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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Gottfried who wrote (44656)	3/28/2001 1:13:38 PM
From: mitch-c	Read Replies (1) \| Respond to of 70976

OT - percentages CSCO down another 8%. A falling knife. About once a month, I have to remind myself that percentages are RATIOS, not absolute numbers. My classic example involves starting with $100, losing $25, then regaining $25. That's a break-even in dollars ... but it took a 33% gain ($25/$75) to offset a 25% ($25/$100) loss. The same thing works in reverse. $100 to $125 to $100 parses as a 25% gain erased by a 20% loss. In context, this is why Jacob's willingness to eschew a small gain to lower the odds of a loss makes good, disciplined sense. So, in an extreme case, five successive days of 20% losses do not add up to (5 x 20% = 100%) a total loss, but rather to ((1-0.2) ^ 5 = .32768) about a 67% loss, with 33% of the original value remaining. Nearly everyone is familiar with the compound interest (gain) version of this problem, so I won't belabor it. - Mitch