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Investing/Strategies / Retirement Investing
|Subject: Re: The Anti-Motley Fool viewpoint||Date: 2/13/1998 4:04 PM|
|Author: orangeblood||Number: 1768 of 77082|
Hi John... a few points:
>>>That said I want to warn novices how dangerous it is to follow any of the various DOGS strategies being purported here. These investment schemes are all back tested and have NO predictive power.<<<
Surely you see you can use this argument for anything. If we look back several decades and see that companies with sound financials and innovative products usually outperform the market, this has no predictive power. But you have to use *something* to pick your stocks.
>>>The first question any slightly skeptical mind would want answered is how long the DOGS have been publicly advocated.<<<
This is an extremely valid point. We must know what effect the popularity of this method will have on the method itself. Horse racing fans will know the name Andrew Beyer, who developed a way of ranking horses with a number. A horse with a 100 speed figure is superior to one with a 90. As long as few people had these numbers, all was fine... Andy's figures often pointed out a strong horse that others were overlooking, and the payouts were great. But as soon as the Daily Racing Form began publishing the figures, their value plummeted, because now anyone can see them, and horses with superior figures no longer pay attractive odds. I can't say this is transferable to what we're talking about here; I just wanted to point that out.<g>
>>>Well let me tell you about a theory that has been around publicly for even longer than that. AAMOF, this theory has even out preformed the DOGS since the mid-sixties -- it's called the SUPERBOWL THEORY.<<<
There comes a time when common sense needs to take over. There are reasons the Dow theories work, even if *you* choose to ignore them. There are no reasons why the market would go up if an NFC team won... we know it is mere coincidence. To my knowledge the backtested Dow theories have held up through bull and bear markets, as far back as anyone has tested. We're talking 70-80 years here!
Therefore, I see nothing "dangerous" with the Dogs strategies. No one is in danger of losing their life savings by implementing the F4, for instance. (Barring a complete market collapse, but that's irrelevant to this thread.) I'll keep an eye on how the popularity affects the strategy, and another eye on the various tinkering and thinking going on.... but I'll sleep soundly.
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