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Author: TMFTwitty Big funky green star, 20000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 122  
Subject: Greetings, Fool! Date: 9/14/2006 11:41 AM
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Welcome to The Motley Fool Discussion Boards, we're glad you're here. These boards are the place to talk about all of the stocks in your portfolio, to make new friends, and to learn about investing with Fools from all four corners of the globe. If you have questions about how to use the Discussion Boards, click the 'Help' link. If, after checking the help area, you have additional questions, comments, or concerns, please drop us a note at FoolBoards@fool.com. Contact BoardRequests@fool.com to request a new board or FAQ link.

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Author: TMFBreakerDave Big gold star, 5000 posts Old School Fool Supernova Phoenix 1
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Subject: Re: Greetings, Fool! Date: 9/14/2006 2:42 PM
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"My name is David....

"I first tried CAPS in November 2004 when it was called 'Project Felton' and it let me rate this stock...

"I don't remember whether it was an Outperform or an Underperform, really, I know it was one of those two... I don't remember the stock...

"I think I was right. Although I can't say for sure. I may have called that stock wrong... I... I've been, well, really ENJOYING this thing ever since....

"Yeah, I still talk to my kids. Actually, I have my kids playing along. It's really a great teaching tool. We talk stocks now... in between clicks... it's, you know, it's like a family thing...

"My spouse? Um, well she thought I should probably post here, is how she's supporting me...

"My name, that's right, my name is David...."

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Author: TMFTwitty Big funky green star, 20000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6 of 122
Subject: Re: Greetings, Fool! Date: 9/14/2006 3:07 PM
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I've been, well, really ENJOYING this thing ever since....

Sounds like you could use a sponsor, David. I'd suggest someone with a really, really low rating. I'd volunteer, but I know your hours, and I like to sleep nights :)

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Author: albaby1 Big gold star, 5000 posts Top Favorite Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10 of 122
Subject: Re: Greetings, Fool! Date: 9/15/2006 3:57 PM
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Ah, markets. The mechanism that allows you to efficiently aggregate the opinions of multitudes in order to value something - in this case, stocks.

Am I right in understanding that you're going to create a virtual market (CAPS) in order to use markets as an information aggregator for a specific population (that subset of your online community that chooses to participate) in order to outperform the same information aggregating mechanism, but one that covers everyone that participates in the equity market (including many of the ones participating in CAPS)?

In other words, using a market to try to beat the market?

A noble experiment, I guess - but I'm afraid I don't understand why this is supposed to work.

Albaby

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Author: TMFBreakerDave Big gold star, 5000 posts Old School Fool Supernova Phoenix 1
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Subject: Re: Greetings, Fool! Date: 9/15/2006 4:03 PM
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Albaby,

Thanks for noticing us. At http://caps.fool.com, take a look at the CAPS Help section (has an audio interview with me included) to familiarize yourself more with Motley Fool CAPS. See you out there!

Foolishly,

David G.

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Author: albaby1 Big gold star, 5000 posts Top Favorite Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 12 of 122
Subject: Re: Greetings, Fool! Date: 9/15/2006 4:12 PM
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Thanks for noticing us. At http://caps.fool.com, take a look at the CAPS Help section (has an audio interview with me included) to familiarize yourself more with Motley Fool CAPS. See you out there!

No problem, Dave. Been a long time since we bounced around the Rule Breaker boards together.

I've read the help section, and I understand the mechanics of how this is intended to operate.

What I don't understand is the basis for the exercise. You're setting a market to beat a market - your information aggregator against the massive, even world-wide, information aggregator which is the United States equity market. The information known to your population is, almost by definition, no greater than that available to the markets themselves.

So why set up a market to aggregate information, when one already exists?

Albaby

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Author: TMFBreakerDave Big gold star, 5000 posts Old School Fool Supernova Phoenix 1
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Subject: Re: Greetings, Fool! Date: 9/15/2006 4:37 PM
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Albaby, I guess I disagree with how you've framed CAPS up. The perhaps simplistic intent that you impute to us isn't how I or our team thinks of CAPS. We're not for instance trying to "create a market to beat a market," although that does touch on elements of what we're working toward, missing all the while many things besides. Hey, I don't begrudge your viewpoint at all -- it's rather an interesting way of thinking about things, and I'm assuming this is your initial reaction based on a brand-new or very recent first look at CAPS. I would say CAPS has at least a dozen separate uses for an investor (or even a consumer), something more akin to a Swiss army knife than the perhaps "household knife" you are seeing.

Among other things, I believe CAPS is creating both a new transparency and new information not previously available to anyone, let alone Wall Street's few. I would also say that CAPS's method of weighting ratings according to performance is fundamentally different from market mechanics, something quite different from being just "a second stock market," as I think you may have been suggesting. Indeed, I believe that people who use CAPS will henceforth be operating with more and deeper information than those who do not. That's my experience from having used the application for the past two years, anyway. And even if the information were merely commoditized or of no greater use than existing market data and pricing, the simple fact that it is a database that logs everything that each of us does individually makes it I think a uniquely valuable public resource, something that any individual can point out to any other individual to show a record of his or her market opinion and stockpicking achievement. I personally think that alone is pretty compelling. Hey, I'm really interested in seeing your page, for instance.

So I would say that it's not really that we're aggregating "known information," although that's some of what we do. I think we're bringing into being previously unknown information, everything from actually tracking and grading and appropriately weighting the influence of Morgan Stanley, or Jim Cramer, right through to weighting the forward predictions of people like you and me based on the demonstrated merit of their historic input provided in this new public venue. I sometimes use the analogy of the "CAPS Stadium" to which all the world is invited to come down on the field and play, if they like, to be accountable for their actions, to be rewarded properly (finally) as opposed to getting the "ear" of Barron's because they may be "well-known for being well-known," etc. Further, the information that I think we have all benefited from via the Fool's discussion boards, for instance, from stock tips to business pointers to good debate, etc., will now be held in this new, more powerful format, one that "remembers," and not just remembers but -- grades, scores, ranks. There's actually a neat "put-up-or-shut-up" new dynamic that I'm now seeing on our boards that further advances the quality of communications across Fooldom, and the trustworthiness of different viewpoints. I could probably write a 20-page paper about that alone, though on the CAPS Swiss Army knife, it's probably only just the toothpick. :)

I see a lot to CAPS, and based on reviewing feedback and member data I can also say happily that I'm not the only one. ;)

This posting is put up on the CAPS Addicts board, so you see where I'm coming from -- and can please feel free to discount everything I'm saying. :)

Foolishly,

David

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Author: TMFEldrehad Big gold star, 5000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14 of 122
Subject: Re: Greetings, Fool! Date: 9/15/2006 4:51 PM
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A noble experiment, I guess - but I'm afraid I don't understand why this is supposed to work.

I think Dave's response here was a very good one. I have a slightly different perspective which I'd like to share.

First, while both are 'markets' in a sense, the degree to with which individuals influence each of these markets is very, very different. In the 'real' markets, those who invest the most money cast the most votes, regardless of past track records. In CAPS, those with the best track records cast the most votes, regardless of the amount invested.

That is a fundamental difference which I believe can allow the CAPS market to beat the real one.

Regards,

Russell


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Author: albaby1 Big gold star, 5000 posts Top Favorite Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15 of 122
Subject: Re: Greetings, Fool! Date: 9/15/2006 5:08 PM
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Hey, I don't begrudge your viewpoint at all -- it's rather an interesting way of thinking about things, and I'm assuming this is your initial reaction based on a brand-new or very recent first look at CAPS.

That's absolutely true.

Reading your post, it seems clear that CAPS is intended to do more than aggregate information into a price - so it's certainly doing something more than the stock market does. As you note, you're using it to cull out particular Foolish stock analysts. It's a bit like the "Best Of," but using past performance instead of recs.

I'll take it for a little spin, though I don't really do much analysis of individual stocks (I'm more of an index fund kind of guy). However, since you're still in Beta, I will implore you to add one thing to the system:

A short explanation of "cherry-picking"

It's the coin-flippers of Graham-and-Doddsville. If you have thousands of people participating in CAPS, a fair proportion (presumably near half) will outperform the market, if only by chance alone. And a fair subset of those will outperform substantially - even if none of them have any stock-picking ability beyond the average. It will be helpful for users of this tool to have that concept at their reach.

Good luck getting it up and running!

Albaby





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Author: TMFEldrehad Big gold star, 5000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 16 of 122
Subject: Re: Greetings, Fool! Date: 9/15/2006 5:20 PM
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It's the coin-flippers of Graham-and-Doddsville. If you have thousands of people participating in CAPS, a fair proportion (presumably near half) will outperform the market, if only by chance alone. And a fair subset of those will outperform substantially - even if none of them have any stock-picking ability beyond the average. It will be helpful for users of this tool to have that concept at their reach.

I agree that this is a good concept to keep in mind regarding CAPS. I think it pays to ask ourselves, "Is that player really good, or just lucky?"

That said, due to a recent rule change (discussed more in-depth on the Beta board) there's a mechanism in CAPS that goes a fair way toward separating the 'good' from the 'lucky'.

Accuracy is an important measure in CAPS, and it's pretty much impossible to get to one of the very top spots in overall CAPS without being very near the top in this measure.

Accuracy ranking is based on the statistical probability of achieving the results in a 'random' coin toss environment based on the number of successes and trials for each indvidual investor. If one is investing randomly, it becomes increasingly difficult to 'get lucky' the more picks one makes. A CAPS player who picks accurately 2 times out of 3 over 100 picks will trounce the CAPS player who picks 7 correctly out of 7 in this critical measure.

No question that sheer luck will influence results, and it's something to bear in mind when looking at CAPS overall, and especially so if one is planning to use CAPS to identify a 'lead steer' to follow. That said, by basing one of the critical measures of success on a probability distribution, with the top spots held only by those who can prove, statistically, that their results were not the result of pure luck, the current player rating goes a long way toward addressing your concern.

Regards,

Russell



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Author: albaby1 Big gold star, 5000 posts Top Favorite Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17 of 122
Subject: Re: Greetings, Fool! Date: 9/16/2006 5:34 PM
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No question that sheer luck will influence results, and it's something to bear in mind when looking at CAPS overall, and especially so if one is planning to use CAPS to identify a 'lead steer' to follow. That said, by basing one of the critical measures of success on a probability distribution, with the top spots held only by those who can prove, statistically, that their results were not the result of pure luck, the current player rating goes a long way toward addressing your concern.

True, but bear in mind that sort of analysis depends on the number of players, not just the stats for each individual player. If you have several thousand players, there are certainly going to be a few that pick better than 2 times out of 3 over 100 picks by random chance (or whatever the stats are - I don't know that outperforming the market is a 50/50 proposition for any random stock).

Hey, I don't want to be too negative - it will be an interesting experiment. I just remember the stock-picker contests that all the financial sites used to run during the "boom" years of the late 1990's. In each contest, the winners would have ungodly returns - not because these folks had the innate ability to pick stocks with annual returns exceeding 540%, but because with so many entrants picking small numbers of stocks, someone was going to have an extraordinary return if only by chance.

Albaby



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Author: ThyPeace Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22 of 122
Subject: Re: Greetings, Fool! Date: 9/19/2006 7:15 PM
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True, but bear in mind that sort of analysis depends on the number of players, not just the stats for each individual player.

So today I watched my percentile bounce from 51st to 32nd to 52nd. Looks like I settled in the 41st or so. (Yup, I have a score of somewhere between -2 and +2, hurrah for me.) I'd like to know whether the number of players or the newness of the game affect such huge bounces. Will that change as time goes on? I'm having a slightly hard time figuring that out. And no, I have no idea why I care, but there you have it.

There is also the fact that you can't weight your ratings. TMFEldrehad referred to it as the people with the most money getting the most votes, but there's a corollary that affects the individual as well. In the real world, if I thought (for example) that 3M was going to outperform the market some, but that Doral was going to outperform the market a LOT, I might purchase more shares of Doral than 3M. Or if I thought that the best things in life are PZZA and BEER, I might purchase equal numbers of shares (or equal dollar values) of those two, and buy a smaller amount of CL and JNJ for the cleanup afterwards. Since CAPS doesn't give me "money" to "invest," my score probably look different than the performance of my individual portfolio.





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Author: TMFEldrehad Big gold star, 5000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 23 of 122
Subject: Re: Greetings, Fool! Date: 9/20/2006 10:10 AM
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I'd like to know whether the number of players or the newness of the game affect such huge bounces.

I think it's moreso the newness of the game (or the large influx of relatively new players) that's causing these bounces. New players will start with scores around zero. A lot of new players coming in a short period of time means a lot of players with scores around zero. As CAPS matures and more and more players' scores naturally move away from zero over time (in both directions), I think we'll see score percentile rankings become less volatile (for those with scores around zero).

There is also the fact that you can't weight your ratings. TMFEldrehad referred to it as the people with the most money getting the most votes, but there's a corollary that affects the individual as well. In the real world, if I thought (for example) that 3M was going to outperform the market some, but that Doral was going to outperform the market a LOT, I might purchase more shares of Doral than 3M.

First, while I don't know where it is on the priority list, I do know that allowing players to 'double down' on a stock has certainly been discussed. While I'd favor allowing for a 'double down', I personally wouldn't push it any further than that. What we don't want is a bunch of players choosing overly concentrated portfolios in hopes of 'getting lucky' and cracking the leaderboard that way - which is what almost inevitably ends up happing in traditional portfolio simulation games.

Regards,

Russell




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Author: missash Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 24 of 122
Subject: Re: Greetings, Fool! Date: 9/20/2006 11:02 AM
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on the other hand, in real life, one has different degrees of conviction about one's stock picks. If for example, $100,000 were to be invested in 7 stocks, it is likely it would not be in equal dollar amounts.

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