# forwarded message from John Conover

From: John Conover <john@email.johncon.com>
Subject: forwarded message from John Conover
Date: Tue, 13 Oct 1998 17:15:23 -0700

```You know, I don't have a lot of confidence in stock market gurus, (in
case you hadn't figured that out.) I spent a very boring afternoon at
a company where I am on the BOD. We broke in early afternoon for a
catered lunch, (it was some kind of meat,) and they had a TV in the
board room, and we all sat around and watched CNN.

names,) that made his forecast of how long the current bear/correction
market will last. He had a graph of the length of bear markets since
1966, (there were 9 of them,) that ran, (as close as I can remember,)
2 months, 3 months, on out to 2 years and 2.5 years. Get this! He
averaged the nine numbers together to get an average bear market
duration of 1 year!!!

Although I don't take issue with his arithmetic, I do take issue with
his methodology. That bear market length/distribution was almost a
perfect 1 / sqrt (t), where t is in months-which would say that the
average duration of a bear market would be 4.3 months, with 50% less,
and 50% more, (which his graph showed to within +/- 10%, ie., 4
shorter, 5 longer,) with a chance of finding a 24 month duration, or
longer, of 1 / sqrt (24) or about 1 in 5, (by my mental gymnastics,
meaning there should be 2; there was. Exactly.)

Think about it. If his methodology was correct, he would have got a
2.5 sigma hit in only 9 samples! Think about it-the chances of that
happening is only 5.4%. When you consider the 2 sigma hit and the 2.5
sigma hit together in 9 samples, it is once in a thousand!

And people watch this inept mathematical regurgitation ...

John

BTW, as you know from the "truth in prognostication," on January 10'th
this year, just counting backwards, by years, (and days, weeks, and
months,) and looking at the graph of the major indices, and finding
the run length, so far, of the bull market, and taking 1 / sqrt (t) in
my head, it was prognosticated that there was a 70% chance, or so, (I
can't remember the exact number,) that this was going to be a bear
year. It ain't over yet, and we will have to wait until January 10'th,
1999 to see how it turns out. But it predicted the next day, the next
week, and the next month, reasonably correctly-prognostications that
were mostly in contradiction with the industry gurus. (Most of my
prognostications were running in the 60-70% range, so it has already
won, since we would expect about 2/3'rds of the prognostications to be
correct.) So, what should the guy have forecast? The bear down turn
started in mid July-so, on average, a typical bear market would last
be over during the first quarter of next year would have given him
slightly better than a 60% chance of being proved correct.

------- start of forwarded message (RFC 934 encapsulation) -------
From: John Conover <conover@netcom.netcom.com>
To: John Conover <john@email.johncon.com>
Subject: Wall St. Stocks End Lower / Wall Street Report [Oct 13]
Date: Tue, 13 Oct 1998 15:32:33 PDT

NEW YORK (AP) -- Stocks halted a three-session rebound Tuesday as
the third-quarter reporting period hit full stride with some
unsettling signals from Eastman Kodak and Merrill Lynch.
The Dow Jones industrial average fell 63.33 to 7,938.14,
absorbing the equivalent of a 44-point hit from Kodak, which beat
most profit forecasts, but posted weak sales and failed to inspire
Broader indexes also turned lower for the first time since the
market's sharp turnaround on Thursday afternoon, which prevented
the Dow and other measures from sinking to new lows for the year.
The technology-heavy Nasdaq composite posted the biggest loss,
falling 36.63 to 1,509.45 after bouncing nearly 200 points from
Thursday's low.
Otherwise, the selling was fairly restrained considering the
size of the market's rebound, which saw the Dow rally nearly 550
points from the bottom.
But despite the market's resilient showing, analysts said it was
too soon say the steep downturn that began in mid-July has finally
run its course.
``We're still in the soup here, still in the
wondering-and-waiting stage to see how earnings season will shape
up,'' said Bob Dickey, managing director of technical analysis at
Dain Rauscher Wessels in Minneapolis.
The results released Tuesday, the first full day of
third-quarter reports by major companies, offered some mixed
signals on how well companies have fared against the drag of
economic instability overseas.
The most bittersweet news came from Merrill Lynch, which posted
a wider-than-expected loss for the quarter, but rose 1 1/16 to 44
15/16 after becoming the first major investment firm forced to cut
jobs due to the turmoil on world markets.
Kodak, whose shares tumbled 11 3/16 to 72 3/8, reported a
third-quarter profit of \$398 million, but ruffled feathers with
lingering price war with Japan's Fuji Photo Film.
Among the Dow 30, Johnson & Johnson rose 1 5/16 to 77 3/4 after the
drugmaker reported a 12.4 percent profit gain; Goodyear Tire &
Rubber rose 1 to 49; and General Motors fell 7/8 to 51 1/16 after
posting a slimmer-than-expected loss of \$809 million for the
strike-tainted period.
The most pivotal profit report of the day, however, may have
come after the close of trading. Intel, which fell 1 7/8 to 83 9/16 in
advance, beat analyst projections amid strong demand from PC makers
in the United States and Europe.
Declining issues outnumbered advancers by a 4-to-3 margin on the
New York Stock Exchange, where composite volume totaled 862.25
million, down for a second session from the billion-plus pace seen
late last week.
The Standard & Poor's 500 fell 2.91 to 994.80, the NYSE
composite index fell 0.81 to 492.14, and the American Stock
Exchange composite index fell 3.15 to 577.86. The Russell 2000
index of smaller companies fell 5.29 320.33.
Overseas, Tokyo's Nikkei stock average fell 2.3 percent,
Frankfurt's DAX index rose 1.2 percent and London's FT-SE 100 fell
0.9 percent.

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John Conover, john@email.johncon.com, http://www.johncon.com/

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