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Technology Stocks : AUTOHOME, Inc

ATHM 23.48

+1.2%

Nov 21 9:30 AM EST

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To: BGR who wrote (10985)	6/11/1999 3:21:00 AM
From: ahhaha	Read Replies (3) of 29970

Merton of LTCM fame was a well-known professor of finance theory. His behavior shows that he doesn't agree with you. His approach was to short futures against cheaply carried securities on the assumption that the carried securities underwent little price change so that adjustments to the complex hedges could be made without altering the portfolio's zero risk expectation. The assumptions failed and the consequences freaked out Greenspan so much that he had to wake up McDonough in the middle of the night from a telephone booth in panic to open the money floodgates. If he hadn't done that your little house of cards would have fallen into a black hole and you would have had to get out your apple sign. It is interesting to find someone spouting MPT on the ATHM thread. You won't find ATHM in many theoretically correct portfolios since its risk isn't commensurate with its return. The stock is an outlier in regularity of returns distribution and therefore is too unstable for optimally diversified portfolios. I told Sharpe and Lintner long ago that if they wished to diversify, they had to get off this planet since nonlinear autocorrelation between the factor variables of risk and return were unavoidable. I have advised many portfolio managers about attempting to synthetically engineer away risk. You find yourself unexpectedly taking more risk by trying to avoid it. Your long term argument is an attempt to out sit the market. The problem is that compounding eats such a strategy alive. But long before that is true, you're too old. There is no point in having a ton 'o dough when you're old. You might as well go for it. lose, and be poor and old. It doesn't matter whether you're poor or rich when you're old. I suspect you have failed at stock market investment. When I was a stockbroker I encountered a lot of people with a similar attitude. It doesn't take much or any skill to time the stock market or individual stocks, but it does take self control. I rarely see that and never see it from the patzer public which thinks they can do fool things and succeed. What they learn after losing is to join up with a mutual fund and let them lose the money. You sound old, but I don't know if you were around in '68 when the mutual fund obsession went into the tank with the bear market of '69. They sounded much like you, but by May of '70 there was a different take on things. It was, "the government has go to do something". They weren't saying that equities is where you should be. They didn't say that again for 15 years and the equity markets were a disaster regardless of how you would like to look at a DOW chart. That is exactly the same environment that existed from the '30s to the '50s. It is only during these hay day periods where the smug approach you have embraced works. Even then you have to time the market and sell, because if you don't, they'll clean ya.

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