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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Seeker of Truth who wrote (18307)	2/21/2000 2:57:00 AM
From: Bruce Brown	Respond to of 54805

RE: Crash predictions and return to the mean theory... Here's a post that Geoff Moore wrote over on the listserv Gorilla Game thread that talks about gorilla gaming and 'return to the mean' theory which grew out of a discussion about valuations, FED action, market timing, etc... . __________ Subject: On Bernstein, Against the Gods, and regression toward the mean From: "Geoffrey Moore" Date: Sun, 20 Feb 2000 19:06:40 -0800 Gang, Peter B's book is indeed a good one to read, but with one caveat -- it does not hold for gorilla game markets. Here is why. Bernstein charts "regression toward the mean" effects -- meaning, just as the poster said recently, that the highs get too high and thus are more likely to go back to average, and the lows get too low and thus are more likely to go back to average. So value investing says, buy on the low lows and let the "law of averages" bring you up at least to average. In mature markets with relatively modest changes in CAP or category, this works. Emerging markets with increasing returns, however, operate just the opposite. There the highs get higher because pragmatists rally around the market leader giving it a positive experience of increasing returns effects) while the lows get lower (because the pragmatists shun the non-winners making their life increasingly difficult). The net impact is "regression toward the extremes." Geoff Geoffrey Moore Chairman, The Chasm Group Venture Partner, Mohr Davidow Ventures __________ Just thought some might find this interesting. I also shared a post on the eWorld thread about Godzillas that Geoff wrote. BB