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

To: EnricoPalazzo who wrote (44523)	7/16/2001 3:59:35 PM
From: Stock Farmer	Respond to of 54805

Hi Ardethan, please let me clarify. First: To my statement: "Indeed, for those who have skill and intelligence and a certain amount of experience, it is not the most effective strategy at all." Perhaps I would have been more helpful if I had inserted "by itself" after the last comma to read "..., by itself it is not the most effective strategy at all." Second, you are "not aware of a 5 year period that has not been profitable." Neither am I. But looking forward, not backward is the important aspect of investing. So I will turn the tables and ask you how confident you are that you will be similarly unaware 45 months from now? Third, on the same topic. Of course a G&K portfolio has been profitable over any 5 past year period assuming purchase 5 years ago and sale today with no intervening activity. So is a savings account, or a government bond. But is that really the point? I thought the whole idea was relative profitability. I am not arguing against LTBH as profitable. I am arguing that in combination with other strategies that greater gains are possible. And further that it is a difficult and perilous path, and that not everyone is cut out for it nor desires the incremental profitability. You also asked "I wonder how short term traders did in 2000". It is quite possible they did much better than long term buyers did in 2000. Those who were long term buyers before 2000 and took profits in 2000 and shifted capital to become long term holders of other things... well let's just say it beats the return of those who just held right on through. My comment: "Witness the last few months which have set even our Gorilla portfolios back to 1999" My point about setting back portfolios to 1999 is just this: those who had a G&K portfolio before 1999 and still hold it will find themselves with approximately the same net asset value as they did back then. Those who added subsequently would have been better off to have purchased government bonds. Period. This is not questionable. This isn't necessarily bad. Just not as good as it could have been. There was a not insignificant period of time in which some activity besides "holding" might have been more profitable than doing nothing. Not just a brief "intermission". A sustainable period of time over which a determined strategy other than LTBH of over priced stocks might have been superior to letting nature take its course. I do agree that there were other periods of time in which LTBH was the superior approach. Indeed, these "other" periods dominate. This gives a mathematical basis to declare LTBH as a superior approach over the long term (if one is judging one approach constantly adopted over another). You will get no disagreement from me on this point. What I am advocating is a "horses for courses" stance. Which is quite different than a "one is better than the other" stance. You request that I am clear in my point. OK: LTBH is superior strategy, but it is naive tactics. And yes you are absolutely right in your inference. Central to effective differentiation between appropriate tactics is the matter of valuation. John.