Wait for Your Pitch, and Other Market Tips

Sometimes an apparently simple idea from one field can provide great insight in another.  As we watch the final games of the 2008 baseball season, investors might be surprised at what they can learn.  

Ted Williams is on everyone's short list of the greatest hitters ever.  He is the last player to bat .400 in a season.  He combined average with power, hitting 521 career home runs, while taking some time out twice for military service.  He and John Underwood wrote one of the greatest instructional books on hitting, The Science of Hitting.

The single most important idea was patience.  Wait for your pitch, one that is right for you.  The Splendid Splinter had what he called a "happy zone."  A pitch in this area was ideal.  The lesson can be seen from the picture below.  It shows a rectangle with the image of 77 baseballs.  Each baseball has Ted's expected batting average for a pitch at that location.

You can see more discussion of this image and an interesting list of batters at one of our favorite baseball sites, The Hardball Times.

One problem with this simple but excellent advice:  Most find it impossible to follow!

Looking to Warren Buffett

Many people know that Warren Buffett is a big baseball fan.  He is also an expert on baseball trivia, especially the '30s through the '50s.  According to the New York Times, he has some illustrations on his wall from The Science of Hitting, perhaps including the image above.

Buffett quotes the lesson from Williams as follows:

"The most important thing in investing," Buffett said, "is what Williams said was the most important thing in hitting"  -- waiting for the right pitch.

"What's nice about investing is you don't have to swing at pitches," Buffett said. "You can watch pitches come in one inch above or one inch below your navel, and you don't have to swing. No umpire is going to call you out. You can wait for the pitch you want."
 

Adding to the Lesson

There are many places where this principle can be applied.  It is almost as if everyone in the investing universe is swinging wildly at every pitch.  So many opinions, so little actual knowledge.  Consider the following:

• CNBC, apparently starved for content, has actually increased the number of boxes in its Hollywood Squares.  Get serious.  What have we learned?  If you stick a microphone in front of someone, you will get an answer.  It does not matter if the respondent has relevant knowledge.
• Journalists as experts.  Journalists on television, in the MSM, and in blogs are straying far from their "happy zone."  Instead of helping us find and understand real experts, they take the easier course of writing their own opinions.
• Experts straying out of their real field.  There are many examples, and perhaps readers will contribute more.  For starters, we have plenty of fellow bloggers who stray from what they know.  This ranges from economists who want to talk about law, to lawyers who want to preach economics.  It includes accountants who cannot understand public policy issues, and public policy analysts who ignore accounting principles.  It means criticism of quantitative models by those who have never built one, and slavish devotion to models by people who should know better.

Warren Buffett is not going to help you on these problems, since he does not use any of these information sources.  He also does not care what the market is doing from day to day.

We all need to figure out this one for ourselves.  Who is swinging at pitches that are high and outside, instead of sticking to the "happy zone?"

Comments

[thedozer:]

I think this article would be more effective as a analogy to football where you get 4 downs to get 10 yards... my play on 3rd down, PUNT!

2008 Oct 15 05:59 PM

[flatman:]

Can anyone really watch Dennis Kneale or Caruso Cabrerro on CNBC any more. These zips actually give advice. I mean if Trish Reagan (the other zero) and Caruso Carrero did their segments topless, I would still turn the channel to Bloomberg between 11:00 and 2:00.

2008 Oct 15 07:17 PM

[MSmith:]

Mr. Buffet now makes his money by talking his book and riding the increase of captital that comes in his investment wake. He also has joined the crony club with weekend meetings with Paulson. His time is coming.

By the way this "GAME" just struck out millions of 401K retirement holders. That's it; game over, they are now taking their ball home. Now you have to play against yourselves.

See you at 5K.

2008 Oct 15 07:45 PM

[anarchist:]

Geeeeze, what a wast of time. The DJI off today 700 points and 900 in after hours trading, a recession in progress, this game is over. The seasonal " wait till next year" is more apropo. This is panic and panic knows no analogies and it aint gonna get better.

2008 Oct 15 10:13 PM

[raising4dau...:]

Jon Stewart showed the 10-faced "deka-box" on the Daily Show.

CNBC has become a total joke. You ought to send them the idea for topless broadcasts.

2008 Oct 15 11:06 PM

[Diegojames:]

Go Topless; its all a show anyway just like E. I mean where are the production figures of sales for the mining stocks. Where are the tons of gold bought by India, China and USA etc, The chart forms are poor and flashed so frequently .... so not quantitative....why watch except on night on the foreign country reports from around the globe and the accents make it hard to comprehend the message.
It is one half of the world(the side in the sun) telling the dark side what to do the following morning and Congress allowing our Wall Street Criminals to set the original pace.
That is why the Communist Chinese with party loyal tendencies will set the future for others/
Diego

2008 Oct 17 02:16 AM

[Doingtime:]

I think the concept of patience is key. I have lacked it on too many occasions. Forcing myself to buy in thirds has helped.

2008 Oct 17 06:01 PM