What's in the bag?


Here's an interesting analogy from Walt Dardenne in IndexFund.com's discussion forum:

I like to think of the stock market as a big bag of marbles, the contents of which we are unaware. Each year we get to pull out one marble and only then do we get to see its color. The more marbles we get to see, the better idea we have of the color distribution within the bag. Still, we never know what we'll pull out next.

For the last five years, we've draw Large Cap Growth blue (chip) marbles. Short time observers may think they've got the mystery figured out. However, there have been enough other colors in prior years to convince me, for one, that the bag is anything but all blue marbles. What will this year's draw be?

For the rest of the discussion, including more elaborate models, click here.


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