NEWS FLASH! Hocomania stalking new prey!

[Yipee-Ki-O]

Hocus has found a new outlet to troll: Financial Webring Forum. As is his custom, he exercises some restraint in his first post. But we all know that full-blown hocomania is sure to follow! Self-control is not the hocotroll's strong suite...stay tuned!

[nfs]

Don't let it worry you, YKO.  That Schlenker fellow has a lot of juice at FWF.

[hocus]

That Schlenker fellow has a lot of juice at FWF.

Oh, Great.

Why can't The Juice ever be on the side of the good guys?

Rob

[hocus]

Of Bennett's last 21 posts, only one person has replied. ?

No one can say that they didn't get their questions answered.

That's the job.

I've read it all the way though three times. It's a very good thread.

Rob

[Schroeder]

I like this response . . .

**LINK**

hocus wrote:
I do not see it as possible for the market to be a random walk and an efficient market at the same time. I see these two terms as antonyms, not synonyms. Something that is "randon" is not "efficient" and something that is "efficient" is not "random." ?

martingale wrote:
Well, then that is simply a limit on your understanding, I'm afraid. If a market is efficient then by definition any new information is completely unexpected and therefore pseudo-random.

;D

[Schroeder]

Martingale offers this interesting comment . . .

**LINK**

If VII is really just the value effect and/or the momentum effect, that's a fairly serious criticism of it, as it could be cheaper in that case simply to follow one of those strategies instead (eg: buy and hold value stocks). It would also imply that you are not getting any free lunch if, as many have argued, there are rational reasons why value and momentum investing have higher returns than the market average. To wit, they are perhaps riskier.

I think Martingale is on to something. His rationale makes sense with respect to the value effect (though I'm not fully understanding how the momentum effect applies).

P/E10 acts like a value-based screen by raising the VII investor's stock allocation when value stocks dominate the S&P 500 (as evidence by lower P/E10 levels ). And conversely, lowers the VII investor's stock allocation when growth stocks dominate the S&P 500 (as evidence by higher P/E10 levels ).

I find this a logical explanation why VII may tend to outperform B&H, as value stocks tend to outperform growth stocks over long periods.

Now the question becomes is whether VII is still an effective value screen as it was in the past. And my answer is, probably not. And the reason is because many companies, including value stocks, have shifted their payout policy away from cash dividends and toward share buybacks. Share buybacks will have the effect of boosting prices more so than when cash dividends were the dominant payout policy.

Schroeder

[nfs]

A moderator moved the thread into a members-only area that FWF uses for non-financial topics like politics and religion after hocus posted ...

I would think that you need to spend some time establishing that it's NOT just one of those other effects, fleshing out the fundamental reasons for it, and not simply resorting to "I believe".

I have an article at my site entitled "What's Faith Got to Do, Got to Do With It?" This really does come down to "I believe" in the end. I think that's so on both sides.

I have mounds and mounds and mounds of evidence. Advocates of EMT have mounds and mounds and mounds of evidence too. The differences are differences in how we interpret the evidence.

If you talk to people who believe in God, they see evidence that God exists in everything they look at. If you talk to people who do not believe in God, they see evidence that God does not exist in everything they look at.

The starting-point premise is critical. If you believe that the market is efficient, you can see evidence of that in the data. If you believe that valuations matter, you can see evidence of that in the data.

People have been discussing this basic issue since the first market opened for business. Things swing in one direction or the other from time to time. I don't believe that the question will ever be entirely resolved one way or the other until the end of time.

Rob

The moderator's explanation for the move was ...

Since this thread is now moving into the area of investing as a faith based exercise, it has been moved to Soapbox.

Carry on.

The thread is still open and hocus posted six times in quick succession this morning.

An aside to any conspiracy theorist:  Although that Schlenker fellow has juice at FWF, he had nothing to do with that moderator's decision.  The moderator doesn't even know who hocus is (but has a sensitive nose for trouble, which is why FWF administration appointed the person).

[hocus]

A moderator moved the thread into a members-only area that FWF uses for non-financial topics like politics and religion

I have an article at my site entitled "Honest Posting on Valuations Banned at Investing Discussion Boards!" There are several comments among those noted there in which community members noted that "defenses" of the Efficient Market Theory have much in common with the arguments used by those "defending" the most intensely dogmatic of religious viewpoints.

It pretends to be science. It is not science. If it were science, there would be a way to defend it that would not be so emotional.

Was the thread "trouble"? It was a fine thread. It was indeed "trouble" for those who cannot bear to questiion whether they were wrong in their decision to buy into the Efficient Market Theory or Passive Investing (a strategy rooted in a belief in this theory).

I don't say that my writings do not shake up people who believe in the EMT. That is the intent.

What I say is that I have never once engaged in any posting tactic that in any way, shape or form could be described as abusive. If the EMT were science, it would not be viewed as "trouble" to point out its weaknesses.

A "theory" that cannot stand up to scrutiny in a discussion held on an internet discussion board cannot work in the real world either. EMT will go down in the first secular bear market to come along since it became widely popular (we are now in Year Eight).

Rob

[hocus]

Although that Schlenker fellow has juice at FWF, he had nothing to do with that moderator's decision.

By definition, the majority of investors are investing irrationallly when the P/E10 value is 24.

The defense we are hearing, reduced to its essence is: "Most of us agree that overvaluation is not possible, so stocks are not overvalued."

It doesn't work that way.

It is when most agree that overvaluation is not possible that the risk of stocks being wildly overvalued is greatest.

I have certainly ?never said that my investing views are the investing views of the majority. I have said that the majority would like to see these questions explored in reasonable and civil discussions. That reality is reflected in the published site rules of all the sites at which the issues have been discussed for a time. All site moderators have a responsibility to the community to become familiar with the published site rules, in my view.

Rob

[hocus]

Since this thread is now moving into the area of investing as a faith based exercise,

Stock investing became a faith-based exercise when the Efficient Market Theory became the dominant model for understanding how stock investing works.

It will become a more rational enterprise again only when most investors understand that denying one's emotions does not make them go away.

Denial does not solve the problem of negative emotions influencing investing decisions. It makes it 20 times worse.

Rob

[Schroeder]

EMT will go down in the first secular bear market to come along since it became widely popular (we are now in Year Eight).

I've already demonstrated this is a false claim. The Dow reached all-time highs last year.

Schroeder

[hocus]

The Dow reached all-time highs last year.

What a relief!

Rob

[hocus]

He seems to have had no problem distinguishing who is being rational and scientific and academic versus who is being emotional and religious.

If he possessed confidence in EMT, he would have no concern with the idea of people seeing it questioned. If the idea could withstand questioning, questioning of it would increase people's confidence.

The only reason for putting a stop to questioning is a concern that the idea cannot stand up to questioning.

If he knows with absolute certainty that the idea is so well "proven" that it is beyond questioning, he should not be participating on a discussion board. Discussions involve questioning.

Rob

[hocus]

The member is apparently a doctor, i.e. someone who works in a field that faces uncertainty and noisy data every day and has been trained to employ as best as possible the scientific method to solve the problems he encounters.

Doctors have made mistakes, NFS. There are many cases of this happening.

I have never questioned that there are many "smart" people who believe in the EMT. This is a reality.

Different people have different sorts of "smarts." There are a number of Big Shots in the investing field that have personality types that are extremely averse to the idea of admitting getting something wrong. This is a big problem.

Being able to admit a mistake is itself a type of "smarts," in my view.

[hocus]

A person with a lower I.Q. who can admit a mistake will often learn things that a person with a higher I.Q. who cannot admit mistakes will not. Seeing a mistake is often the first step to attaining a majot breakthrough.

The ability to admit mistakes is a critical skill that is very sorely lacking in the investing field, in my assessment.

Yucko!

Rob