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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Mama Bear who wrote (4421)	3/8/1998 8:56:00 AM
From: Pancho Villa	Read Replies (2) \| Respond to of 18691

>But a coin flip is a random event. People buy and sell stocks for a reason. Just because a random event like a coin flip produces a chart that looks like a stock chart, does not mean that it is. I guess I'll remain doubtful of the random walk methodology.< You are getting there! A coin flip is a random event and stock prices behave randomly. IMO the reason for this are two fold. First of all stock prices are dictated by supply/demand conditions these very widly. A lot of smart people trying to get a bargain and or stick someone else with a looser; as a result prices are fairly efficient [most of them and most of the time IMO about 90%]. What I mean by efficient is that stock prices reflect pretty much all the available information on the stock. At the very least what the consensus about this information is. Individual players may differ substantially in opinion [like us the shorts in AOL], they will eventually be proven right or wrong. Now, news events are random events. Since all previous info is reflected in the current price (you are of course entitled to a different interpretation of the news and if you are consistently right about your interpretation and others wrong you beat the market. However beating the market in the short term may be the result of just plain luck). Second, IMO since it is pretty defficult to value stocks given the random nature of the world [forecasting earnings is extremelly difficult as we need to know what the competition economy etc., etc, etc, will do]. Everryone is pretty much guessing and stock prices vary on a wide [random] range but a range that will result in about a 12% return driven by earnings. Most businessses do make money. The seccond point is my own two cents of why prices vary so much. No one really know exactly how to value stocks! I guess you won't read about this one in too many places! pancho