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To: donald sew who wrote (22607)	3/2/1999 10:33:00 AM
From: RocketMan	Respond to of 86076

I agree, Donald. Predicting rare events, such as a 20% or more decline is extremely difficult, so even a 50-50 success rate should be considered great. Now, if one acted on such a prediction, and was wrong half the time, even though it might be a great predictive model one might lose financially, depending on when you got back in. The Pitbull claims that last summer's crash call was the first since 94, and I suppose this would be their second. In that sense they would have correctly called every "crash" since 94 (in a Clintonesque sense), since there has only been one (although there have been some nasty corrections, falling short of 20%). However, they also claim that their system has never failed. Well, it failed in 94, because there was not a crash even though their system called for one. However, there was a 10.2% correction between 31 Jan and 4 Apr 94, and perhaps they are refering to that. But in that case, they would have missed similar corrections of similar magnitudes in 96 and 97. So let's assume that they have a system that has called one out of two crashes since 94, for a 50% success rate. As you pointed out, this is actually quite good because they are forecasting a rare event. But as I alluded to earlier, even if you timed it perfectly (which they do not claim to do), you might save a 20% loss but miss out on a 20% or greater gain on a missed call. I guess we will know within a month. They will either look like geniuses or they may have to shut down their site :-)