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Author: imdajunkman Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: The Bond FAQ Brouhaha Date: 11/25/2006 1:43 PM
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But I don't know how to tell you how I got here,” said Alice to the White Rabbit. Well, why don't you begin at the beginning?

Perhaps I am misreading the bond faq, and perhaps I am asking more of it than should be done. Thus, the following comments might be based on multiple misunderstandings. If so, my apologies to all in advance.

The bond faq implies that cash-management --e.g., buying CD's, TIPS, etc. -- is equivalent to "investing". But the two are very distinct processes. Furthermore, nothing is said in the faq about how to write a basic, five-factor investment plan (i.e., Selection, Direction, Timing, Weighting, and Protection). The net effect is that those who confuse cash-management with investing also tend to focus almost exclusively on Selection. And by slighting the other four factors --if they are even aware of them-- they become the dumb money at the table.

It's no one's job to protect would-be investors against themselves. But having once been one of those dumb and preyed upon investors myself, as we all once had to have been, I'd like to shelter beginners from such grief by providing them with the best starting points possible, hence my criticisms of bond faq, which can be done piecemeal or by a frontal assault. I think the faq is unfixable, because its implicit paradigm is demonstrably wrong-headed, which is not to say that there is only a single viable replacement. There are a multiplicity of viable investment paradigms, which is the crux of the teaching problem: Where to begin?

It is my belief that beginners need to be taught much more than a specific investment paradigm. Instead, they need the broader skill how to evaluate paradigms generally, which creates a Catch-22 situation. A meta-level approach won't make sense to them until they have gain sufficient experience within specific paradigms to begin to be able to make the comparisons by which they can bootstrap themselves to wherever they want to go with their own specific paradigm, which they --of necessity-- have to create for themselves, because each person is unique in their personality and financial situation. Thus, the would-be instructor has to have already traveled the territory of not just the paradigm he himself successfully uses, but the territory of all territories such that he can go freely in the investment world where ever his ideas and energies might take him.

Whoever the lead writer of the present bond faq might be, what I see lacking is two things:

(1) The person doing the writing is not an active investor who is able to support himself on his investing alone.
(2) The person doing the writing does not have a mastery of the published investment literature, nor has he engaged even a fraction of it in any meaningful way.

But as I said at the beginning, I could be wrong about this. If so, my apologies. If not, then decide what you as writers and you as readers want to do about it. But I'm outta here for a while until the brouhaha blows over, because I know who I am as an investor and who I am as an investment theorist. I've done my time in the trenches, and I've done my time in the libraries. So my choice is simple: I have a moral obligation to help others in the same way that others have helped me. But I have no obligation to help the preversely uneducatable. So, as I said, I'm outta here for a while. The brouhaha will blow over. They always do. Meanwhile, markets will extract their own revenge on those who don't understand them, and markets will reward those who do. Each will receive what he deserves in proportion to his understanding of how to manage risk, which is yet another basic topic the bond faq fails to address.

It's not fixable, and it isn't worth reading.

Charlie
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