Congrats to DWOT
October 28, 2008
– Comments (7)
If you look at her score.....she has destroyed the market because she is net short. In order for her to beat the market she must not only be right on the direction...but she must outrun a falling knife. In an environment where the market has crashed over 40%....that is quite an accomplishment indeed.
A real life short that would provide a 50% return only shows beating the market by 10% in CAPs. If DWOT made that bet actuality...her personal returns would be much better than her CAPs score would represent. Conversely, if she green thumbed a stock that only went down 20% versus the markets 40%, she would lose 20% in real life but CAPs would show a 20 positive points.
This is not a knock on CAPs....it is the way the game is played and more reflective of how institutional portfolios are managed.....I don't get it but that is life. Many institional managers think it is less risky lose money by beating the market's losses than making money going all cash by and not participating the market.
Remember, in the last century, if you participated from the beginniung to the first half (1950)....your returns would have been practically nothing. I am working on a theory that we might even have a worse this first half century this go around....but the second half is going to provide fantastic returns. The only problem is figure out what we are going to do for the next 48 years.
In real life, DWOTs returns have been far higher than her points reflect.....my guess is that she is that way in her personal life as well based on the quality of her posts and ability to sift wheat from stalks. Don't whine about how CAPs scores, understand the rules and use it to your advantage.
Hint: when a quality company has been really hit hard...that is a good time to green thumb at least for the short term because it is likely to out perform the market.
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