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ETFTimer (< 20)

60% of CAPS players losing to S&P 500

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January 27, 2009 – Comments (13) | RELATED TICKERS: AGG , TIP , SHY

Looking at samples of CAPS players with various ratings, it's clear that the majority of players are losing to the S&P 500 right now - which is not good considering that the S&P has lost 47% since October 2007.

A typical player with a rating of 50 (middle of the pack) might have a score of -50 with a 50% accuracy, or a score of zero but with 40% accuracy.

The break-even point of zero score and 50% accuracy (mirroring the S&P 500 on average) gives one a player rating of around 60.  So just keeping up with the market is an accomplishment!

All-star status (rating 80) can be achieved with a score of 100 and 50% accuracy, or a score of 30 with 70% accuracy.

13 Comments – Post Your Own

#1) On January 27, 2009 at 9:12 AM, djemonk (< 20) wrote:

There's a big difference between losing to the S&P 500 in real life and losing to the S&P 500 in CAPS.  For me, CAPS is more of a tracker and a watch list along with a basic idea of which picks I've made and why.  I'm willing to pick something based on pure speculation in CAPS.  Those picks tend to not work out so well.

My real portfolio is much more focused than my CAPS portfolio and every pick except GE is beating the S&P 500.  However, having a small CAPS portfolio dooms you to having a low score since there's no magnitude for each pick.

Having a high CAPS score doesn't always mean more than "this person has figured out and maximized the rules of CAPS."  

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#2) On January 27, 2009 at 9:17 AM, dwelllewd (28.43) wrote:

There are some jumps in logic here that are not explained in your post.  I don't doubt that your conclusion could be valid, but the inferences are either incompletely explained, or possibly mistakes.

Perhaps you can elaborate to clarify how you deduced 60% of CAPs members are losing to the market.

Accuracy is 1/3 of a players rating.  Your post suggests that accuracy is as important in beating the market as it is in CAPS.

There are many trading strategies that can lead to market beating performance with accuracy far below 50%. 

Since player rating includes accuracy as variable with large influence,  the average player score and the median player score cannot be calculated without additional information.

Note:

There are many players with ratings above 70 with negative scores, so losing to the market. 

There are also players with low ratings (down to 40.5) that are beating the market with positive scores.

 

Perhaps you are privey to some information I don't have or have overlooked, or perhaps my morning coffee has not kicked in, but from my vantage, the path you have suggested does not lead to the place you describe. 

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#3) On January 27, 2009 at 9:25 AM, ETFTimer (< 20) wrote:

That's fine, djemonk. However, the supposed purpose of CAPS is to identify superior stocks, and that mission is compromised if the average player doesn't put his best foot forward. If a large fraction of CAPS portfolios are experimental as your is, then it means there's a good deal of noise interfering with the ratings.

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#4) On January 27, 2009 at 9:36 AM, kdakota630 (99.96) wrote:

ETFTimer, you make a good point.  I maintain two profiles on here and I do try to do my best with them, but with different strategies.  This one is working (using a lot of shorts) and KDakotaFund currently isn't (all longs, long-term).

I did have KDakotaFund ranked at 99.62 at one point though.  The only real mistake that I made with it was starting it so soon after I started this profile and while still very green (hell, I still consider myself pretty green) made a lot of picks I otherwise wouldn't have.  I'm still working with it though with the original strategy fixing it as I can like I would in the real world.

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#5) On January 27, 2009 at 9:38 AM, ETFTimer (< 20) wrote:

dwelllewd,

I'm just using the data we all have access to.  Find any list of players, (a top-ten list works well) sort them by rating, and then go forward many pages to find lower ratings, and you will see the numbers I'm talking about.  If you find a group of players with ratings near 50, you'll see that they nearly all have negative scores.  If you find a group of players with ratings near 60, you'll notice an equal number of positive and negative scores, and accuracies scattered around 50%.

This is a perfectly logical outcome IF the majority of CAPS portfolios are inferior to a random selection of S&P 500 stocks.

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#6) On January 27, 2009 at 9:51 AM, TDRH (99.98) wrote:

Wonder how many of them are active, or actively not trading?

In my real life portfolio I find it better not to go into my account very often or I cannot sleep!   Maybe some are that way with CAPS, or have lost interest altogether.

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#7) On January 27, 2009 at 11:01 AM, isusan (< 20) wrote:

ETFTimer

I'm using CAPS in the same manner that djemonk is.  My primary focus here is to learn from the group.  I haven't participated in the game and I use the watchlist for stocks and sectors that I am interested in or would like to learn more about.  How can I prevent my score from impacting the group's rating?  I hadn't considered the possibility that it might be having a negative impact on other players.

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#8) On January 27, 2009 at 11:28 AM, ETFTimer (< 20) wrote:

kdakota: As long as you're trying to optimise each strategy, I'd say you're helping the system.

TDRH: You may have nailed it. There are more than 50,000 players who haven't made a pick in 90 days.  Certainly many are still alive and simply thinking long-term, but there have to be some abandoned players in that group.

isusan: Good point. If you don't want your picks to affect stock ratings, there is a "watch list" tab you can use - when you put stocks there it doesn't affect your score.

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#9) On January 27, 2009 at 11:36 AM, kdakota630 (99.96) wrote:

Not making a pick in 90 days I don't think is a big deal, but anyone who hasn't even bothered to log in over a long period of time (like a year) should probably be automatically deleted by the system.

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#10) On January 27, 2009 at 2:38 PM, edwjm (99.46) wrote:

I think anyone that has not made a pick in 60 days should be sent an email asking if they still want to be considered active players.  If no response received within 15 additional days their account should be deleted.  If a response is received to indicate that the player wants to stay with his present picks, that should be the start of another 60 day period.

 I also am concerned about how much "dead wood" is contained int the CAPS system.  It is a problem that should be addressed. 

I personally know a player that abandoned his list in late 2007 that is still ranked (less than 20, of course) thus providing data that is not helpful to the system.

How can we bring the attention of the powers that be to this problem?

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#11) On January 27, 2009 at 3:25 PM, ETFTimer (< 20) wrote:

That's not a bad idea.  I'd probably give players longer than 60 days though - even a 1-year threshold would probably take care of many abandoned players, but that's just in the details.  The blue "contact us" tab is a good way to talk to the chiefs - I use it all the time to notify the guys in charge of new ticker symbols, and I always get a courteous response in less than one trading day.

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#12) On January 27, 2009 at 3:41 PM, GirlScoutDad (98.80) wrote:

Well, I'm pretty new to CAPS but I checked the picks of some of the higher-ranked players, and they seemed to have an inordinate number of low-priced stocks, many issues of less than one dollar per share, and many more of less than five dollars per share. 

That's a turn-off for me because, like most self-directed investors, I am interested generally only in legitimate companies listed on one of the major exchanges.  Maybe you get to maximize your score by picking a whole lot of penny stocks?

It does seem to me that a CAPS player is penalized, in terms of ranking, by using a buy=and=hold strategy, with a fairly focused portfolio (i.e., fewer stocks), and rewarded by selecting an unrealistically high number of stocks, many of which are ridiculously low-priced, maximizing their CAPS scores by capitalizing on the volatility of such cheap issues.

 

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#13) On January 27, 2009 at 4:51 PM, ETFTimer (< 20) wrote:

Yes, the goal of CAPS is to rank stocks, moreso than players, so they reward people for picking more stocks. Someone who picks only one stock that rises 500% may be a great investor (or may be lucky), but they won't get a very high CAPS ranking.  On the other hand, someone who picks 200 stocks and beats the S&P by an average of 10% will become a top-ranked player, and will also have a larger influence on the 1-star-to-5-star rankings of the stocks he picks.

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