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#1
08-08-2007, 01:52 PM
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Re: Too Much Information
I definitely didn't expect this post to inspire TA vs. FA discussion, but I suppose it makes some sense.
kimchi, just because you use less data than other analysts doesn't imply your data is any better. So your "one piece of data" comment is sort of loaded. I'm a little confused regarding your thoughts that "[Price] can't be massaged or manipulated like most other forms of data." What forms of data do you feel can be manipulated and how are those manipulations different than possible price manipulations. Marc Andreessen paints a pretty clear picture of price manipulation in a recent blog post about the Sowood hedge fund collapse: "Given what we were facing and our uncertain ability to meet margin calls [we were leveraged -- we used debt to double down on our bets to juice returns, common for this class of hedge funds], we sought other buyers for some or all of the positions [all our peers on Wall Street smelled "blood in the water" and drove down market prices even further]." Lastly, why use "hourly,daily, weekly, monthly charts" for price? Why not chart something else, like spread or volume? There's a big difference between using fewer inputs and using the right inputs, and you seem to be suggesting that one implies the other, even more specifically, that the first implies the second. blueman, can you post an example of me writing long paragraphs to disagree with you when you were right? hawk, "coming up with complex models incorporating lots of variables seems smart and gives you precise numbers, while saying you have no idea what exactly is going to happen but are pretty sure the stock is very undervalued doesn't sound so smart." I gave a presentation for an investment club at NYU on November 4, 2005 pitching Wynn Resorts (WYNN) as an investment idea. This was only a few months after they had opened their first casino in Vegas and there was virtually no operating data available yet. I chose not to include a valuation (I did include some statistics like win/table/day and revenue/room/night). The audience pressed me for a specific value in Q&A. This was not unreasonable because nearly all presentations in this club ended with a DCF that produced a specific dollar value of the company. My rebuttal went something like this: "Let's say I offer you a bar of gold. You know, for a fact, that it is 100% real gold. I hand you the bar of gold, which is about as big as your phone, but you are not allowed to weigh it or in any other way attempt to determine its mass, volume, etc. Then I tell you that I'll sell you the bar for $50. Now do you care what the hell it's worth?" Wynn got voted in by like 3 votes (25-22 or so) [img]/images/graemlins/smile.gif[/img] 
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#2
08-08-2007, 01:58 PM
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Re: Too Much Information
[ QUOTE ]
"Let's say I offer you a bar of gold. You know, for a fact, that it is 100% real gold. I hand you the bar of gold, which is about as big as your phone, but you are not allowed to weigh it or in any other way attempt to determine its mass, volume, etc. Then I tell you that I'll sell you the bar for $50. Now do you care what the hell it's worth?" [/ QUOTE ] Definition of what makes a great investment...
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#3
08-08-2007, 02:13 PM
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Re: Too Much Information
[ QUOTE ]
[ QUOTE ] "Let's say I offer you a bar of gold. You know, for a fact, that it is 100% real gold. I hand you the bar of gold, which is about as big as your phone, but you are not allowed to weigh it or in any other way attempt to determine its mass, volume, etc. Then I tell you that I'll sell you the bar for $50. Now do you care what the hell it's worth?" [/ QUOTE ] Definition of what makes a great investment... [/ QUOTE ] I'm not following. Is this sarcastic, serious, something else?
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#4
08-08-2007, 02:23 PM
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Re: Too Much Information
[ QUOTE ]
[ QUOTE ] [ QUOTE ] "Let's say I offer you a bar of gold. You know, for a fact, that it is 100% real gold. I hand you the bar of gold, which is about as big as your phone, but you are not allowed to weigh it or in any other way attempt to determine its mass, volume, etc. Then I tell you that I'll sell you the bar for $50. Now do you care what the hell it's worth?" [/ QUOTE ] Definition of what makes a great investment... [/ QUOTE ] I'm not following. Is this sarcastic, serious, something else? [/ QUOTE ] Probably sarcasm. Also, "I hand you the bar of gold, which is about as big as your phone, but you are not allowed to weigh it or in any other way attempt to determine its mass, volume, etc." If you hand me the gold, I can still guesstimate its weight, look at what the market is paying per ounce, and determine if $50 is a bargain or not. So of course I care how much it is worth. Maybe the analogy was just a figure of speech and wasn't meant to be taken seriously? [img]/images/graemlins/confused.gif[/img]
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#5
08-08-2007, 02:25 PM
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Re: Too Much Information
[ QUOTE ]
[ QUOTE ] [ QUOTE ] "Let's say I offer you a bar of gold. You know, for a fact, that it is 100% real gold. I hand you the bar of gold, which is about as big as your phone, but you are not allowed to weigh it or in any other way attempt to determine its mass, volume, etc. Then I tell you that I'll sell you the bar for $50. Now do you care what the hell it's worth?" [/ QUOTE ] Definition of what makes a great investment... [/ QUOTE ] I'm not following. Is this sarcastic, serious, something else? [/ QUOTE ] I'm baffled shouldn't this bar of gold be well into the five figure range? I mean if every case was this easy, I'd just take free money that people are handing out and sit around all day.
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#6
08-08-2007, 02:29 PM
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Re: Too Much Information
Wow, sometimes I guess you really have to spell it out.
HERE WAS THE POINT OF WHAT I SAID You can tell it worth a lot, and more importantly, a lot more than you're going to have to pay for it. You don't know exactly what it's worth and you could easily be off by 20% or more if someone asked you to fill in the value of the purchase. However, those limitations notwithstanding, it is still an obviously good idea to buy the gold.
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#7
08-08-2007, 02:37 PM
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Re: Too Much Information
[ QUOTE ]
Wow, sometimes I guess you really have to spell it out. HERE WAS THE POINT OF WHAT I SAID You can tell it worth a lot, and more importantly, a lot more than you're going to have to pay for it. You don't know exactly what it's worth and you could easily be off by 20% or more if someone asked you to fill in the value of the purchase. However, those limitations notwithstanding, it is still an obviously good idea to buy the gold. [/ QUOTE ] Sorry, you know... Text has limitations with stretched examples and I kinda glossed over when I read through that Wynn stuff. Rereading it makes it very easy to understand. Me: -1
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#8
08-08-2007, 07:50 PM
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Re: Too Much Information
[ QUOTE ]
Wow, sometimes I guess you really have to spell it out. HERE WAS THE POINT OF WHAT I SAID You can tell it worth a lot, and more importantly, a lot more than you're going to have to pay for it. You don't know exactly what it's worth and you could easily be off by 20% or more if someone asked you to fill in the value of the purchase. However, those limitations notwithstanding, it is still an obviously good idea to buy the gold. [/ QUOTE ] I wasn't being sarcastic. The best investments are easy decisions that don't require lots of data to support them. They are "obvious".
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#9
08-08-2007, 05:33 PM
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Re: Too Much Information
[ QUOTE ]
[ QUOTE ] [ QUOTE ] "Let's say I offer you a bar of gold. You know, for a fact, that it is 100% real gold. I hand you the bar of gold, which is about as big as your phone, but you are not allowed to weigh it or in any other way attempt to determine its mass, volume, etc. Then I tell you that I'll sell you the bar for $50. Now do you care what the hell it's worth?" [/ QUOTE ] Definition of what makes a great investment... [/ QUOTE ] I'm not following. Is this sarcastic, serious, something else? [/ QUOTE ] highly doubt thats sarcasm. you made a great point and DC si agreeing. good analogy; gold=stock easy to value gold and while you acan't determine exactly what it is worth, you know for a fact (given your assumptions) that it is worth well more than $50. Barron
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#10
08-08-2007, 02:34 PM
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Re: Too Much Information
To add the obligatory Buffett quote..
"It is better to be approximately right than precisely wrong." Also, Gladwell's Blink seems to be very relevant to this discussion. He talks about how thin slicing can be more effective than people with more information in the examples of determining divorce, diagnosing heart attacks, hiring employees, etc. There are two things that Gladwell talk about that I think are important with investing. One is thin slicing exemplified with Buffett where he ignores the vast majority of information available to him. The other is snap judgements and the subconscious where experience investors like Soros thrive. He used to say he followed the "theory of reflexivity", but then later said that the theory was bogus and could be ignored. His son Robert said, "My father will sit down and give you theories to explain why he does this or that. But I remember seeing it as a kid and thinking, Jesus Christ, at least half of this is [censored]. I mean, you know the reason he changes his position on the market or whatever is because his back starts killing him. It has nothing to do with reason. He literally goes into a spasm, and it's this early warning sign."
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Hybrid Mode
