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Author: TMFBreakerDave Big gold star, 5000 posts Old School Fool Supernova Phoenix 1
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Subject: Wonderful variety of our Top 10 players. Date: 9/26/2006 12:19 AM
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Many seem focused on Russell's performance in CAPS, and in some cases seem to suggest it's unbeatable, and/or akin to "the route to success in CAPS." I'm now calling this Eldrehad-ophobia. Look, Russell has displayed -- among many other gifts -- an impressive knack for opening and closing smaller, and repeat, winning positions in stocks. In particular, he has achieved this with stocks he believes will underperform. I have to stop right there and right now say that I have personally learned and benefited from his viewpoint, yes indeedy -- thanks for pointing out the weakness that is the Ethanol IPO, Russell! -- and I believe that anyone who has followed his work will indeed see how right he's been on this topic (among others). There is something of a fallacy at play here, because there is a tendency looking backward to assume in retrospect that this was all "easy" and not worthy of the reward. If that is true, I'm pretty sure lots of others will do it, and if they do and undermine CAPS, we will adjust. But for now, avoiding the use of hindsight, I'm going to stick with "it's not that easy." I'm going to keep my binoculars scanning the horizon for people who are doing the same thing just as well and getting "unfairly" rewarded for that.

By the way, I've read some good thoughts on possible tweaks which we have in the past discussed internally -- like the idea of adjusting Accuracy so that it rates you by ticker, as opposed to by multiple picks of a ticker. Or maybe we would cause re-uppers to have to pause a bit longer in between re-upping. None of these is fail-safe, actually, and they do complicate the system a bit. But I want you to know if you didn't already that you're working with a CAPS team that has for two years disciplined itself to keep its collective mind alive to constant tweaking and improvement of "our baby." In many cases those improvements have consisted of actually simplifying the system, reducing fiddly extra rules, which are probably the most powerful improvements of all. The story of CAPS so far is indeed the story of community intelligence continuing to inform our development of CAPS, and in some cases has caused us outright to revise our scoring system. But we're not strongly convinced (as perhaps has been suggested here occasionally) that much more at all about our Player Ratings needs fixing. We're open to fixes and will always remain so, but very few new suggestions have struck us any more desirable -- in fact, many quite less so -- than our present system.

But this is all kind of background for my main point. Which is:

Don't overfocus on one guy who just so happens to have achieved outstanding performance using one approach. Look over the top ten and tell me what else you see. As a pretty inactive, passive holder of stock (and CAPS positions) myself, I can already see several top ten performers -- out of almost 7000 people, now -- who haven't even closed one position, let alone spent lots of time hyperactively trading, or re-upping new positions in the same tickers.

To wit, DatabaseBob has rated 112 stocks, and only closed down 8 of them overall. TrackRothCapital, the top Wall Street player and presently #5 overall, has no closed positions. #6, cbata, has 60 positions, zero ended. #8, cduprayjapan, 20 positions and zero ended. Etc.

I just want therefore publicly to observe that I believe too much of the "how to win" conversation is concentrated on the magnet of the leader, whereas many people who invest just the same way that I do, much more passively, have nearly identically outstanding ratings of 99.98, 99.96, etc.

I believe that CAPS is achieving one of our visions, which is to bring together into the same venue many different people -- a hugely motley variety -- showing off their radically different styles, and showing that many styles can win investment profits, all of them have something to offer, and any of them if well pursued can win success in CAPS. And the more different inputs we have to the rating of every individual ticker, the more strength we have baked into our stock ratings. My confidence is definitely steeled somewhat, therefore, by a simple review of not just the #1 scorecard on the service, but all of the Top Ten scorecards on the service, which exhibit very different approaches in different mixes of tickers. If this isn't a reason on its own to have started CAPS (and there are other good ones too), I don't know of any better reason.

So we commit to you to keep watching Russell and keep making any improvements to our system if we believe they're obviously needed, whosever actions provide us guiding insights. Meanwhile, I would ask that each of you who care also please make your own commitment to ensure that you're watching ALL the talented people in our Top Ten participants (and the many outside of the top ten). CAPS is already showcasing a multiplicity of different approaches to the market, in rating a huge variety of different stocks.

A simple point, but one that I believe needed more recognition.

Foolishly,

David
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