Hielko

You don't exactly understand what the IRR calculates compared to a TWRR and your broker has crap performance reporting and apparently doesn't use either method. Your IRR return and your TWRR return are both flawed to some degree, and both don't tell the single truth what your real performance was or is. Fun fact: if you have irregular cash flows the IRR formula has multiple solutions, so you could have a positive and a negative return at the same time! does that make sense? Your TWRR answers the question what kind of return would you have had if you had invested $1000 at the start of the year and not added or removed any money. That seems to me the purest definition of investment result if you don't control cash flows. If you do control cashflows, you should use a measure that accounts for them.

If I had significant amount of capital, I'd go with 50% stock index(es), 50% conservative bond fund (possibly Loomis Sayles)/cash. Reasoning: outperformance only matters if you have insignificant amount of capital. If you have significant amount, you're much better off trying to preserve it than trying to outperform with it (see also Buffett if you need authority ;)). No, you are totally wrong! If you have a significant amount of money you can afford to lose a lot without any impact on your lifestyle. If you have a little bit of money, losing it will have direct consequences on whether or not you can go on holidays, buy a bigger house etc.

That's a great memo. And I think IRR is the correct metric by which to judge the performance of someone like an individual investor, who is completely in control of his/her own capital. IRR, or something that's abstractly similar (ROIC, ROE, etc.), is what we all use to judge all of these companies we're investing in. Why wouldn't we use it on ourselves? The time weighted metric just seems like a way to avoid the truth. Most individual investors are absolutely not fully control of their own capital. You can't change when you receive your salary, or when you get an inheritance or a gift etc. If you got a big gift in 2009 you just got lucky, while if you got it in 2007 you got unlucky. If you don't try to time the market does it make sense to try to measure that?

Using IRR is not necessarily the correct way to calculate performance. You can also make a good case for calculating a time-weighted rate of return, but that is usually pretty hard to calculate if your broker isn't doing that for you. I use an IRR calculation because that is the only practical option when you have to combine results from multiple brokers. Hielko, what do you mean time-weighted return? irr is just the fixed rate of return for all contributions until now, which will give you the current account balance that is marked to market. That's how mutual funds post their trailed 1yr, 5yr, 10yr and from-inception returns...... No: mutual funds calculate time-weighted returns, not internal rates of return. When you calculate a time-weighted return you eliminate the impact of deposits and withdrawals which might be appropriate since you might have no or a limited influence on when you make them (for mutual funds it's determined by their investors while for you personally it might be determined by when you receive your salary). If you try to time the market by deciding when to add cash you should use an IRR. Use google to check the difference... Ok I can't google any place that gives the formula for mutual fund returns but I'll pose some scenarios. Folks please feel free to chime in. Suppose Brk is at $1000 in 2011, by 2016 it is $2000. So its IRR or whatever you want to call it is about 15% right? They pay no dividends. Suppose you have a mutual fund that owns nothing but brk, then its advertized rate of return over those five years is also 15%? Now suppose you have a fund that pays dividends and capital gain distributions annually. Then isn't the return the irr calculated from the initial NAV, the annual distributions and the final NAV? So for example for one fund I would enter on the spreadsheet -365 (initial NAV) 10 (distribution 1) 10 (distribution 2) 10 (distribution 3) 10 (distribution 4) 495 (final price + distribution 5) so the advertised 5yr return is the irr of the above 6 cells? http://lmgtfy.com/?q=time+weighted+return+calculation

Using IRR is not necessarily the correct way to calculate performance. You can also make a good case for calculating a time-weighted rate of return, but that is usually pretty hard to calculate if your broker isn't doing that for you. I use an IRR calculation because that is the only practical option when you have to combine results from multiple brokers. Hielko, what do you mean time-weighted return? irr is just the fixed rate of return for all contributions until now, which will give you the current account balance that is marked to market. That's how mutual funds post their trailed 1yr, 5yr, 10yr and from-inception returns...... No: mutual funds calculate time-weighted returns, not internal rates of return. When you calculate a time-weighted return you eliminate the impact of deposits and withdrawals which might be appropriate since you might have no or a limited influence on when you make them (for mutual funds it's determined by their investors while for you personally it might be determined by when you receive your salary). If you try to time the market by deciding when to add cash you should use an IRR. Use google to check the difference...

Using IRR is not necessarily the correct way to calculate performance. You can also make a good case for calculating a time-weighted rate of return, but that is usually pretty hard to calculate if your broker isn't doing that for you. I use an IRR calculation because that is the only practical option when you have to combine results from multiple brokers.

Measured in EUR: This year 20.23%, IRR since inception mid 2010: 26% Pretty pleased with that result because I really own and owned a lot of companies with exposure to things that performed poor this year (oil, emerging markets, commodities). Think PDER, CNRD, AWLCF, BOL.AX, DSWL, ARGO, CDU.LS, RHDGF. Think the year has been saved by a bunch of special situations and a currency headwind, but have yet to do the attribution calculations.

This, or the trade will be cancelled (I've had 4-5 trades cancelled on stink bids / asks over the years... always the cancels were not to my benefit). Ben Will you get cancellations when your bid/ask is just 5 or 10% away from previous close? Indeed, that is the main problem.

I think the major problem that you will have is that you will almost never get action, and once you get action there might be news that is moving the price and you could be the sucker.

I think that only makes sense superficially. Measuring your results in your home currency makes sense, but ignores the complexities of the real world. Perhaps you have bought a business that imports from your country and they will suffer if your home currency rises, or perhaps they export to your country and they will gain if your home currency falls. So you can't make a bet on a stock price without results getting disturbed by changes in currency values: doesn't matter if you have "hedged" it or not. And usually, the relationships are way too complex to figure out because there are not a lot of companies that simply import from one country and export to another country. So that variable that you don't want to add to your results is always already there. by hedging you only change it in a somewhat random way.

With currencies you are always making an implicit bet on something, and it really shouldn't be called hedging because you are either long your home currency or long some foreign currency. It is not possible to have a hedged position with zero exposure.

I don't think you need to strip out MI from EV because it isn't part of it to begin with when you calculate it the usual way: when you take the market value of debt + market value of equity you are already ignoring the market value of the minority interest. So the only thing you need to do is strip the earnings attributable to the minority interest away to get a clean EV/EBIT(DA) number.

They actually do advise companies to shut down. In Red Notice (fascinating book, highly recommended) the author starts out as a management consultant, and he has to advise a Polish bus company that was a former state-run business. He describes how he tries to find alternatives to shutting down the company after he gets to know the people working there (who all seem to think he is the hero that will rescue the company). His supervisor deletes all the alternatives and the official recommendation is that they wind down business (and that was probably also the correct advice). In the end that doesn't happen, and the company is subsidized by the state. I'm guessing that business doesn't exist anymore.

I think it is usually worth it to read the Q&A section in the transcript.

lol, like you know whether or not finding shorts ideas is worth it for Einhorn.

Adding shorts to your portfolio usually decreases your risk because shorts are negatively correlated with long positions....

You should compare it against what a short position in the S&P500 would have done in the same period.

That's a product from DeGiro, absolute worst broker ever doing everything they can to screw their customers (doing a lot of stuff that would be illegal in the US). I suggest reading amsterdamtrader.com for some more background. I think Saxobank is also absolutely horrendous. I do like Binck (Dutch broker), no cheap transactions but good customer service. It's a bit like TD Ameritrade IMO. Decent broker, but IB is way better.

It is not technically correct since it depends on the number of players at the table / the average hand strength that people have when entering the pot. 72o is better than 32o when you play headsup. The odds are in your favour when you have a strong hand. When it is second best you just have bad luck.

It's not that clear cut because a lot of people in Europe don't have to pay the dividend taxes or they get a refund or tax credit for it. Dividends are often tax efficient.

Not that it's the right way to value BRK, but if you take $16B of earnings as CF and run a 5% growth for 10 years DCF, your hurdle rate is only 7% to make current price cheap. If you use 10-15% hurdle rate, it is quite overvalued. That's why you have to bring other parts into equation to persuade yourself that it's rather cheap. Or just go with P/B. ;) Why would you use a 10-15% hurdle rate for BRK? Because I want to have 10-15% return. Hurdle rate == return rate. What you want to make shouldn't have a place in a discussion about what fair value is. If possible I would like to make 100% annually, but I'm not going to call something that is expected to return less overvalued.

You also run the risk that you can't even prove that you have been hacked/are a victim.

1. Is not fishy, that is healthy competition on who is providing the best price. 2. This is fishy, but legal. It's the result of some bullshit rule that allows market makers to execute orders instead of executing them versus the order book on the exchange as long as they provide a price improvement. The price improvement is usually just 0.0001/share and allows them to front run other liquidity providers. I think this practice should be banned. This is also why brokers get paid a lot of money for (retail) order flow.

Rb, I don't think there is a nice way to say this so I'll just say it: you are completely clueless with regards to computer security. That's no problem since it isn't your job, but it's probably good to realize this before you form an opinion on anything security related. For example, you think hackers have to break through IB's awesome xxx-bit encryption. Sure, they are not going to do that, but that's almost never how someone/something is hacked. There are tons of attack vectors, and usually the goal is to obtain your username and password (for example: installing malware on your pc to intercept your keyboard input, guess weak passwords, hack another site and try if you use the same password, and so many more options!). Once they have acquired this combination they can log in, and do whatever they want with your account. Unless of course you have 2-factor authentication and they also have to acquire something physical.

That's because the futures prices is usually the current price + the cost of storage