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Author: junkman02 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35397  
Subject: Dan: On Talking the Talk Date: 12/4/2009 2:53 PM
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I recognize that gap and try to bridge it sometimes, because I don't think it's unbridgeable. But I'll admit it causes frustration sometimes, for which I apologize. I appreciate your trying to push through anyway!

Dan,

Don't apologize, explain (as if you're talking to a wider audience). And don't thank me, fight back (so that I can learn. too).

There's no one right way to do any of this stuff, but there do seem to be lots of ways of making a mess of it, most of which are the result of accepting some else's opinion and then trying to implement it without understanding the total context from which it came.

That the source of a lot of my fights with most investor who simply mouth "current wisdoms" but who haven't attempted to replicate the crucial experiments for themselves. It takes about ten minutes with Excel and downloaded data to shown that the pivotal assumptions of Modern Portfolio Theory are nonsense. But it takes weeks of work to create an alternative that makes sense in terms of how markets might actually work, and that alternative is fragmentary at best. So, of course, most investors stick with the simpler, but incorrect, version of market reality, because MPT works very well under "normal circumstances". It only when markets are under stress that it fails, which is exactly when a good theory is most needed.

Look, the basic problem all of us are dealing with is how to make a couple of bucks from our investing and how to hang onto those bucks. I run an all-bond portfolio, because it's what I stumbled into and discovered I could do. But nobody whom I respect --Graham, Whitman, Mamis, O'Neil-- would ever advise doing such a thing. The only guy who would see in what I'm doing his own methods is Van Tharp whose insights about stock and futures trading I adapted to bond investing. I'm simply running a version of his "marble game" within a fixed-income context. That means that though I do look at balance sheets and such, I'm not doing cash flow projections and such. I'm just gaming puts, trying to make a buck, all the while trying to keep myself out of more trouble than I can manage.

So I'm coming at this stuff from a very different viewpoint than most investors. That means that though we might use some of the same words, we really are speaking different, almost incomprehensible dialects. Yes, it’s probably to both of our advantages to understand how the other thinks. Frustrating at times, but also worthwhile in and of its own sake. Just as there is more to fishing than fish, there is more to investing than just profits and losses. It’s a wonderful laboratory in which to explore ideas. But, sometimes, communicating those ideas gets tough because of dissimilar assumptions and experiences.

A suggestion: Stick with what you know and has proven its worth to you. Don’t try to incorporate pieces of what I do. You’ll end up the worse for it, the proverbial man with two watches and no means to tell what time it really is. Pick a method, any method, and make it work for you. What anyone else does might be interesting, but it’s also irrelevant.

Charlie
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Author: TMFGalagan Big gold star, 5000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29501 of 35397
Subject: Re: Dan: On Talking the Talk Date: 12/16/2009 8:39 PM
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Sorry for not responding to this earlier.

A suggestion: Stick with what you know and has proven its worth to you. Don’t try to incorporate pieces of what I do. You’ll end up the worse for it, the proverbial man with two watches and no means to tell what time it really is. Pick a method, any method, and make it work for you.

Don't worry - I've been doing that all along. What works for me is to listen to as many different people's philosophies as I can, reject what doesn't work, and synthesize what does into my own new strategy. The way I see it, I'm the proverbial man who can read a clock, a watch, a sundial, or the stars, and always know exactly what time it really is -- or at least know just how inaccurate my read is, and strive to keep improving it.

cheers,
dan

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