Message Font: Serif | Sans-Serif
No. of Recommendations: 6
if i may be so bold, mmsrs. camillo and hunziker, my interpretation of camillo's post is that many of the folks who are punting the f4 have only been using the method for less than 2 years (ie less than two rotation cycles) - and not holding the f4 (one cycle) for 2 years.

i get that impression, and must agree with camillo, that people are prematurely booting the f4. not that i'm a foolish apologist. it's just that many folks in this current market have become pavlovian and expect to drool profits every time the stock bell rings. until recently that is.

prior to the nasdaq's tanking, everone felt "the new economy" was untouchable and infinitely sustainable. at the same time, the dow dowdies were looked at as dinosaurs, hathaway was deemed fit for the glue factory, and the f4 method suddenly became the tortise to the nasdaq's hare. it didn't help that this was one bad year for the f4 (as we all know that several stocks were un-dowed by the wsj this year, gt among them). suddenly everyone is saying the f4 doesn't work and that statistics lie (mark twain of course said 'there are three types of lies - lies, damn lies, and statistics'). these seem to be the same people who were claiming 3 months ago that the tech would continue to astronomically climb because we had entered a "new economic paradigm" of infinitely sustainable growth.

anyway, several folks have said that due to the random nature of statistics, and the fact that the f4 has been selected non-randomly (retrospective rather than double blinded, as a true scientfic study should be) the f4 is suspect as a "proven method" despite 50 years of "back testing." i understand and like the arguments, but let's face it - all we got in this world are statistical models. medicine, politics, astronomy, business plans, even the motion of particles on a subatomic level (quantum mech - schroedinger's equation - icky stuff, gave me a headache in college) are all based on predictions which are in turn built on statistics. as much as twain agrees that stats can be damnable lies, it's kinda hard to operate without them.

anyhow, i don't believe that folks can rightly conclude after one year or two years (one or two turnovers of an f4 portfolio) that the f4 doesn't work in the long run. a sample size of n=2 is ridiculously inaccurate (math nerd example: you can conclude by listing 1,3,5,7,9,11,13 - and stopping there - that all odd numbers are prime, with 9 being a statistical anomaly). if you're ready to throw in the towel on a long term mechanical investment plan after a short term (1-2 years, as opposed to 10 or 20), then you should never entertain using one in the first place.

this year has been a horrible f4 year for me - gt and s were booted, and i was down quite a chunk of change. but s has since rallied into positive territory, t is about to unleash a mammoth ipo with awe, and gm keeps trucking (wince) along. gt still sucks, but at least it looks like its bottomed. and, halfway through a miserable year, i'm up 10% overall on the f4.

so embrace stats or hate them, but remember, if you are using a sample size of one or two (ie one or two years of following the f4) you're just as guilty of misuing stats and letting them dominate your actions.

Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.