# Flipping coins and the share market



## skc (6 December 2009)

A little lighthearted piece from a always colourful Marcus Padley

http://www.smh.com.au/business/achieve-a-flipping-headsup-20091204-kaz4.html



> Achieve a flipping heads-up
> MARCUS PADLEY
> December 5, 2009
> 
> ...


----------



## bellenuit (6 December 2009)

*Re: Flipping coins and share market*



skc said:


> Imagine, if you will, a daily coin flipping contest conducted across the whole of the Australian nation. Everyone's in. On the first day 21 million Australians flip a $1 coin. The rules are that if you flip heads you stay in, if you flip tails you give your dollar to the ones who flipped heads.




I think he needs to revise the rules. I'm sure he means to say "if you flip tails you give your dollar AND THE DOLLARS YOU HAVE WON SO FAR to the ones who flipped heads". Otherwise, each winner only wins an amount equal to the number of flips he has made.

Nevertheless, the article does make a lot of sense.


----------



## ROE (6 December 2009)

*Re: Flipping coins and share market*

But he miss the main message of Warren, if out of those 20 flip winners
10 comes from a certain background with the same teacher and practice the same principles, wouldn't you want to know what these guys doing differently?

Most investors Warren mentioned dont pick the same stocks but they have similar return and beat the market every time now would you be interested in the core principles of them picking those stocks


----------



## Wysiwyg (6 December 2009)

*Re: Flipping coins and share market*



ROE said:


> Most investors Warren mentioned dont pick the same stocks but they have similar return and beat the market every time now *would you be interested in **the core principles* of them picking those stocks



Yes I am interested in the core principals. What are they please or is that line a bit of a tease?


----------



## Garpal Gumnut (6 December 2009)

*Re: Flipping coins and share market*

Its as good a way as any of picking stocks.

However to profit you need money management, an exit strategy and particularly stop losses.

gg


----------



## ROE (6 December 2009)

*Re: Flipping coins and share market*



Wysiwyg said:


> Yes I am interested in the core principals. What are they please or is that line a bit of a tease?




Core principles is easy but hard in practice each people do a little differently, this is where you need your own brain..unless your are independent you wont have the guts to go against the herd

* Margin of Safety ....a 30 Tons bridge you want to drive a 15 ton truck across.

* Buy stuff below its intrinsic value, I'm not talking about next year
   it's 5 to 10 years from now but most good company deliver well before that  but prepare to wait for 5-10 years...

* Know what you get yourself into else don't get involve and if you don't prepare to hold for 5 - 10 years don't hold it for even 10 minutes.

* Hold no more than a dozen or so stocks but that dozen you know it inside out and you pound on it when people bail out.
and get out when it's sell way above its intrinsic value..

* Have the courage to admit when you make a wrong move and put steps in place so that you don't repeat the same mistakes.

Read Intelligent Investor by Ben Graham and Common Stock and Uncommon profit and Phil Fisher that lay the foundation for the core principles and don't just read it practice it..

if you are true to those principles, decent return isn't rocket science
it required patient and consistency and stick to your conviction.
and by conviction if some ten stock analyst slap a sell stickers on a stock
and you know better than those suckers you go and load up   and you ignore them...they provide good indicators of when you buy cheap stocks
and when to sell over price stocks 

I give you examples going back a few years you wont see many analyst put a buy sticker on 
DMP or SUL or NVT yet these stock not only prosper in the worse of financial crisis but kick some serious ass and dividend return keep rising .....they all slap on the buy stickers now when it share rally like crazy


----------



## Wysiwyg (6 December 2009)

*Re: Flipping coins and share market*



ROE said:


> Core principles is easy but hard in practice each people do a little differently, this is where you need your own brain..unless your are independent you wont have the guts to go against the herd



Thanks for the explanation ROE.


----------



## ROE (6 December 2009)

*Re: Flipping coins and share market*



Wysiwyg said:


> Thanks for the explanation ROE.




Here is some tips you can learn from Uncle Walter Schloss

http://www.gurufocus.com/news.php?id=72536#72675

He use Assets I use earning and I have my wrapper around the earnings to cover for my error in predicting earning  

He's the old school of Ben Graham who love asset, I'm the school of Phil Fisher and Warren where Earning and Brands is the keys..


----------



## Wysiwyg (6 December 2009)

*Re: Flipping coins and share market*

Here is part of the original transcript if anyone is interested.

http://www.gurufocus.com/forum/read.php?1,71264,71264#msg-71264


----------



## Wysiwyg (6 December 2009)

*Re: Flipping coins and share market*



ROE said:


> Here is some tips you can learn from Uncle Walter Schloss
> 
> He use Assets I use earning and I have my wrapper around the earnings to cover for my error in predicting earning
> 
> He's the old school of Ben Graham who love asset, I'm the school of Phil Fisher and Warren where Earning and Brands is the keys..



Checked Walter Schloss and from what I have read he started out with 100k of "other people's money" and invested it in stocks. Now 100k in 1956 would have been a small fortune and no doubt would have moved stock prices. Then there is the self fulfilling prophecy where the crowd follows the big money or the name (Ben Graham connection etc.).

Not all obvious on the surface but with financial weight and "connections", people do make things happen in their favour.


----------



## skc (7 December 2009)

ROE said:


> But he miss the main message of Warren, if out of those 20 flip winners
> 10 comes from a certain background with the same teacher and practice the same principles, wouldn't you want to know what these guys doing differently?
> 
> Most investors Warren mentioned dont pick the same stocks but they have similar return and beat the market every time now would you be interested in the core principles of them picking those stocks




Completely agree with you there. Having a go at Warren was probably not warranted. But the survivorship bias does apply to a great majority of gurus who can't stand the test of time.



bellenuit said:


> I think he needs to revise the rules. I'm sure he means to say "if you flip tails you give your dollar AND THE DOLLARS YOU HAVE WON SO FAR to the ones who flipped heads". Otherwise, each winner only wins an amount equal to the number of flips he has made.
> 
> Nevertheless, the article does make a lot of sense.




That was an omission but implied... trust the poster who likes to post logic/iq/probability questions to point that out


----------



## brty (7 December 2009)

Considering that flipping coins is as equally non random as the share market, then what is the point of this article and thread??

brty


----------



## schnootle (9 December 2009)

brty said:


> Considering that flipping coins is as equally non random as the share market, then what is the point of this article and thread??
> 
> brty




Your good fun brty 

Of course, according to classical mechanics the outcome of coin is purely deterministic based on a very large number of factors. The number of factors are so large however that in an uncontrolled environment, flipped by a human it is incredibly random. Then there is Quantum effects, but we have been there before 

If your game, i take coin flipping bets at 1.99:1 heads and 1.99 tails.


----------

