Top stockpics by author's forecasting accuracy

Top stockpics by author's forecasting accuracy
arbitragedude.com

Here's why: http://arachnoid.com/equities_myths

And remember -- people who actually have money, and who are seasoned investors, aren't misled by sites like yours.

> If the poster outperforms, his accuracy goes up.

No, it's not about accuracy, it's about chance. His position on a normal distribution changes, but the mean of the distribution is equal to the market long-term growth pattern, not any exploitable "secrets of the winners" advantage. The WSJ dartboard contest proved this once and for all -- professional stock pickers can't pick stocks, but they can charge brokerage fees.

Anyone can throw eight sequential heads with a fair coin, but only a fool thinks this makes him psychic. (If you throw a fair coin 256 times, according to the Binomial Theorem the probability is 63% that, somewhere in the series, eight sequential heads will appear.)

I can mail my customers six months of reliable, accurate and exploitable market forecasts and then try to get them to sign their portfolios over to me, but I don't actually have to know anything to do this, or have an inside track on the workings of the market. Do you doubt this? Here's how it's done:

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

The bottom line is that there are no secrets of the winners, and the only people who actually beat the market (in a reliable statistical sense) are those willing to deal in illegal insider information.

Guess what Warren Buffet chose as the financial instrument for his relatives, during his estate planning? Index funds. Buffet knows better than to trust market forecasters.

EDIT: In a long and reliable tradition, the above perfectly accurate post, replete with technical detail and references, is downvoted for the simple and sole reason that it's right. The downvoting is performed by people who can't articulate their grievances, but who can click a mouse.

This is common sense -- if the operator of the site actually had an inside track on the market's workings, what possible reason would he have for revealing his findings to the public, instead of privately investing his funds based on his genius insight?

One answer is that the site's operator might have a position in the listed stocks and hopes to trick people into investing in them, thus enriching himself at the public's expense -- the so-called "penny stock" scam.

All speculation, of course. But for those unversed in equities trading, sites like that linked here are utterly without value, a fact demonstrated by the now-famous WSJ dartboard Contest:

http://online.wsj.com/news/articles/SB1000142412788732450470...

Further reading: http://arachnoid.com/equities_myths

Yes! Absolutely! Half of them are more successful than chance and half less! In the same way, if I flip a fair coin, roughly half the flips will confirm my prediction that I am a genius -- or that I don't know anything about probability.

This requires a bit of science:

1. There are "successful" investment houses and individuals.

2. What's the reason? Is it stock picking genius? Or is it the blind workings of probability?

3. Easily answered -- if an investment house publishes its predictions, and if the predictions consistently beat the market, then the SEC will step in and arrest those responsible for insider trading.

4. Guess how the SEC detects insider trading. Yep, you guessed it -- they do better than market averages.

> ... so you can see for yourself if Jim Cramer's recommendations are worth listening to.

But I can tell you in advance that they aren't. When they succeed (beyond a chance expectation of 50%), it will be because of the announcement effect:

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

A given viewer is well advised to ignore Cramer's advice for what should be perfectly obvious reasons, if people were only educated in skepticism and common sense.

> I agree 90% can't beat the market but I am trying to find the 10% that do beat the market consistently through ArbitrageDude.

I was right. You really don't understand probability. If you succeeded in finding the magic 10%, you would only have isolated a temporary probabilistic anomaly, a "black swan".

Remember that, in science, an untested claim is assumed to be false until incontrovertible evidence proves otherwise (the "null hypothesis"). Your clearly stated position is that an idea is true until proven false -- the opposite of the scientific outlook.

> FT, WSJ, barrons, none of these tabloids provide any accountiblity record of their recommendations.

Yes, and seasoned investors don't care, because they know these recommendations are worthless.

> Please read Robert Shiller's (Nobel Prize) winner's response to efficient markets.

Your frequent allusion to authority (yours and that of others) tells me that you don't understand science, which rejects all authority, relying instead on direct evidence.