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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (54784)	4/6/1999 10:43:00 AM
From: Freedom Fighter	Respond to of 132070

Mike, >>This is the crux of the argument I had with Abby Joseph Cohen in 1979. << You know "Her Highness" Wow! <g> Curious, was she always a perma-bull or is she a bear when the going gets tough. You know, the point at which the values become attractive again. Wayne

To: Knighty Tin who wrote (54784)	4/6/1999 6:48:00 PM
From: Knighty Tin	Read Replies (2) \| Respond to of 132070

To All, An outstanding Rap from Bill Fleckenstein today. stocksite.com

To: Knighty Tin who wrote (54784)	4/6/1999 7:36:00 PM
From: BGR	Read Replies (1) \| Respond to of 132070

Michael, You are not alone in criticizing statistical model for distinguishing between upside reward and downside risk. However, if equity price changes are indeed random (and may be they are not, as contemporary research shows), the two are symmetric and hence statistically speaking both are valid measures of risk as the estimated value may differ from the actual value only by a constant factor. Try any books of statistics for the proof. As for whether the market embodies an acceptable level of risk, MPT doesn't say it does! Acceptable levels are determined by individual situations. MPT only advocates adjusting returns by risk for comparative analysis. If the fund manager assumed the same level of risk as the market and got a better return, that's superior performance! If the investor doesn't consider a negative return as an acceptable level of risk, (s)he can invest in a different fund. As for your portfolios, what if in the 90/10 portfolio you lose 10% in options? Do you stick to t-bills from that point on? If you do, you do not have a chance of beating the market. If you don't, then your downside risk is more than 10%. If you claim that you can never lose 100% of the options portion, you are making an assumption like those who claim that the market always goes up in the long run. That is a categorically wrong assumption in a mathematical sense while calculating risk. As for the remaining two portfolios, again, my question to you is: how do you rate their riskiness relative to the market? Provide an objective numeric estimate if you please. -BGR.