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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75340  
Subject: Stock Market Math Date: 10/6/2003 1:31 AM
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Mathematician says winning at stocks wasn't in equation

http://www.chron.com/cs/CDA/ssistory.mpl/business/2134863


intercst
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Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37401 of 75340
Subject: Re: Stock Market Math Date: 10/6/2003 10:02 AM
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This math professor is no investor, he is an idiot. At best, he is a gambler. Investors buy great stocks at the right prices and they are patient enough to wait for their rewards.

This guy is a risk taking gambler who does not even understand diversification. And, here he is trying to sell his book that teaches the wrong conclusions based on his wrong headed investing techniques. This is a sacrilege in my book.

The math is simple...he just is too stupid to see the math. Let me show the curve to you. Here is the curve for a company that I do not happen to like, but it makes my point to perfection. Let's look at General Motors Corporation.

http://quote.fool.com/Chart/chart.asp?osymb=&osymbols=GM&symbols=gm&currticker=GM&time=all&uf=0&compidx=aaaaa%7E0&ma=0&symb=gm&freq=1mo&lf=1&comp=&type=2&sid=2160

Now, there is only one thing anyone needs to know about GM. GM is a consumer cyclical stock. So goes the economy, so goes GM. Times are good, GM goes up...times are tough, GM goes down. Look at the graph...think about where we have been with the economy.

Anyone can make money buying and selling GM stock. It is a no-brainer but it takes patience. GM cycles over years...not over days or months. You could buy GM in 1996 at about $30. You could sell in 2001 at $85. Several months ago it was back around $30. I am willing to bet it will top $80 within five years. In other words, an investor can expect to almost triple his or her money in GM in five years by doing nothing but buying and holding the stock. In the meantime, GM pays a fairly nice dividend. I have done this with GM for many years. It is a no brainer and that is why I do not really prefer to invest in GM. I can do much better with other great businesses.

To me, that is what an investor does...the math is clear. What this math professor was doing was not investing. But, writing a book about what he actually did is stupidity. He is about sophomore level in my book...he is no professor when it comes to investing. He isn't real good at math either. That scares me. He is teaching others. People believe what this jerk says...they even pay good money to hear his wise words. Yep, that is very, very scary to me.

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Author: PosFCF Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37403 of 75340
Subject: Re: Stock Market Math Date: 10/6/2003 1:57 PM
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BuildMWell

Here! Here!

Another good post! Couldn't have expressed my opinions of the perfesser any better!

It's one thing to be able to crunch numbers and quite another to understand the implications of the results.

PosFCF

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Author: RetiredVermonter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37404 of 75340
Subject: Re: Stock Market Math Date: 10/6/2003 3:57 PM
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Investors buy great stocks at the right prices and they are patient enough to wait for their rewards.

Depends on what you call "patient enough".

I know nothing about this "professor", but I'd question him if he advises putting all or most of your eggs in ONE place. I can tell you that my strategies continue to pay off most of the time, be they trades that last for half an hour, a day, a month, or even several years. However, a key is diversification.

Today, for example, I am pleased to see that of some 25 stocks in my portfolio right now, 18 are up (some sizably) over last Friday alone, 2 are unchanged, and only some of the "fliers" are down a bit, for a net that is very nice. I think that's a lot better than some of the so-called "pro's" are doing.

Am I gambling? I don't think so. Most of my buys and holds -- and sells -- are based on considerable research and my own added "gut" feel, after a lot of investing experience.

Patience is in the eye of the beholder, I guess. As long as you make a profit, you were patient enough.

Vermonter

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Author: RetiredVermonter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37405 of 75340
Subject: Re: Stock Market Math Date: 10/6/2003 4:07 PM
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This caught my eye in your reference:

Investing turns most people daffy to some degree, said Meir Statman, a Santa Clara University finance professor. As a specialist in behavioral finance, he explores the human reaction to risk and reward.

"All people, mathematicians included, make the same dumb mistakes," he said. "We are all alcoholics when it comes to the stock market. The best way to deal with it is not to buy individual stocks."


I would reply that "All people who make sweeping, general statements like his... make ... dumb mistakes."

NOT buy individual stocks? Maybe HE shouldn't, but a lot of people do -- and not all of us are "losers", gamblers or drunks.

The example given, of someone who got all caught up in buys of huge amounts of ONE wild stock -- on margin, yet! -- IS an example of pretty stupid action. Read the letters: D I V E R S I F Y. And, before investing in ANYTHING, be it an individual stock, a mutual fund, or some other "great way to make money", proposed by your banker or anyone else, exercise what we call "your own due diligence". Look carefully at factual information before you leap.

Vermonter


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