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Author: LifeGuard Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75791  
Subject: The Anti-Motley Fool viewpoint Date: 2/11/1998 3:16 PM
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Someone posted that Forbes trashed the MF. I could
not find anything on it based on the link they gave.
However, here are some interesting articles that
provide an alternative view to the Motley Fool site.

http://www.forbes.com/forbes/98/0223/6104146a.htm
http://www.investorhome.com/fools.htm
http://www.investorhome.com/dogs.htm
http://www.investorhome.com/anomaly.htm

An abbreviated version of what Mark Hulbert writes
could best be summed up by saying that

(1) 3 out of 4 real money portfolios at the MF have
underperformed the market.

(2) The Fools do not practice what they preach.

O.K. We know that the Boring Portfolio
has had problems. We know that the Fool Portfolio
has trounced the markets. So what are the other
two portfolios? They are not the Drip and C-K
portfolios. In fact, I have never heard of them.

As an aside: Hmmmm. 3 out of 4 mutual funds
underperform the market. 3 out of 4 portfolios
at the MF underperform the market. Coincidence?

Personally, I think that he was looking for an axe
to grind with point #1.

As for point #2, I have to agree with him. Fools
seem to preach one thing (long-term, buy-and-hold,
do not worry about daily stock moves) yet write up
the stocks every day. Not only that, but the
Boring portfolio bought stocks high and sold low
when they crashed and the panic set in.

Now I understand _why_ the MF have to write about
stocks every day; they need turnover. No, not as
in stocks, but in people visiting the site. If they
only posted weekly, guess what, I would only visit
weekly.

I have learned a lot from MF. Some of it I already
knew (personal responsibility) but was glad to have
it reinforced. Others I learn from watching the
mistakes made at MF (Boring P., shorting stocks,
not closing out the short of DJT when they reached
their goal, etc.)

So read the above articles and see what you think.
Discuss them. Read them some more. And learn from
others mistakes so that you do not make them yourself.

LifeGuard
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1736 of 75791
Subject: Re: The Anti-Motley Fool viewpoint Date: 2/11/1998 4:55 PM
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LifeGuard,

<<So read the above articles and see what you think.
Discuss them. Read them some more. And learn from
others mistakes so that you do not make them yourself.>>

And therein lies the profundity. Anyone who blindly follows the advice of others is a fool (undercase "f" fully intended). Following any or all of the portfolios discussed in these folders without an understanding of the inherent risks is simply stupid. The important thing is to LEARN so we are better prepared to do invest for ourselves. Each of us is responsible only to ourselves, and the decisions we make are our own responsibility.

"Ya makes your choices and ya lives with the results."

And in making those choices, I want as much information as I can get.

Regards.....Pixy

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Author: galtsgulch One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1766 of 75791
Subject: Re: The Anti-Motley Fool viewpoint Date: 2/13/1998 2:34 PM
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First let me say that I think the MF site has a lot to offer. Specifically, TMFPixy's thorough analysis of various retirement strategies (100% stocks vs. Modern Portfolio Theory {i.e. diversification across asset classes}) was very informative to me.

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.

Fundad wrote

<< As an aside: Hmmmm. 3 out of 4 mutual funds
underperform the market. 3 out of 4 portfolios
at the MF underperform the market. Coincidence?>>

No, this is not a coincidence. In an efficient market it is very difficult to beat the market average after taking expenses into account. I cannot prove the DOGS won't beat the market next year for the same reason its proponents can't prove it will. The best I can do is examine its proponents arguments for it and show how they don't prove anything.

Before I do that I'll just remind the readers of the maxim _if it sounds too good to be true it is_ Do any
of you really think that if DOGS truly worked all the mutual fund managers wouldn't hear about it and start using it? Amazing.

The main argument for DOGS is that it has worked in the past. The rest of the arguments are what I'll call plausibility arguments like "we are buying stocks out of favor" which, incidentally, begs the question of why they are out of favor. For example, if it turned out that the DOGS UNDERpreformed thE market by 5% each year since 1961, then no one would care IF someone said "we are buying stocks out of favor". The only thing people care about is how has it done -- I would like to convince you that the only thing you should care about is how the market will do.

The first question any slightly skeptical mind would want answered is how long the DOGS have been publicly advocated. (Since any theory that is ONLY backwards tested isn't even worth consideration.) I've asked this question before and was told they've been round for about 10 years and have done quite well during that time. Well, this sounds good, right?

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.

It was observed in the early 80's that whenever an original AFL/AFC team won the superbowl the market did poorly, but when an old NFL/NFC team won the market had a good year. The NFC won every superbowl from 1984 - 1998 (up until this year). During this time we all know that the market has performed fantastically! In order to use this strategy all one has to do is by the market when the NFC wins and sell when the AFC wins. (So those of you easily _Fool_ed people should sell this year since Denver won). In any case, this theory has been very successful and has just as much predictive power as the DOGS.

---John Power



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Author: orangeblood Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1768 of 75791
Subject: Re: The Anti-Motley Fool viewpoint Date: 2/13/1998 4:04 PM
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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.

orangeblood

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Author: JeanDavid Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1855 of 75791
Subject: Re: The Anti-Motley Fool viewpoint Date: 2/19/1998 9:47 AM
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<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.>

Can you suggest any tested investment scheme whose tests (of whatever kind) HAVE predictive power? In other words, whatever strategy you use, how did you determine it was better than the others? Since you disdain back-testing, have you some effective forward-testing method?

The only forward-testing method I know of had a disadvantage. It was in Stravinsky's "Histoire du Soldat" where, as a result of a pact with the devil, the soldier got a subscription to the next day's stock list.

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Author: galtsgulch One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1857 of 75791
Subject: Re: The Anti-Motley Fool viewpoint Date: 2/19/1998 10:36 AM
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<<Can you suggest any tested investment scheme whose tests (of whatever kind) HAVE predictive
power? In other words, whatever strategy you use, how did you determine it was better than the
others? Since you disdain back-testing, have you some effective forward-testing method?

The only forward-testing method I know of had a disadvantage. It was in Stravinsky's "Histoire du
Soldat" where, as a result of a pact with the devil, the soldier got a subscription to the next day's
stock list.>>

Good lord this is tiring! I've stated my reasons so many times that I'm getting blue in the face. Please look at my posts directed to orangeblood. This is no longer of any benefit to me so I am withdrawing from this debate.

----John Power

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