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URL:  https://boards.fool.com/jono202-i-accept-in-this-forum-that-what-i-have-14852603.aspx

Subject:  Re: Sector Returns Date:  4/26/2001  6:04 PM
Author:  wayjo Number:  2264 of 6186

Jono202 I accept in this forum that what I have said is my opinion and I am not denying sectors move in diffent cycles offering investmnet opportunities at any given time. My point is that I don't think myself or most other investors have a sufficient knowledge base, or skills, to sit here today and determine which sectors will move in which direction over the next 12 months.

Sorry if I misunderstand your question about probability theory, but this theory was developed in the late renaissance period by Fermat to solve a gambling problem that had puzzled people for many years. It is now taught as part of any university statistics course (and maybe high school these days as well). Bernstein's book "Against The Gods" does a very good job of showing how it works in financial markets.

To combine these 2 thoughts in an analogy:
Every Saturday in Sydney, Melbourne and Brisbane there are race meetings with 8 races on the card. 24 races in total with an average of 15 horses per race making 360 horses going around - about the same number of sectors but about 1/3 of the number of companies on the sharemarket.

As a punter do I bet on every race knowing for a fact there will be 24 winners or do I only bet on races where I truly believe I understand the chances of each horse winning - and in particular the one/s I have backed??

I don't know enough about all 360 horses and the 24 races to make the bet so I stick to following a particular horse and when he is in a race where he is not properly priced by the bookmakers then I make the bet (and I bet significantly).

To take the analogy 1 step further consider
- the bookmakers = stockbrokers
- jockeys = CEO's
- Turf Club = ASX
- Treasurer = the starter and marshall of the course
- Reserve Bank = curator/groundsman
- punters =

As an aside I am in an investment club of approximately 60 people made up of traders and long term investors so this topic is a continual debate. It is good natured and we all have a laugh knowing that neither party is going to change their strategy, a strategy they feel comfortable with.

So I accept that in this forum neither of what you or I say will change each others minds and we should agree to disagree, besides there are much bigger issues in this world to worry about.

respectfully
Wayne
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