The 1975 Buffett memo that saved the Washington Post's pension

Re:The 1975 Buffett memo that saved the Washington Post's pe... by lutusp on Friday August 16, 2013 @08:21PM (#6227611)

I can't believe you aren't getting this. There are no secrets of the winners.

> Real world example: http://www.cnbc.com/id/100809395

That's an announcement effect, not a method for beating the market. It exploits people's stupidity, not their intelligence. For a classic announcement effect, there are an equal number of winners and losers, and the average return is zero. In this specific example, some people get to buy the stocks in advance of the public announcement, then the public investors stupidly and dutifully buy stocks whose price has already peaked and is about to fall. It transfers money from uneducated investors to educated ones. If the uneducated investors realized what was being done to them, they would not invest and the system would collapse.

http://www.investopedia.com/terms/a/announcment-effect.asp

A typical announcement effect scam are online penny stock touters, who:

1. Buy a worthless stock.

2. Tout the stock online: "I just heard from my cousin that this stock is about to move!"

3. Wait for some idiots to invest in the stock.

4. Sell.

> It could also be the case that some people have a comparative advantage. Maybe they have certain skills that enable them to win were other people cannot.

Maybe Occam's razor says that it's all chance.

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Re:The 1975 Buffett memo that saved the Washington Post's pe... by bhickey on Friday August 16, 2013 @08:51PM (#6227719)

You're on the money in both this post and the grandparent. However, I'd urge you to examine your style. There's no need to condescend. In particular: > I just proved it. If you didn't understand the above proof, read it again.

> I can't believe you aren't getting this.

Plenty of otherwise rationally minded people have a hard time reasoning about this stuff. If I had a dollar for every time someone suggested that you can beat the house by playing a Martingale... gosh! You'll have a much easier time persuading people if you don't insult them.

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Re:The 1975 Buffett memo that saved the Washington Post's pe... by lutusp on Friday August 16, 2013 @09:01PM (#6227754)

I agree with your point, but in the 21st century, I have a hard time accepting that many people ignore basic scientific principles -- in particular, the null hypothesis, which in essence says that a given proposition is assumed to be false until there's evidence for it.

> Plenty of otherwise rationally minded people have a hard time reasoning about this stuff.

Rationality is what rationality does. There's a devious investment scam that, once explained, seems obvious, but most people fall for it unless forewarned. I call it the "Miracle Man" scam. Here it is:

http://arachnoid.com/equities_myths/index.html#Miracle_Man

I would like to live in a world where a scam like "Miracle Man" couldn't work, because people would say "It seems too good to be true, therefore chances are it's not true."

But that's not this world, not by any means.

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Re:The 1975 Buffett memo that saved the Washington Post's pe... by im3w1l on Saturday August 17, 2013 @07:48AM (#6228831)

>It transfers money from uneducated investors to educated ones

And this is exactly what you "proved" could not happen

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