Forum Archive Index - June 2000

["Nigel Bree" <nbree@kcbbs.gen.nz>]

Phil Eriksen wrote:
> Whatever the merits or otherwise of DFM, nobody enjoys seeing a business
> they have spent time building being slagged off in a public forum. 

The problem is, what constitutes "slagging off". Mr. White might like
to go and read http://www.fool.com/ddow/2000/ddow000607.htm for instance,
which quite correctly says much the same as Chris did about the entire
financial advice industry (albeit for the U.S.).

And since Mr. White managed to come back with absolutely no substance
whatsoever (merely a typical marketing spiel) while making his threat
of legal action, a challenge: note that a strategy based around random
stock picking from an index, if weighted appropriately like an index,
will have an expected return asymptotically equivalent to that index.

If the readers of Sharechat would like to collectively posit a method
of managing a model portfolio (say, NZ$10,000) on the NZSE based on
no other information than sharebroker or analyst recommendation, then
we can backtest the broker/analyst's predictive powers. If one cannot
manage a statistically significant improvement over an NZSE40 index
strategy, then their advice is - practically speaking, and quite 
literally - no better than tossing a coin.

Since real managed funds in the U.S. are well-known to collectively
underperform the market, I'd be willing to bet real money against
_any_ firm offering financial advice.

> With free speech, however, comes responsibility.  It simply isn't good
> enough to think you can say whatever you like about a company under the
> umbrella of "free speech".  

Indeed. But then, companies will do *anything* to avoid avoiding having
negative information - even scrupulously researched and accurate -
published. There's a reason why many of Microsoft's products come with a
license which prohibits the user publishing the results of any
performance tests, which is so that Microsoft can control the release
of ALL information about them.

> [...] Why not turn this into a positive?  You talk about your
> investment professionals and all the work they do - why not give us
> more info about this work?

Indeed. Being able to to demonstrate a *consistent* ability to beat the
NZSE40 would be something to be rightly proud of. I wonder how many firms
would be brave enough to step up to the plate on that one?

> [...] Whether you like it or not, the internet makes you more
> visible and accountable -  the question is whether a company reacts (ie
> scaring people off) or is pro-active - allowing negative feedback,
> answering it publicly, and using it to strengthen your business.

Quite. 

- Nigel


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