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Politics : Ask Michael Burke
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To: BGR who wrote (54997)4/7/1999 6:24:00 PM
From: David Rosenthal  Read Replies (1) of 132070
 
BGR,

I have followed your discussion with Michael over the last few days and have to say that I have rarely been able to understand the case you are making. I do understand the 90/10 approach. I understand taking out options on way overvalued/undervalued stocks and looking for triples+ while I haven't a clue about what you are recommending as a method for stock selection. I understand that a loss of 5% relative to a comparable average loss of 10% is still a loss. I understand Mike Burke's track record, which seems to exceed those average mutual fund/market returns which I thought was your measure of success. And I definitely understand a 10% absolute risk and I don't have a clue what you are saying about adjusting your returns for risk.

I guess you are using some statistical models. During my career I worked on many predictive scientific algorithms that used time history to predict future behavior. They are comforting black boxes where you plug in the numbers and they will almost always give you a result. However, you could tweak the weights and number of inputs and number of variables all you want. You could never have great confidence in these systems because you knew your model was incomplete. And you could always find cases where the real world wasn't modeled.

In short: what Mike has stated is a common sense approach that everyone can understand and has been proven to work over an extended period of time. It has also worked for a bear in a great bull market, which suggests robustness. If you really want to blow holes in his system then you had better stop asking Mike to do it for you. Map Mike's approach to your approach. Show us why yours works better. Show the inherent risk in his trades. Make your case.

Dave
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