Live Cat Bounce

With stocks at such depressed prices, there is little evidence that any smart money is in the market. But surely a professional stock picker is smarter than a cat?

The London newspaper the Evening Standard is not so sure. It has laid down a challenge: Pick five stocks that will outperform five randomly selected by the newspaper's cat six months from now.

Jeremy Batstone-Carr, the head of research for the London brokerage firm Charles Stanley, has bravely picked up the gauntlet. He is up against not only the cat, but a mattress (cash deposited underneath; no stock picks) and a savings bond at a bank.

"If Batstone-Carr loses to a cat, he has to forfeit one of his surnames," the Evening Standard says. "If he wins in style, he's allowed to add another one."

The challenge is a variation of an old warhorse, to continue the animal theme, often used to illustrate the theory of efficient markets, or the idea that markets reflect all known information so it is impossible to outperform a market except through luck.

As Burton Malkiel explained in A Random Walk Down Wall Street (1973), the theory, taken to extremes, would mean that "a blindfolded monkey throwing darts at a newspaper's financial pages could select a portfolio that would do just as well as one carefully selected by the experts."

The Wall Street Journal and other newspapers and web sites have in the past employed the analogy for stock-picking contest. The Journal, from 1988 to 2002, used darts, while others have had chimps and other animals.

The picks by the Evening Standard cat are a little suspicious. The cat is said to have "pawed its way meaningfully around a page" of the Financial Times, which would limit its alphabetical range. And one of the cat's picks just happens to be Daily Crest, one of Britain's biggest milk companies.

And really, there should have a video of the cat wandering and making its picks upon the "pink 'un." It would have been a sure-fire viral video hit on YouTube.

But perhaps it is just as well, in case kitty does not know best. As the newspaper explains:

"Animal rights groups have asked us to reassure that the cat won't be harmed, but this is capitalism like it used to be before banks suddenly started demanding handouts."