Quote:
Originally Posted by pelagius
No you took a swipe. You said a person you respect a great deal called it mental masturbation and you found it convincing ... That's a bit of swipe.
I am fine with your first paragraph ... It may be entirely consistent with portfolio theory depending on the preferences of the investor. I think you may be arguing against a version of portfolio theory that is oversimplified.
LTCM was clearly not following portfolio theory ... it may be an interesting example but it can hardly be used to condemn portfolio theory.
|
A "swipe" is not a condemnation, let alone a "bit of a swipe".
LTCM was a swipe at supposed "smart guys" and their investing. It was meant to show "smart" and good investing do not necessarily go hand in hand. Too many let their intellect get in the way of using common sense. Of course greed takes over which is a malady of smart, dumb and average alike.
I am not arguing against "modern portfolio theory". I am saying it is one discipline that can be followed, but not necessarily "the" discipline to be followed.
Just as a closer. My favorite manager I use and showed the numbers for wouldn't be for everyone. He has some year or years in a cylce of 5 to 10 year period where he will underperform the S&P. If my client is one who gets more upset about a year of underperformance than appreciates outperformances over a longer period, I won't suggest this manager to that client. The marriage won't work.