Forum Archive Index - February 2004

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Cristine,
 
I appreciate the initiative you have brought to sharechat.   Having 
people go out there do their homework and tell us what they think is 
what this forum is all about.    I am not saying that I agree with 
everything you write, but then this forum would be a dull place all the 
time if we all agreed with each other over everything, wouldn't it?

I notice that, characteristically, you have put significant time into 
working out initial boundaries for a T/A vs F/A competition.   However, I 
question the need for such an approach as the two techniques are not 
necessarily mutually exclusive.    

In simple english, if you start assuming that either F/A or T/A is 'better' 
and draw up a test to 'prove it' one way or the other, the results will be 
meaningless if the proposition you start with is flawed.

Furthermore, particularly my style of F/A is not amenable to such a 
test.    Why not?    Because I make no predictions at all on timing, or 
how long I will have to hold an investment before it comes right.   My 
sole aim is to recognise undervalued situations.     I have no control 
over when Mr Market wakes up and recognises the same 
undervaluations that I do.

> 
>If you proceed ...
> 
>1) Suggested Time Frame, eg; 1.3.04 - 31.8.04? (All picks to be 
posted
>by 1.3.04)
> 

My minimum investment time frame is three years.    So tests on such 
a ridiculously short timeframe of a few months are really of no interest 
to me.    To any contemplating investing in the sharemarket when they 
know they will need that money just a few months later, my advice is -
don't!    

>
>2) Industry - all industries or specific?
>

I can't see any merit in restricting the universe of industry in which you 
can invest.

> 
>3) Blue Chip only or open field?
>

I think the key point here is that for a competition you need liquidity in 
the shares that you trade in.  I would suggest that unless your share 
trades every day, in reasonable volume on every day in which the 
market is open, it is not a suitable candidate to be in any competition.


> 
>4) Number of picks - 2 x ASX, 2 x NZX (each for FA & TA)?
>

Far too few shares I think.  I would say five is a minimum.   Anything 
less and you are just running a random lottery.  In fact I would suggest 
that running a share competition over a time frame of weeks , not 
matter how many shares are selected, is akin to a random lottery 
anyway.

> 
>5) Valued on share price as at 1.3.04 and 31.8.04, or should value
>include total value, eg; dividends, etc?
>

Of course any competition could not proceed without including 
dividends.   They are part of the investment returns so how could you 
ever even contemplate excluding them?

> 
> 6) Impartial Judge, or group consensus and if so what minimum or
> maximum number will represent consensus?
>

I think any result should be able to be measured.    No judge or 
consensus should be necessary.

> 
> 7) Number of entrants - limited or open field?
>

I guess you would want equal representation from each discipline.

> 
>8) Extenuating circumstances: Will consideration be given when
>unforseen world or local events have a dramatic negative influence 
and
>if so, will competition then focus on the best 1 out of the 2 to
> determine the victor? (Hence possible need for impartial judge.)
>

No exception for any extenuating circumstance.  It is the same for 
every entrant.   There are many traders who do not understand the 
concept of 'risk of ruin'.  That relates precisely to extenuating events 
and this is what finishes most of them off financially in the end.

> 
> 9) Volunteer to chart progress - weekly or monthly?
>

In any competition like this the only result that counts is the final one.

Oh, and one more thing on the Telstra T/A vs F/A exchanges on 
Telstra in this forum recently.     Phaedrus claims that trading Telstra 
would have been a far better proposition than buying and holding 
Telstra, specifically over the last three years.  But the only information 
he has given us is that he bought TLS around May 2003 and sold 
around November 2003.     That is a mere six months.     Phaedrus 
gave us no information on what he did with those Telstra funds in over 
two years of unaccounted time.     I'm not saying that Phaedrus didn't 
do better than I did over that period.    I am saying that he didn't give 
us the information to allow us to make an effective comparison.

I guess the implicit implication of saying nothing is that you could have 
your money sitting in the bank just waiting for the opportunity to land 
that trade.    But one thing I would guess is that Phaedrus certainly 
didn't do that.   

Perhaps Phaedrus was off using the money to make other positive 
trades, in which case good on him.   Perhaps he had a few net losing 
trades.    Even if he did the latter, there is a possibility he still came out 
ahead of me, or maybe I am ahead of him.    But declaring that he 
made a 10-15% profit on Telstra shares over a six month period 
neither proves nor disproves that he outperformed my buy and hold 
strategy with TLS over the most recent three years.  

SNOOPY




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