Re: casino's, shares and more
 

> Ok, I will agree that odds do change in
> casino games. However, it still remains that
> overall the odds are against you, and things
> you can do to change this (using computers,
> card counting, etc) are banned in casinos.

Hi Thomas
Thanks for your response.
I don't want to be too pedantic here,
but just want to clarify that counting is not illegal. It happens in your head and is hard to prove.

Casino's can harrass you, raise the table minimum and vary the conditions of play if they suspect counting, eventually asking you not to play. But it is not a crime. You can be asked not to play using the Trespass Act.

But obviously, barring a player using skill is bad publicity, so it would be a last resort from the casino. (ie they are losing too much money)

Carrying hidden computers IS a crime, but determining a bias in a roulette wheel and playing that is legal.

> It is true that payout and odds are both
> important, and thus odds can be in your
> favour from time to time (like with slot
> payouts), but I think it's fair that over
> time people lose money at casinos.

I would say that MOST people lose, but that there ARE professional syndicates that do win consistantly at SOME games when they determine they have an edge.

Carrying this further, I think most people never achieve or acquire much in life anyway, and that walking the path of the average person is a sure path to mediocrity

> Yes, I'd say describing the market as
> semi-efficient (pricing in public
> information but not private) is fairly
> accurate. However I think it's a mistake to
> say that markets are *always* efficiently
> priced and more correct to say they are
> *mostly* efficiently priced, with occasional
> changes from the efficient price.

I agree with you.
I'm glad you posted this with your background as an analyst. I think what you say is the key--

>...we strive for an absolute return
> by focusing on the 10% or so of the market
> where valuations are out of line with
> reality, and thus don't have strong views or
> positions on the majority of the market.

This would fall in line with what you say about being "mostly" efficient, but not totally.

Thanks for your comments from the "Coal-Face".

Cheers,
Tom B.

academic resouce to check out
 

Hi
Thought some people might be interested in the vast amount of academic papers you can download to read about the latest studies in everything from semi-efficient markets, shares, blackjack, biased roulette wheels and more.

Much is technical, but there is a gold mine of info on the latest research and analysis of many subjects.

http://citeseer.nj.nec.com/cs

Hope you find it useful.

Tom B.

Re: casino's, shares and more
 

> Considering the fact that 80 percent of all
> mutual funds underperform the market
> averages in any given year, this is indeed
> an impressive track record.

Let me start by saying that when I say the odds are in your favour when you invest in the stock market, I am talking about the odds of producing a positive return over time. The odds of *beating* the index, or outperforming, is a different issue and these odds are significantly less. :)

80% of mutual funds underperform the market. While this is a startling figure, I think it is a figure that makes sense for a number of reasons.

Firstly, an index is basically a collection of stocks used to represent the market. The value of an index is calculated by adding up the price of each component of the index multiplied by its weighting in the index, and thus a return on an index over a given time period is just a change in prices of the underlying assets.

Which is all fine, as it gives you an indication of how the underlying assets have performed.

The problem with this is that indexes do not account for any of the transaction costs, whereas manager returns are typically after all fees and transaction costs, which includes things like brokerage which you really can't avoid.

So even if you were to personally go out there and buy all the stocks in an index, you'd skip the management fees associated with managed funds but you'd incur brokerage costs, and at the end of the day your performance would underperform the index.

- Thomas.

Re: Odds Not Fixed Make Things Worse.
 

A very good question, Simon.

One I had myself for a while. Then a while back I read “Trading in the Zone” by Mark Douglas. He compared trading to a casino. Odds to odds. Chances to chances. And said overall, this is why you lose at gambling.

But then… ah, the card counter. Takes him a while to figure it out, but once he has a system he can follow with discipline (the hard part), he can get the odds slightly in HIS favor over a number of trades. And not just because the market tends to go up over time. I’m talking about averaging over a number of 20/30/50 trades in a month.

“But the card counter gets thrown out once the casino discovers him.”

Yes, but there’s no security to throw out the slightly more experienced, disciplined player in the market. Douglas eventually moves past the card counter example and says the way to think about it is you want to BE the casino. Inevitable small losses and a few big ones, but with enough of an advantage to come out ahead over a period of time.

Thanks for starting this interesting thread, Robert.

Success,

Erik Lukas

P.S. Douglas’s first book, The Disciplined Trader, should also be required stock market reading.

P.P.S. I would also say that most people who try to play their hand at swings and scalps will lose. But there are a few who don't.

Thanks, great resource!
 

Hi Tom,

That's a great resource I didn't know about - thanks for sharing it!

By the way, a few years ago now I wrote a post about gambling and billionaires.... I figured you might be interested. :) You can read it here....

http://www.sowpub.com/cgi-bin/forum/webbbs_config.pl?read=1380

- Dien

> http://citeseer.nj.nec.com/cs