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To: CommanderCricket who wrote (83866)	5/1/2007 3:22:19 PM
From: Wyätt Gwyön	Respond to of 206334

What I don't agree with is an individual can not long term beat the market indexes. i didn't say that. what i said was, you can't know in advance that you will beat the long term averages. if you are a piano virtuoso who is one of the 100 best concert pianists in the world, and are at a football game with 50,000 fans, you can be positive that you play your style of piano better than the average person there. if there was a Chopin-playing contest, you would be in the top 1 percent, and probably you will be the best one there. you can say that in advance and everybody will believe you, because you have a demonstrable skill which can be called upon at will. this is what we mean by real skill. it is as obvious as a person's height. if you take the same group of people and start an investing contest lasting one year, you have no way of knowing in advance whether you will even be above average, much less in the top 1 percent. that's because there is no corresponding skill in investing. i say that, having myself generated about 1200-fold return on capital since 1999--which i consider to be due mainly to luck. that is, i am pretty sure, in the top 1 percent of results over the period. but i have no way of knowing i would be top 1 percent or even above average, over the next year in a trading contest against a random group of 50,000 people. unlike the case of the piano virtuoso, in a stockpicking contest there can be no assurances that future results will look anything like the past.

To: CommanderCricket who wrote (83866)	5/1/2007 5:06:07 PM
From: Paul Senior	Read Replies (2) \| Respond to of 206334

"What I don't agree with is an individual can not long term beat the market indexes." The black swan argument. All we need to do is find one person who can beat the market long-term. Given the numbers of people in the market and the head/tail tossing argument, there will be people beating the market. Some. What is long-term? I'll define it as 18 years -- two years more than Commander Cricket's experience. -g- Let us assume an individual has beat the market 16 years. There would be two different ways of viewing this. Either beat consistently or beat on-average. If we're talking consistently, then I might use the same logic of the head/tail selectivity process, and assume there's a 1 in 4 chance that any 16-year winner will survive the process another two more years. If we're looking at market beating returns on average, then I have to know the standard deviation over the 16 years to make a prediction for the subsequent two years. My belief is that the difficulties increase and the odds against beating the market from years 16-18 increase. The reason is that the person is older and perhaps more risk averse. And the success would mean more money has been accumulated and has to be dealt with. Also, at some point, bragging rights of saying "I beat the market" have less substance than validity. (That is, if I'm successful for 16 years, and decide I better conserve with say 80% bonds-and-stocks in a core account, I become THE market, and 20% doing "my thing" to beat the market, I might continue to "beat the market" overall but my returns approach the market's because of my large conservative (core) holdings. Regardless though, I agree with Wyatt Gywon if I am understanding him correctly: although some people will beat the market long-term, it is not possible to identify in advance who those people will be. And that also means that a person cannot identify himself in advance as one of the people who will beat the market. Which suggests that one ought not make future spending goals/plans on the assumption one can or will beat the market. jmo, of course.