Present Value of Future Cash Flows
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Couldn't you just pick one of E and 4 (proving or disproving the latter rule) and then one of K and 7 (proving the former rule)? I feel like I am missing the point horribly, I need some sleep. I will be back tomorrow.
The answer is the E and the 7.
Apparently the most common answer is E and 4. But E and 7 are the only cards that can confirm if I’m lying. The E card is obvious, Turning the 4 over tells you nothing but most people choose it because of a bias to look for confirming information, rather than information that will show us to be wrong, which the 7 would do if there’s an E on the back.
Not sure how many people come up with K or why
Ok, you're right. I was conflating the E and the 4 cards as the same thing in my response above. (ie. confirmation bias).The answer is the E and the 7.
Apparently the most common answer is E and 4. But E and 7 are the only cards that can confirm if I’m lying. The E card is obvious, Turning the 4 over tells you nothing but most people choose it because of a bias to look for confirming information, rather than information that will show us to be wrong, which the 7 would do if there’s an E on the back.
Not sure how many people come up with K or why
Cheers. Have a good one.
skc
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The question doesn't make sense to me... can I paraphrase?
So there are 4 cards.
Each card has a letter on one side and a number on the other.
The letters can only be E or K... so there may be 0, 1, 2, 3 or 4 cards with E's on it.
The numbers can only be 4 or 7. Again, there may be 0, 1, 2, 3 or 4 cards with 4's on it.
If you tell me an E card has a 4 on the other side, I assume that doesn't exclude another E card having a 7 on the other side.
So to verify that you are telling the truth, I would first have to turn over all cards with E's and then all cards with 4's.
I am failing to see how this connect to the thread (or may be it doesn't?).
P.S. Please ignore all the above... read your question again and got what you are asking. It must be getting late.
Yep, missed
Problem with going from memory. (EDIT, didn't miss it after all.) .
Nothing really to do with the thread except I recall my gut reaction when I first saw this problem was to go E and 4. Confirmation bias, actually bias of all types and we all have them is a problem when analysing businesses. I think I learnt the concept of inverting from reading something by Charlie Munger – It’s a good way to work around mental biases.
This is a nice clear description of the problem space. But I think the other thing that needs elucidation is:
"out of the universe of cards described, four are provided. The visible sides of the four cards are revealed to be E, K, 4 & 7"
To verify the posited rule that "E's always have 4 on the other side", you obviously need to turn the "E" to check it has a "4" on the other side.
There's no need to turn the "K", since it isn't implicated in the rule, and no need to turn the "4", since the rule doesn't state that "*only* E's will have 4 on the other side". Eg, that card might be K/4 and that wouldn't disprove the rule.
If the other card, the "7" holds an "E" on the other side, then that would disprove that "E's always have 4 on the other side".
It's subtle and needs careful wording of the question. The crux of it is to avoid the assumption that since E correlates with 4, then 4 must correlate with E.
Remembered the name for the experiment below. Here’s something a little more precise then what I asked.
Doing the experiment won’t have the same effect now you know the answer, but go through and see the results in further analysis.
Confirmation bias is the norm.
http://www.philosophyexperiments.com/wason/Default.aspx
Doing the experiment won’t have the same effect now you know the answer, but go through and see the results in further analysis.
Confirmation bias is the norm.
http://www.philosophyexperiments.com/wason/Default.aspx
Craft - any idea which book / essay / article you may have read about this in?
Hi V
Sorry missed this post.
I’m not sure where I have seen the invert line, probably on some video or another.
seems to have become his motto for summing up the psychological issues. Here is well known speach he gave on psychology of human misjudgment.
http://www.rbcpa.com/Mungerspeech_june_95.pdf
I’ve done a little more thinking on this rebalancing issue. Please critique, because I am not sure I have got it right and its hard to see the trees for the forest inside my own thoughts.
The decision (or lack of decision) to date has been to let the profits run. I have now decided to limit the mark to market exposure to 25% of an account. If it goes above I will trim it back to just under.
MTU was one of the companies that had climbed in % and it has had a fair impact on my final decision. One morning I looked at the screen and seen a little icon in the announcement field. A little icon that meant MTU wanted me to invest a big chuck of money at short notice at a price over 4 times my average cost – It was renounceable and the price held up early allowing options but it gave me a jolt as to the difficulties around this weighting issue.
MTU was trimmed during the rights period and got another haircut yesterday as did MMS. The gut still doesn’t quit feel right selling for weighting issues rather than business performance reasons. Still not a totally settled issue for me – more a work in progress probably awaiting some lessons to be learnt the hard way.
Cheers. I remember reading a few weeks back when I made the post that he took the maxim from a famous German mathematician. It's a good maxim to follow; in all endeavour of life. Now to make it a habit.
Craft, I know you use your dividend cash flow to support your family. How do the numbers compare if you look at those holdings in terms of portfolio income? What is the impact of the worst case scenario? I guess what I am trying to get at is that it would be more useful to look upon what effect that it would have on your lifestyle, rather than portfolio value. After all, that is why you invest (and for enjoyment, I assume) not because you hoard wealth. You could always set a trailing stop loss for the proportion that you want to have "at price risk" (rather than business risk) if the over-balancing concerns you. Besides what would you do with the sale proceeds? Are there better, lower risk assets out there?
I have this book, it's massive, it heavy and it best lay on a coffee table and browse through
it will you sit there enjoy a nice cuppa of tea/coffee
some very good advices
http://www.amazon.com/Poor-Charlies-Almanack-Charles-Expanded/dp/1578645018/ref=cm_lmf_tit_1
At the end of this month, if the XAO and 10yr bond yield both stay where they are we will have the highest Equity Risk Premium (based on trend earnings) priced into the overall market since 1974. Nice
View attachment 47158
I have updated my numbers for month end and get an Equity risk premium of 6.74%
Last time we were in this range was July 1974 (6.55%) by Sept 1974 it was 11.23% by Jan 1975 it was back down to 6.15% a figure not beaten until now.
Price instability from inflation fears was the culprit in 1974 to cause the spike.
Are we about to get another generational spike in the equity risk premium? If so, what will be the culprit this time?
The major contributor to the equity risk premium this time around as opposed to 1974 is the low rate on Gov’t Bonds. It seems to me that this needs to be unwound before a proper bull market can get underway. In 1974 the large ERP was unwound by a Bull market into 1980 and fairly stable bond rates. Perhaps/probably the ERP unwinds this time over a long period via a range bound market [I’m imagining the range as the 2008 down leg] and rising bonds. My big picture
IF however interest rates remain stable at low levels then equities are cheap. (notice the big if)
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Perhaps/probably the ERP unwinds this time over a long period via a range bound market [I’m imagining the range as the 2008 down leg] and rising bonds. My big picture
Probably. But we have also been in a very long period of cheap bonds, perhaps because equities were so much more attractive. Using the example of US Treasuries, real yields have been falling for decades after having spiked during the era of stagflation. I think it's wholly unrealistic to expect anything much above 0% in real terms over the long run for treasuries, or similar assets. If risk is positively correlated with reward then it seems to be an aberration of history that an asset approaching "risk free" was yielding 3-4%+ over the inflation rate.
Just my
