Brad-
Thank you for maintaining some objectivity and not falling prey to the primitive fight or flight response that can so easily manifest itself in "others" when their viewpoints are directly threatened.
<Market Wizards is quite good, as is its Sequel. However, it is hardly Empirical evidence that TA works>
Strictly speaking, it is certainly not "empirical evidence", however, when one learns that all NBA players practice shooting, it may be advisable for NBA aspirants to start practicing themselves. Any person with an open mind should be struck by the fact that the vast majority of great traders interviewed gave credence to TA, and a few nearly relied on it exclusively.
<A RANDOM WALK DOWN WALLSTREET. The boiled down point (of the book) is that if gillion people all flip a coin a thousand times, some smartie
is going to flip 100 heads out of 100 flips.>
Brad, I hope this is not the gist of the book. . . because this point as applied to investing is an abomination of human thought and logic. It scares me to think humans may actually think like this. One cannot hold this thought without believing that it is merely coincidence that the stock of Microsoft and Intel has appreciated so significantly and are essentially "random events". One cannot even give credence to this coin flip argument without first assuming that the price movement of a stock is utterly random. . . and no investor who can outplay cauliflower in chess believes this. The moment that it is accepted that there is some logic to price movement (ie great companies' stock appreciates over time) is the moment it becomes possible for some investors to develop greater understanding of that movement and capitalize from it. And this undermines any argument that the success of investors is based purely on luck.
Furthermore, trying to equate the results of a complex and intellectually demanding investment decision to the outcome of a coin flip is humorously simplistic. It is like saying you have a 50/50 chance of beating Michael Jordan in a game of one on one. Paul could give you shouts of encouragement like "I know you're down 57-4 right now, Brad, but keep your chin up, given the fact the number of basketball players at his level do not fall outside of the standard deviation of luck, he's probably just lucky . . don't be surprised if he starts missing dunks soon." Anyway, this analogy simply does not apply and is "specious" at best.
< the number of people beating the market does not prove a winning system unless that number falls outside the standard deviations one would expect from a any "random" event. There is plenty of data on this,and it is not in your argument's favor.>
Well, of course that's true! But I assure you, all of the Market Wizards employ systems that fall outside the standard deviations that one would expect from luck. Each system is 1 for 1. And, of course, the one employing the system is the Market Wizard.
<Now if you want to argue that the"bell curve" of people that beat the market vs the ones that don't roughly matches the "bell curve" of intelligence, you may have a valid arguement.>
Well, that would be the argument, but the trait is not intelligence per se, but rather a subset of different skills uniquely required for investing.
Happy Investing!
jason |
