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To: Tony Starks who wrote (83752)	4/29/2007 7:09:34 PM
From: ChanceIs	Read Replies (2) \| Respond to of 206329

>>>I'm looking forward to reading Black Swan. I've got a hold on it at the local library, waiting for it to arrive.<<< I just - literally - got both of them. Black Swan was back ordered forever at Amazon. I made seven figures on the '98 through '01 patch run up. I got pasted on the summer '01 OSX crash and then 9/11. I got lucky on the run up in that: 1) I had an undeveloped latent fascination with the oil biz - sprang to life in May'98, 2)crude melted down to $10 about the time when my real interest took hold, and 3) through the miracle of the internet, (and probably this board) I became acquainted with the writings of Matt Simmons. The rest was work - reading day and night. 9/11 - Black Swans. They are out there. My wife figured if she bought me the books, it might not happen again. I think that Frank's wife set a little aside from the KMart wages post PGO crash for similar educational materials.

To: Tony Starks who wrote (83752)	4/30/2007 3:34:57 PM
From: Wyätt Gwyön	Read Replies (3) \| Respond to of 206329

you essentially attributed your market winnings to dumb luck and I thought, "Sounds like a page out of Fooled by Randomness." I'm looking forward to reading Black Swan. the average market participant will, by definition, have average returns minus costs. although my returns have been above average, i don't believe i have any enduring edge that would reliably cause me to have above-average returns. therefore, the most likely reason for the good returns is luck. as you know, what Taleb says is that there will always be some people with extraordinary market returns, given a large enough sample population. that is not a sign of "skill", though not surprisingly, many people with good returns believe they are skillful. Taleb expands upon this, making the general statement that most of society's "big winners" are just lucky fools ("fooled by randomness"). they might be born on third base and think they hit a triple, or they win some kind of DNA lottery, or otherwise benefit from luck of the draw. that doesn't mean effort and will have nothing to do with it, but most of us have benefited from circumstances along the way. Taleb believes people shouldn't count on luck. for example, they should choose a "non-scalable" career like dentistry, where the odds of modest success are high and failure low; as opposed to a "scalable" career like actor or rock star, where the odds of failure are high, but a few smashing successes creates an image of glamor. if you follow Taleb's thinking to the logical extreme, you wouldn't say that you can't beat the market, but that you can't reliably know that you will beat the market (i.e., ex ante, you have no reason to expect you can beat the market). ergo (prescriptive conclusion), you shouldn't try to beat the market and should just invest in USTs or maybe index funds per MPT. as Bernstein put it, people who try to beat the market are "overconfident buffoons": "The market can be thought of as an enormous computer whose job is to amalgamate all of the available information, both public and private, into extremely accurate security prices. The only way you can beat it, is if you are privy to non-public information or smarter than all of the other market participants. If you believe that either of these is true, then either your name is Ken Lay or you are an overconfident buffoon (or both)." efficientfrontier.com so, i must be a buffoon, since i am not indexing, although i would dispute the overconfident part because i am not so deluded as to be sure it will work. what is my excuse, then? i must think there is some kind of inefficiency that can be exploited, else why bother? as i have said before, i think the individual's best advantage is the ability to lengthen time horizon in comparison to the institutional competition. i don't have any shareholders to report to, and i am nobody's fiduciary. so i feel i can hold through more volatility than institutions will put up with. i have no idea what will happen tomorrow, or next month. but i think in ten years oil prices will be higher than now, substantially higher. even if one accepts that as true, it is not very useful information to hedge fund manager. they are worried about this quarter, or this month, or even this week. they can't even conceive of ten years. so, i consider that a real advantage in today's investing world. if this advantage is real as i believe, naturally my PF has to be able to withstand whatever short-term volatility the market throws my way. i have to be able to eat a 25% or more drawdown on my equities--that's another reason i choose not to be fully invested and don't use leverage. Buffett has said you shouldn't buy a stock if you can't stomach a 50% drawdown (notice Buffett is a practitioner of LTBH and has had more than his share of huge drawdowns; i doubt he'd be famous if he got "stopped out" of Coke, Washington Post, etc.). the only other edge (other than small size compared to HFs, which reduces transaction costs) i think can be exploited is value stocks, although they may be in a bubble themselves nowadays. efficientfrontier.com