On the way home from Houston I finished the 8th edition of A Random Walk Down Wall Street. It covered the two major schools of camp on stock pricing in detail: firm foundations and castles in the air. Firm foundation believers seek to determine a stock's proper value or "the worth of any share as the present value of all dollar benefits the investor expects to receive from it." Most firm foundation followers assume that the market is 90% logical and 10% psychological. Castle in the Air believers are chartists and believe that past history grants clues to future behavior. Most castle in the air believers assume that the market is 90% psychological and 10% logical. They seek to anticipate the behavior of the other players in the game. Will there be a bigger fool to buy this stock later?
It appears from the evidence presented that the stock market is very efficient at pricing itself. The exact level at which the stock market is efficient appears to be debatable. However, the historical data currently suggests almost no pricing inefficiencies exist that are large enough to take advantage of and make money (after transaction costs and taxes are subtracted). Luck would explain the extraordinary performance of most at picking stocks. The nature of averages is a few investors will have extraordinary results, just as a few people will flip tails consistently when engaged in a coin flipping contest (with a fair coin).
Modern Portfolio Theory (MPT) assumes all investors are risk averse and want high returns with guaranteed outcomes. Harry Markowitz invented this theory in the 1950s and for his contribution received the Nobel Prize in Economics in 1990. Basically, this theory uses diversification among asset class to manage risk.
The Capital-Asset Pricing Model (CAPM) says that the total risk of each security is irrevelant as far as extra results go. The important component of risk is the systematic part, since given a sufficient pool of stocks the unsystematic risk (or specific risk) can be eliminated. (The specific risk of all the stocks in a given portfolio balance each other out and go to 0 with a sufficient pool, usually > 60 issues.) Consequently the CAPM asserts to get a higher average return you should increase beta (systematic risk) in your portfolio. However, study of the beta to return relationship of all stocks over the 1963-1990 period (of all New York, American, and NASDAQ exchange issues) didn't support this theory.
Definitely read it if you are interested in stock pricing theory!
I decided it was time to upgrade from the 19" NEC Multisync CRT monitor I have had for the past five years to a flat panel LCD. I have had my eye on LCDs ever since I first experienced a Silcon Graphics 1600SW flat panel. Wow! I kicked around the idea of buying a 1600SW, but that would have required an expensive adapter and only a short list of graphics cards were supported.
Flat panel LCDs have come a long way since the introduction of the 1600SW. I decided to limit myself to a 20" or larger display. I also wanted plenty of inputs: Digital, Analog, S-Video, Composite. Being frugal I wanted to spend $500 or less. I thought about the Dell 2001FP which was close to meeting all of my criteria. The 2001FP has a native 1600x1200 resolution. It was close but I was not fully satisfied.
Then, Dell released the 2005FPW. It was a wide screen flat panel that met all my criteria. It even provided plenty of screen real estate with a native 1680x1050 resolution. When I discovered that the 2005FPW was priced the same as the old school 2001FP I decided it was time to order me one.
I unpacked it and was immediately impressed. First, I hooked it up via S-Video (using the Advanced A/V kit) to my X-Box. The picture was wide (without looking stretched), super crisp and plenty quick for gaming. Next, I popped an anamorphic widescreen DVD into my X-Box. Wow! Second, I hooked it up to my computer (which already had the NVIDIA nView Desktop Manager installed). I used nView to switch the resolution to 1680x1050 and I auto-calibrated my flat panel against nView's calibration screen. Once again, I was very pleased with the results.
I have an ancient NVIDIA GeForce2 MX/MX 400 graphics card and it is definitely getting a work out running 1680x1050 resolution with 32bit colors. I think an upgrade is in order, so I can push more FPS at high resolution. Josh, are you ready to have your ass kicked in high resolution at Quake?
Aside:
Dell just released a 2405FPW 24" wide screen display, but it is priced over twice what I paid for my 2005FPW 20" LCD
Nick and I checked out the Houston Rodeo last night. It was definitely the most entertaining rodeo I have ever been too. I guess the saying that everything is bigger and better in Texas holds true. The rodeo events were right after one another and involved very little dead time.
Each night of the Houston Rodeo has a major performer to close the evening (at the Reliant Center). We had the privilege of seeing the Steve Miller Band perform. It was a great show and we were struck by how professional Steve Miller looked. He was clean cut, dressed in a sports coat, and definitely didn't have the washed out drug look so prevalent in musicians of his era. He could have walked into any building in Houston and fit right in.
Steve Miller and his band had engaging stage presence, solid chops, and delivered all their great songs. After finishing up their set with "The Joker", fireworks were launched to finish the evening with an exclamation point.
My dad's computer was infected with spyware / malware recently. I am almost finished with a clean operating system install and setup / configuration of all his programs. I found this list of things to secure on a Windows box very helpful. I added one more step to the aforementioned list and created a backup image that captured all the work I did in case it needs to be redone.
I finished reading You're Fifty-Now What? Investing For The Second Half Of Your Life on the flight back from New Orleans. When I checked it out at the library, the check-out lady made a joke of why a young man like me would be reading a book such as this. She thought I was picking it up for my father.
I found the book useful for figuring out how to reach the point of having a retirement that meets my expectations and empowers me to do what I desire. With proper planning the golden years can be very enjoyable. Once retired this book covers how to figure out what you can safely spend in retirement without depleting your resources while still enjoying the long active lives modern medicine has rewarded us with. I think the title is misleading and both young and old will benefit from reading this book by Charles R. Schwab (founder of Charles Schwab).
Unfortunately, the library check-out lady represented our American culture all too well. We are too often spenders rather than savers (the average savings rate has fallen to below 2%/year). We seldom plan for tomorrow and drive with the pedal down today. I challenge you to not follow the herd mentality and realize you need to plan and set aside for retirement while you are still young.
I printed out a coupon from Yahoo! and redeemed it for a free ice cream cone at the local Baskin Robins. It was a nice treat, considering the weather is warm and sunny in Louisiana. :-)