The greatest lie ever told used to be Wall Street telling main street to “buy and hold”.  Of course thats what they told you every chance they got. It’s not what they did.  The holding period for stocks dropped from 8 years in 1960s to 2 years in the 1990s and 8 months in the 2000s.   Today, stocks are bought and sold in milliseconds.  Which is one of the big reasons you don’t hear much about buy and hold any more. That and the fact it didn’t work.  I think individual owners of stocks  finally came to understand that old saying “Fool me once, shame on you. Fool me for 50 years, shame on me. “

But Wall Street needs a marketing slogan doesn’t it ? How else are they going to get all the suckers back into the market ? (Great article on the Stock market is for Suckers from Macleans.ca). So what’s the new mantra that all those brokers, mutual funds and ETFs want you to buy in to ?

Asset Allocation (Aka diversification) is the best approach to investing.  Everyone is talking about asset allocation.  It’s not a surprise given all the new funds, REITs and ETFs that have popped up in the last couple years. The more diversification sold to individuals, the more money to buy them all.  Wall Street has to sell what it has doesn’t it   ? It’s just good business for them. But not for you.

No longer does Wall Street  even want you to consider buying what you know. Remember Peter Lynch describing how buyers of stocks should pay attention to what they see in the mall and elsewhere and use that as a source  of ideas and information ? Or Warren Buffet suggesting that we should actually invest in things we know and look for the value there ?  Well you can forget about that kind of investing.

Today, your investment advisors want you invest in things you have absolutely no fricking clue about and have pretty much absolutely no fricking ability to learn about.

They want you to diversify into Emerging Markets, Commodities, International Bonds, Munis, Real Estate Investment Trusts, ….and.. well, a lot of different “stuff”. Here is an excerpt from an article from a Sarasota  paper today:

“For context, I will provide the performance of my “moderate investor’s asset allocation” for both 2010 and with its predecessors for the period since 2000. For the previous 10 years, its predecessors were up about a cumulative 104 percent.

Last year’s version of the allocation was:

Fifteen percent in an S&P 500 index fund (IVV).

Five percent in a small-capitalization value fund (VBR).

Twenty percent in a diversified international stock fund (VEU).

Five percent in an emerging markets international fund (VWO).

Five percent in Real Estate Investment Trusts (VNQ).

Ten percent in large and mid-capitalization stocks with a history of paying competitive and increasing dividends (VIG).

Ten percent in a diversified portfolio of convertible securities (ACHIX).

Five percent in a U.S. Treasury inflation-indexed bonds and notes (VIPSX).

Fifteen percent in an international bond fund with traditional fixed coupon bonds (GIM).

Five percent in an international bond fund for inflation-indexed bonds (WIP).

Five percent in cash equivalents.”

That is a suggestion for a “moderate investor” . Let me translate this all for you. “I want you to invest 5pct in cash and the rest in 10 different funds about which you know absolutely nothing. I want you to make this investment knowing that even if there were 128 hours in a day and you had a year long vacation, you could not possibly begin to understand all of these products. In fact, I don’t understand them either, but because I know it sounds good and everyone is making the same kind of recommendations, we all can pretend we are smart and going to make a lot of money. Until we don’t“

Asset allocation is about making you a sucker.  Do you seriously want to put a significant percentage of the money you will need for your future in funds that put your money into things you have absolutely no idea about? Will you have any clue about when to change your asset allocation ?  Will you change it based on changes in the dollar ? Changes in domestic inflation ? Changes in European inflation ? Inflation in China ? Changes in tax laws in Italy and Greece ? Changes in interest rates ? Trade balances ?

It comes down to this. Do you want to invest in something you know, or in something Wall Street wants you to believe ?

Do you really think your broker, his boss and the analysts at their firm really are being completely honest with you about how much they know about these investments they want you to make ?  Ask them if they are making the exact same investment with their money. Ask them if they would make the same investment if they were not allowed to look at a quote screen all day long like you aren’t able to – which tells you if they trust the investment or want to watch it second by second knowing they may have to pull the trigger and get out on a moments notice.

Ask your broker for the names of people they have had to call or get a call from and let them know that their investment has  been wiped out. Talk to those people to understand what the ramifications of making in an investment in something you know nothing about might be.

Don’t be a sucker. Remember this. It’s better to make less, or next to nothing than to lose everything. Don’t get greedy.  Don;t get desperate. The stock market can’t save your financial future, but it can end it .

http://blogmaverick.com/2010/08/20/the-stock-market-is-still-for-suckers-and-why-you-should-put-your-money-in-the-bank/

A week before Auburn vs Oregon came down to the final play we made the inquiries.  Could TCU play the winner of Auburn vs Oregon ?  TCU had only played 13 games. Oregon would only have played 13 games. Auburn, 14 games.  If Oregon won , would it be possible to play TCU as their 14th game ?

The schools, on an off the record basis, were not opposed to it.  They didn’t come out and agree to it, but they certainly were not opposed to the idea. The problem ? It wasn’t money.  The problem was that when we asked anyone who could know whether or not the NCAA would approve another game , a +plus one playoff game, the response was unanimous , and I’m paraphrasing here “There is no way in hell the NCAA would approve a +1 playoff game between any two teams .  There is no way TCU vs anyone could happen”

Hey. We asked.

We projected that there would be about $50mm available to the schools. But it wasn’t a question of money. It was a question of yes or no from the NCAA.  We decided it was better not to actually pop the question to the NCAA. We decided to rethink the question of whether or not there should be a BCS playoff.

The first step in rethinking the process is to first work from the most likely premise and try to adapt it to the goal. So we started with a simple perspective: “What if the current BCS system is a good system and the only system available to determine which two teams should play for the national championship ?”.

To some, this may be a non-starter.  They believe that the BCS is so flawed and incapable of crowning a true national champion that it’s not worthy of consideration. I disagree. When you look at the system, the current BCS system it is actually a very, very good starting point for determining a national champion. It is not perfect. It is far from  perfect from a financial perspective. It leaves a lot of money on the table.  But maximizing revenue is not a stated goal of the BCS system. So you can’t really blame them for that.

The BCS system actually reaches quite a few of its goals. It retains tradition. It makes every game of the regular season important. It retains some semblance of normality for student athletes schedules and it allows them to enjoy the unique experiences of the bowl system – a week in a cool location with family, friends, fans and teammates.  You may argue about these goals, but the current system gets there from here.

The one goal that is not arguable is that the best two teams are always in the BCS Championship game.  Even the staunchest BCS supporter will tell you that every year there are going to be disappointed teams and fans who feel that the only barrier between their team and a National Championship is the lack of a true playoff.

So I set off to think about whether or not there is a way to work within the current BCS system to optimize the likelihood that the last two teams playing were the two best teams.

In technology there is the very simple principle of GIGO. No matter what the algorithm, if the data going in is incomplete or misapplied then the results will be less than optimal or just plain wrong.

THe problem with the BCS is that the data going into the system is bad.  I’m not talking about the polls. Yes we can argue about the polls the BCS uses and their problems of which they are many. But no polling or ranking system, whether built on votes or on technical analysis is going to be anywhere near perfect. (And for the record, in FOOTBALL  the margin of victory weighted and re-weighted for the quality of the competition  should be a factor in ranking teams )

The biggest  problem with the BCS system is that there are no parameters or constraints on who BCS eligible teams schedule. Pretty much every BCS eligible school tries their best to game the system to put themselves in the best position to qualify for a bowl and to go undefeated. Put another way, almost every school schedules at least 2, if not 3 “cupcakes” every year.  There in lies the rub of the BCS system. Cupcakes distort the system.  Rather than playing games that could further contract the number of teams in the championship hunt, these games increase the number.  GIGO.

The way to fix the system is to replace the cupcakes with a mid-season playoff system .

The first question in replacing cupcake games with BCS impactful is to ask whether or not teams can change their game schedules, many of which are planned years in advance. In the words of an AD “changing games is a lot easier than you think”. Particularly when you realize that the cupcakes take on the role of sacrificial lamb purely for the money. It would be relatively easy to buy out the cupcakes.

Then there is also the consideration that the cupcakes are scheduled so that schools can become bowl eligible. Bowl eligibility is not just about the experience, but also about the bonuses. Get to a bowl. Get paid. Nothing wrong with that. But in order for some to consider making their schedules more difficult they are going to want to have their bowl bonuses covered.  We can do that as part of this new approach.

With those little inhibitors eliminated the question becomes “what is the optimal approach to an in season tournament”  ?

I don’t have the perfect solution, which is why I wanted to throw it out for people to discuss on http://www.facebook.com/pages/HDNet-CFB-Playoff-Series/171212686252635

My first thought on this is that we ask the BCS to require any school that would like to be considered for the BCS championship game to be leave as open dates on their schedule the 6th , 7th and 8th  weeks of the season.   Then we take the published BCS rankings and we “playoff ” zero loss teams against each other. We do the same with 1 loss teams, 2 loss teams, etc.  So the best undefeated teams play each other in a 3 game playoff. In the event there are an uneven number of undefeated teams, we take the highest ranking one loss team (s).  You do the same all the way down the line.

In the first round the highest ranked undefeated team plays the lowest ranked. The teams are then re ranked after the results of the first games. Then we do the same thing all over again.  Formerly undefeated teams are placed in the 1 loss ‘division’ , 2 losses in the 2 loss division, only this time there is one huge change. Starting with the 2nd round, each team plays the team ranked directly below them . So 1 plays 2. 3 plays 4. 5 plays 6, all the way through however many eligible teams are participating.  Then we do the same thing all over again in the 3rd week.

By the end of these 3 weeks the number of undefeated teams are reduced, and there is the real possibility that there are no undefeated teams left. Any and every Non AQ undefeated team is going to get their chance.  We will have had some amazing matchups between conferences and probably even intra conference.   And on the bottom of the heap, every winless team is going to face another winless or at worst a very poor team and have a chance to get on the board with a win. More importantly, the rankings in the BCS system will now reflect the results of games designed to be competitive. By the end of the season, the likelihood that they two best teams are competing in the championship game has increased substantially.

What about the money ? How much do you think the value of these games will increase for current TV partners ? Auburn vs TCU as the 7th game of the season vs Auburn vs Chattanooga ?  How much will sponsors pay to brand this tournament ? How much more excited will fans be ?  Of course there is the issue of who gets the home game in this series, that can be handled via a flip of a coin. And there is the costs associated with uncertain travel expenses, which can easily be picked up via sponsorship and increased TV revenues.

And what about the Bowl Games ? They can continue on as they always have, BUT, they have the opportunity to create “re-matches”.  If Boise State knocked Penn State from the ranks of the undefeated in the first match-up game, but both ended up with 2 or 3 losses, why not a re-match ? In addition, if there is a Cinderella team(s) from the tournament, they now have a much higher national profile which in turn will make the bowl game they are involved in much more attractive.

What does everyone think ? I’m not saying this is a perfect solution. That doesn’t exist. Even in a playoff system, someone will always be disappointed. But I do think that this works within the current system in a manner that is completely in control of school ADs who do the scheduling and works within the guidelines set by the BCS and the NCAA (as far as I could tell in a first pass look), and results in a far better chance of the BCS Championship game hosting the two best teams.

How can I make this approach better ?