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Weekend reading: Spin the wheel of satire

Good reading from around the Web.

I Ctrl+C copied the URL of an article on Oblivious Investor this week to forward it to my co-blogger, The Accumulator, only to open up my email folder and find he’d already emailed it to me.

After that, it wouldn’t only have been rude if I hadn’t made it my post of the week. It would probably have been bad luck!

In the article [1], the site’s guest blogger highlights a new breed of ETF that delivers returns based on the spin of roulette wheel:

Index roulette ETFs, such as Roquefort’s ROQ, simply bet on red and black equally. Roquefort uses random numbers generated by a proprietary atomic decay device, and cites academic research that claims this reduces the standard deviation compared to traditional selection methods.

Roquefort also offers two chromic strategy ETFs: REDS, which always bets on red, and BLAK, which always bets on black. Stoker notes that these are riskier: “Be sure you know which color you like before investing.” Roquefort has just introduced OO, which bets on the double zero. The potential for 3500% returns is attractive, but Roquefort notes that due to volatility it may not be suitable for all investors, only for better-than-average investors like you.

There’s plenty more in that vein. Obviously (I hope!) it’s a satire of spurious investment products created to be sold, not to deliver returns.

Sticking with gambling, long-time Monevator reader Niklas Smith highlighted an academic paper that considered whether poker was skilful or not. The researchers argue poker is not gambling, because a small subset of skilled players competing in the 2010 World Series of Poker achieved positive returns, at the expense of less skilled losers.

Niklas highlights [2] the fun bit for our adventures in investing:

The economists say that similar tests of persistence in returns have also been used to detect whether mutual-fund managers have genuine expertise. In contrast to the case of poker, they point out, those tests have tended to find “little evidence of skill in this domain”.

That means that you can’t reliably choose a fund manager who will outperform the market, but you can choose a poker player who will outperform. Perhaps it’s time to start demanding fund managers and investment advisors get lottery licences?

Alternatively, perhaps fund managers should be forced to call themselves exciting poker-style names like Volatile Vince, Leveraged Lucy, Double-Dip Dave, and Dave ‘The Churn’ Dudley.

At least that way the public could see where most of them are coming from.

From the blogs

From the mainstream money sites

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