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  #11  
Old 11-21-2007, 12:06 PM
Gadfly Gadfly is offline
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Default Re: Four Ways To Use My Ideas

Sklansky’s got it mostly right.

What also follows from what he wrote is this:

It’s usually not a good idea to trade against a big stock move that seems insane (to you).

The economist and speculator Keynes told us -- after going broke three times-- that,
“the markets can stay irrational a lot longer than you can stay solvent.”
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  #12  
Old 11-21-2007, 12:08 PM
stephenNUTS stephenNUTS is offline
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Default Re: Four Ways To Use My Ideas

[ QUOTE ]
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i'd imagine this would work best in stocks that the stupid general public have a lot of interest in, and everyone thinks they're experts in (GOOG for example). the challenge of course is figuring out how the stupid public prices those stocks.

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actually scratch that... the moronic public doesn't try to price stocks, they just buy because they think OMG GOOGLE. maybe there's something there but it's obviously pretty complicated.

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The General public is SO WRONG in many more ways than you can ever imagine:

1. The Google IPO which was a dutch-auction where basically the GP had the ability to "bid" the price and submit that bid to their broker....the openong price I believe was $85...and IMMEDIATLY was BID up to $100 the first day.Many of these GENIUS John Q.P.s...sold their stock in the $100-125 range,and took home their nice profit....while the PRO's valuing GOOG MUCH higher bid it up day after day.....it is now up over 6x that price (and so far rightfully so fundamentally it seems also).Whats more amazing is I have had a few lay person friends who were in on the GOOG IPO,sold for a nice profit......and then got SO upset "selling too early"......they proceeded by trying to re-enter...getting in and out at EVERY wrong time,or even worse SHORTING Google, recently when it blasted through $700,giving all their profits and more back.....just AMAZING.

Instead of just buying and holding for a specific time/price target....whether they sold at $150...$250...$500...or still own it after the few short years GOOG has been public....their EMOTIONS took over with devastating results to these few,as so many public market participants do
However "IF" they listened to the "MARKET".....they would be sitting on a 6 bagger....and I just saw UBS raised their target on this MONSTER to $900 yesterday.Whether I think GOOG is worth/valued at todays current price or not isnt important.......but that fairly effortless 600% rise ...with stunning Fundys as well,along with solid technicals, was completely BUTCHERED by the original public perseption

2.As to Davids comment on bookmakers putting out the so called "TRAP/SUCKER" betting lines ....while I dont think the BM is intentionally making the line lower/higher to attract a certain side(a true BM business model wants TWO sided action to earn their respective 10% or higher vigorish on exotic bets(teasers,parlays,etc).They are NOT supposed to be gambling themselves ....making what "appears" to be wrong line to attract action.Small time BM's used to do this all the time to ATTRACT more money ...and get crushed by pro's middling them on 2-3 games a week sometimes

This "TRAP" line however just "looks to good to be true to the public",and they are WRONG probably 65% of the time on these occassions.To be clear though, I am basically talking about the most widely bet sport ...The NFL

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.It is NOT a zero sum game...as many dont even understand this believe it or not

I would also suggest this CLOSING PRICE is a myriad of factors such as standard handicapping,track conditions,jockey changes,tout sheets,various TIPS,superstitios betting such as horses name/silk colors/gate number/etc...ALL baked into one.

It used to be that many "PRO's" considered the opening line from the Racing Form to be the STRONGEST line based on that PRO handicappers ability.....and would then make their FINAL choice just based on these descrepencies alone in the opening/closing price JUST prior to post time after the clueless public entered the game.Smart money also has a way of "falsly" dictating the odds IMO also

4.NOW back to the market....There are MANY indicators still widely used that give the General Public ZERO creditabilty(such as the odd lot sales/specialist short sale ratio is one STILL widely followed).The GP ALWAYS seems to be TOO late to the party...whether it be buying/casing stocks WAAAY too high....or trying to catch the proverbial falling knife,averaging down.....refusing to SELL stocks until it is too late...which has ALWAYS resulted in that final capitulation type sell-off that pros look for in finding MAJOR market bottoms every few years.This indicator IMO is a geat indicator with regard to the GP...which is just based on basic physcology for the most part.

Anyway just my 2cents....and I must say,I happen to like this thread or am slowly adjusting to the DS method of posting.............OH please say no ..JK [img]/images/graemlins/smirk.gif[/img]

GG,
Stephen [img]/images/graemlins/cool.gif[/img]

BTW...even though I did my share of gambling way back when,I DONT gamble on anything I dont feel I have an edge in anymore.I built many a BM's house....and kept alot of OTB's open in my early years [img]/images/graemlins/frown.gif[/img]
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  #13  
Old 11-21-2007, 12:17 PM
adios adios is offline
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Default Re: Four Ways To Use My Ideas

[ QUOTE ]
...The fuddy duddy FAs on this forum are already using the first strategy ....

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Haha funny.


On points 1 and 2 it's pretty clear when you sell and thus it's clear what the expected return is.

I'll concede that I may not have read 3 and 4 closely enough but it's not so clear. Maybe you just sell when you acheive your expected return.

From a portfolio theory perspective, a portfolio of these selections can be evaluated such that the risk being undertaken can be compared to taking the equivalent risk of buying something like SPY and comparing your expected returns to the expected returns from SPY for the equivalent risk. I also note that acheiving a higher return than the market return involves using leverage with SPY. A long winded way of saying that IMO there's a decent chance such a portofolio is sub-optimal. Maybe I should just say that you need to develop the risk aspects more thorougly FWIW.

Effecient Frontier - Risk and Returns
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  #14  
Old 11-21-2007, 12:19 PM
pig4bill pig4bill is offline
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Default Re: Four Ways To Use My Ideas

[ QUOTE ]
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...


[/ QUOTE ]

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.
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  #15  
Old 11-21-2007, 01:51 PM
tippy tippy is offline
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Default Re: Four Ways To Use My Ideas

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).
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  #16  
Old 11-21-2007, 05:20 PM
David Sklansky David Sklansky is offline
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Default Re: Four Ways To Use My Ideas

[ QUOTE ]
[ QUOTE ]
The fuddy duddy FAs on this forum

[/ QUOTE ]

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...

[/ QUOTE ]

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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  #17  
Old 11-21-2007, 05:27 PM
stephenNUTS stephenNUTS is offline
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Default Re: Four Ways To Use My Ideas

[ QUOTE ]
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.

[/ QUOTE ]


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

Stephen [img]/images/graemlins/smirk.gif[/img]
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  #18  
Old 11-21-2007, 05:35 PM
stinkypete stinkypete is offline
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Default Re: Four Ways To Use My Ideas

[ QUOTE ]

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

[/ QUOTE ]

ummm, yes it does
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  #19  
Old 11-21-2007, 06:14 PM
skindog skindog is offline
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Default Re: Four Ways To Use My Ideas

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.
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  #20  
Old 11-21-2007, 07:59 PM
Foghatlive Foghatlive is offline
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Default Re: Four Ways To Use My Ideas

[ QUOTE ]

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.

[/ QUOTE ]

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.
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