




The Stingy News Weekly (01/12/01)
The Markets This Week DOW 30: 10,525.38 1.28% to a P/E of 27.1 TSE 300: 8,716.40 +0.30% to a P/E of 22.6 The markets were mixed this week with the DOW down and the TSE up slightly. P/E ratios remain sable, but are still a touch on the high side. Yawn. The Winter Warmth Contest Inspired by Hersh Shefrin's book "Beyond Greed and Fear" I'm starting a contest similar to one that was run by the Financial Times in 1997. Hersh's description of that contest is: "Readers were told to choose a whole number between 0 and 100. The winning entry would be the one closest to twothirds of the average entry. The Financial Times provided the following short example to help readers understand the contest: Suppose five people enter the contest and they choose 10, 20, 30, 40, and 50. In this case, the average is 30, twothirds of which is 20. The person who chose to enter 20 would be the winner. What is the point of this pickanumber game? The point is that if you are playing to win, you need to understand how the other players are thinking. Suppose you think everyone who enters the contest will choose 20, since that is the winning choice in the example. In that case, you should choose the integer closest to twothirds of 20 or 14. But you might reflect on this for a moment, and wonder whether most other entrants would also be thinking along these lines, and therefore all be planning to choose 14. In that case, your best choice would be 10. And if you kept rethinking your choice, you would eventually come down to choosing 1. And if everyone thinks along these lines, then the winning entry will indeed be 1. But in a group of normal, even welleducated, people, the winning entry will not be 1. In the Financial Times contest the winning choice was 13. [...] The real point of this game is that playing sensibly requires you to have a sense of the magnitude of the other players' errors. The pickanumber game illustrates two of the three themes of behavioural finance. People commit errors in the course of making decisions; and these errors cause the prices of securities to be different from what they would have been in an errorfree environment." The rules of the Winter Warmth Contest are similar to those mentioned above. This time contestants are asked to pick a number between 0 and 1,000 (no decimals or fractions). The winner will be the one who is closest to 3/4 of the average entry with ties resolved by random draw. The winner will receive a bottle of Dave's Insanity Sauce. I've found it most pleasing when added to a bowl of chili. To enter the contest you must be a current subscriber to the Stingy News and email your choice of number, before February 14 2001, to: Contest@stingyinvestor.com Only one entry per person. Good luck! Stingy Links AOL Time Warner Deal Approved Fortune's take on the AOL Time Warner deal. Lots of links here. Cash, Stocks and Home Mortgages Thinking about taking out a mortgage to buy stocks? This one's for you. Financial Forum Ok, it's a big mutual fund flog fest, but they usually have lots of free stuff. Be sure to check out Dan Hallett at the Sterling booth in Toronto. The Callan Table of Investment Returns A keen pdf file that shows which investment styles have outperformed recently. Historical DJIA A handy table that shows the changes to the DJIA since 1928. Market Trivia The trivia questions this week are:
Bullishly Yours, Norman Rothery Please visit the Stingy Investor website at http://www.stingyinvestor.com To (un)subscribe please use our email centre at http://www.stingyinvestor.com/cgibin/email.cgi Email comments or questions to info@stingyinvestor.com Refer legal disclaimers at http://www.stingyinvestor.com/SI/legal.shtml http://www.stingyinvestor.com/SI/legal/conflict.shtml  
 
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