricand's horse wins more often when it has lower odds because the Joes see no other option worthy of providing competition, so they in turn bet with Fabricand making his horse a smaller favorite than he calculated. It isn't that his system is so magical, it is simply that the situation is so clear. Maybe in some perverted way, Fabricand used the Joe's collective knowledge to his advantage. Not a single Joe could find an attractive hidden alternative to threaten Fabricands favorite.

Now, if there were Fabricands horse and another horse similar, this would probably drive the Joes away, as now they have to choose their longshot to beat TWO similar favorites. With no Joes, you have only the "SMART" money betting the race, all of which can easily pick the favorite thereby driving his odds down as Fabricand predicted.

Just a few thoughts as to why Fabricand's results turned out the way they did. He probably manipulated his statistics very well without realizing the macroelements around him (the Joes) and he also miscalculated his own unconscious expertise (intuition).

[stinkypete]

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The OP was tl;dr but whether someone knows something you don't doesn't really matter.

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ummm, yes it does

[skindog]

Great post David! Points 1-3 sum up my theories on stock trading eloquently and succinctly. There is a often a definite pattern to exploit when dealing with mispriced securities, a psychological rift that emerges beteen a stock's true value and its price, when certain conditions are present. Investors that learn to identify the market's psychological stumbles and flawed groupthink will earn abnormal profits. Even without a ton of hard work. Eat that, efficient market theorists.

[DesertCat]

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The fuddy duddy FAs on this forum

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Sigh.

Go ahead poker player/investors. Find investing strategies that are easy to implement while you are still playing the horses and poker 12 hours a day, avoid strategies that require actual hard work. Us Fuddy Duddy's will watch for your results with interest...

[David Sklansky]

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The fuddy duddy FAs on this forum

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Sigh.

Go ahead poker player/investors. Find investing strategies that are easy to implement while you are still playing the horses and poker 12 hours a day, avoid strategies that require actual hard work. Us Fuddy Duddy's will watch for your results with interest...

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Keep in mind that I wasn't calling them fuddy duddies because they were avoiding my more debatable suggestions. It was only the suggestion that they shrink their required discrepancy when that discrepancy can be explained and dismissed, thus giving them more picks, that they are fuddy duddies if they ignore.

As for the fact that my theories seem to indicate that there are winning strategies that don't take that much hard work or expertise, that's just the way it is. There are many, many endeavors where the person who does hard work will be an underdog to someone with only moderate knowledge and work ethic who comes upon a key concept or two that can be utilized against them. I do agree however that while the hard worker should have an open mind, if he is already successful, he should sit back and let others be guinea pigs.

[stephenNUTS]

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There are many, many endeavors where the person who does hard work will be an underdog to someone with only moderate knowledge and work ethic who comes upon a key concept or two that can be utilized against them. I do agree however that while the hard worker should have an open mind, if he is already successful, he should sit back and let others be guinea pigs.

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David...............We are starting to AGREE

Stephen [img]/images/graemlins/smirk.gif[/img]

[Mark1808]

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The fuddy duddy FAs on this forum

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Sigh.

Go ahead poker player/investors. Find investing strategies that are easy to implement while you are still playing the horses and poker 12 hours a day, avoid strategies that require actual hard work. Us Fuddy Duddy's will watch for your results with interest...

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Keep in mind that I wasn't calling them fuddy duddies because they were avoiding my more debatable suggestions. It was only the suggestion that they shrink their required discrepancy when that discrepancy can be explained and dismissed, thus giving them more picks, that they are fuddy duddies if they ignore.

As for the fact that my theories seem to indicate that there are winning strategies that don't take that much hard work or expertise, that's just the way it is. There are many, many endeavors where the person who does hard work will be an underdog to someone with only moderate knowledge and work ethic who comes upon a key concept or two that can be utilized against them. I do agree however that while the hard worker should have an open mind, if he is already successful, he should sit back and let others be guinea pigs.

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Warren Buffett took $100,000 and turned it into $50 billion buying stocks. He explained how he did it He scoured financial reports looking for companies with a competitive advantage selling at a significant discount to what an informed buyer would pay for the whole company. His time horizon was basically forever and once he bought a stock he did not let the price influence his decisions. He cited many other disciples with the same mind set who also achieved signicant performance. Why would a casual observer think they could improve on these methods? Bufffet has access to the best minds on Wall Sreet and laughs at trading, leverage, TA, short term trading and most exotiic investments. Either you can do what Buffett does or find someone who can and pay them to manage your money. Trying to use a horse handicapper to devine a system that will improve on Buffett seems extremley naive.

[stinkypete]

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Warren Buffett took $100,000 and turned it into $50 billion buying stocks. He explained how he did it He scoured financial reports looking for companies with a competitive advantage selling at a significant discount to what an informed buyer would pay for the whole company. His time horizon was basically forever and once he bought a stock he did not let the price influence his decisions. He cited many other disciples with the same mind set who also achieved signicant performance. Why would a casual observer think they could improve on these methods? Bufffet has access to the best minds on Wall Sreet and laughs at trading, leverage, TA, short term trading and most exotiic investments. Either you can do what Buffett does or find someone who can and pay them to manage your money. Trying to use a horse handicapper to devine a system that will improve on Buffett seems extremley naive.

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he's not attempting to improve on buffet. he's attempting to exploit the same mispricings buffet looks for, but with a different method. he's not claiming that it's better than what buffet does.