netnet
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Very interesting guy. Sad to hear. I heard he married up.
Indeed he did. Munger talks about this--that Lee married the only girl in the class smarter than he!
The tribute was quite nice.
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Unless, it's your own hedge fund ;)It makes little sense to invest over long periods of time with a hedge fund and pay those types of fees.
If you went through it year by year using book value then you would may find that the 2 and 20% would eat even greater into the outcome.My rationale for this is that the 2 and 20% take a greater haul on your good years. Then there is the actual down years where you still pay 2% of AUM, but your losses are not 20% repaid. Then there is trading taxes which Buffett has shielded Berkshire holders from.
Does this make sense mathematically or am I out to lunch?
It depends whether the book value or the stock price is more volatile--and whether there are any so called high water provisions along with the 2 and 20. On a straight 2 and 20 with no high water, the investors get creamed.
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I have a membership. It's good for people with smaller portfolios and the discussion is decent. It's cheap so I'd say it's definitely worth it. But if you already have a separate gmail account with google alerts with good automatic search strings updated daily, you might find most ideas redundant.
So the search string is buyout, arbitrage, spinoffs?
Netnet
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Biaggio--thanks for the posting. I have attached the interview as a pdf for ease of use.
Re: what to buy to insulate yourself against dollar depreciation. Twacowfca has good points about insurers.
Also, assets denominated in strong currencies or that get payments that rise with inflation. It is interesting to note that one of the best investments in dollar terms in the 60's to 80's was German Bonds! Buffett's discussion in the AR's during the 80's also points the way-- asset light companies that have a toll like function--Washington Post for example. You just need to take that framework and update to the times.
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We would buy some nearly every day and swap stories of what prices we got. I remember getting an email from him one day stating that at closing he got 50 contracts of the $160 strike 2008 for 80 cents. Just imagine... the stock broke $300 before that expired.
That was a great trade. Now here is a question, even with hindsight. What have been a reasonable amount of one's portfolio to put in the trade. Given that the position could have gone to zero.
Personally, I would think it would be 0.5 to a 1% position, maybe 2%. I just can't see putting more than that in options.
Thoughts?
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Bronco - this is the weirdest thing. We disagree so much on the analysis and rhetoric but your suggestions are pretty easy to accept. Again I think that's a good idea. I dont think we should subsidize plant closures but it doesn't make sense to trap capital abroad (MSFT, WDC). I like carrots and sticks though.
Agreed.
The Dems in my opinion have dropped the ball. How do you lose business support (after bailing them out) and the populist angle (The Tea Party has that market) is beyond me.Agreed. It's a mystery to me as well. Although I don't think it will happen, but should the Tea Party run the Republican Party and they win the White House and the Congress in '12, we will be in for interesting times. You won't see Russia from your doorstep, but you may see disaster from your roof!
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These are ad hominem arguments that don't address the substance of what D'sousa has discovered. The arguments go something like this: Dinesh allegedly believes: A,B,C,D. Therefore, his model that he claims will explain: F must be of no account, and we should dismiss it without even looking at what he says.
None of these emotional attacks is a logical refutation of his model.
No on the contrary. You cited D'souza per se as a reputable, serious scholar, etc.. I am merely giving you his work. Ad hominem attacks by definition bring up irrelevant issues. If you tell me he is credible because of his wise opinions and I show you he has some crack pot ideas then this is hardly irrelevant. It's hardly emotional, as you put it, to cite an author's views, particularly if it shows his general methodology. Remember you have to read in context. Thus, you read, for example Mein Kampf a certain way because Hitler wrote it. So too you read Freud, in the light of both his other writings and Vienna of the time.
Now on to his argument. D'souza has created (as he has in the past) interesting stories via speculation and selective quoting, (again Dinesh is a brilliant polemicist), so from Media Matters:
CLAIM: Obama sees his father as a "hero" who "represented a great and noble cause"From D'Souza's Forbes article:
So who was Barack Obama Sr.? He was a Luo tribesman who grew up in Kenya and studied at Harvard. He was a polygamist who had, over the course of his lifetime, four wives and eight children. One of his sons, Mark Obama, has accused him of abuse and wife-beating. He was also a regular drunk driver who got into numerous accidents, killing a man in one and causing his own legs to be amputated due to injury in another. In 1982 he got drunk at a bar in Nairobi and drove into a tree, killing himself.
An odd choice, certainly, as an inspirational hero. But to his son, the elder Obama represented a great and noble cause, the cause of anticolonialism. Obama Sr. grew up during Africa's struggle to be free of European rule, and he was one of the early generation of Africans chosen to study in America and then to shape his country's future.
[...]
In his own writings Obama stresses the centrality of his father not only to his beliefs and values but to his very identity. He calls his memoir "the record of a personal, interior journey -- a boy's search for his father and through that search a workable meaning for his life as a black American." And again, "It was into my father's image, the black man, son of Africa, that I'd packed all the attributes I sought in myself." Even though his father was absent for virtually all his life, Obama writes, "My father's voice had nevertheless remained untainted, inspiring, rebuking, granting or withholding approval. You do not work hard enough, Barry. You must help in your people's struggle. Wake up, black man!"
Kurtz: Dreams "offers a largely critical portrait" of Obama's father. Kurtz wrote on September 16:
D'Souza says his thinking about Obama's influences draws heavily from the president's memoir, "Dreams From My Father." But that book describes a young man's struggle to understand his African roots and the father he never really knew, and offers a largely critical portrait of the Harvard-educated man who left his family.
Weigel: "Everyone else" who read Dreams "saw Obama burning with disappointment in Barack Sr." In a September 13 review of D'Souza's forthcoming book, Slate.com's David Weigel wrote, "While everyone else read Dreams From My Father and saw Obama burning with disappointment in Barack Sr., D'Souza sees a man burning with 'hatred derived from the debris of the anti-colonial wars.' "
CJR: Did anyone come away from reading Dreams ... with the idea that Obama thought his father was a hero? I sure didn't." In a September 13 Columbia Journalism Review post, Ryan Chittum called D'Souza's article "a fact-twisting, error-laden piece of paranoia." The post further stated, "Did anybody come away from reading Dreams From My Father with the idea that Obama thought his father was a hero? I sure didn't."
Reason's Tim Cavanaugh: Dreams is "a narrative of Obama's non-relationship with his father." Tim Cavanaugh of Reason wrote on September 12:
Dreams From My Father is in fact a narrative of Obama's non-relationship with his father. The whole point of the book is that the author's paternal heritage is delivered in fragments during brief and usually troubled encounters. While Obama goes on about his father's misfortunes -- many of them clearly self-inflicted -- in Kenya, there is no evidence for the claim that the elder Obama bequeathed his son a coherent or even a partial political philosophy.
D'Souza crops passage from Obama's book to omit portion where he discussed shortcomings of his father. D'Souza quoted a passage from Dreams from My Father in which Obama writes, "My father's voice had nevertheless remained untainted, inspiring, rebuking, granting or withholding approval. You do not work hard enough, Barry. You must help in your people's struggle. Wake up, black man!" But D'Souza omitted the following paragraph, which states: "Now, as I sat in the glow of a single light bulb, rocking slightly on a hard-backed chair, that image had suddenly vanished. Replaced by...what? A bitter drunk? An abusive husband? A defeated, lonely bureaucrat? To think that all my life I had been wrestling with nothing more than a ghost!"
From Obama's book Dreams from My Father:
All my life, I had carried a single image of my father, one that I had sometimes rebelled against but had never questioned, one that I had later tried to take as my own. The brilliant scholar, the generous friend, the upstanding leader -- my father had been all those things. All those things and more, because except for that one brief visit in Hawaii, he had never been present to foil the image, because I hadn't seen what perhaps most men see at some point in their lives: their father's body shrinking, their father's best hopes dashed, their father's face lined with grief and regret.
Yes, I'd seen weakness in other men -- Gramps and his disappointments, Lolo and his compromise. But these men had become object lessons for me, men I might love but never emulate, white men and brown men whose fates didn't speak to my own. It was into my father's image, the black man, son of Africa, that I'd packed all the attributes I sought in myself, the attributes of Martin and Malcolm, DuBois and Mandela. And if later I saw that the black men I knew -- Frank or Ray or Will or Rafiq -- fell short of such lofty standards; if I had learned to respect these men for the struggles they went through, recognizing them as my own -- my father's voice had nevertheless remained untainted, inspiring, rebuking, granting or withholding approval. You do not work hard enough, Barry. You must help in your people's struggle. Wake up, black man!
Now, as I sat in the glow of a single light bulb, rocking slightly on a hard-backed chair, that image had suddenly vanished. Replaced by...what? A bitter drunk? An abusive husband? A defeated, lonely bureaucrat? To think that all my life I had been wrestling with nothing more than a ghost!
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Don't know about global warming, D'souza is also an intelligent designer as well. (From your tone I suspect you doubt those are his views, well just read him. Now, all of this is not to say he is not a really smart guy, he just happens to believe in a lot of hogwash as most ideologues on the left and right do.
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Dinesh D'sousa isn't a cocktail party kibitzer.
He is precisely a cocktail party type. I grew up in D.C. and those psuedo intellectual members of the chattering class are a dime a dozen. I will leave you with some of his better comments:
- When he was at Dartmouth he outed some closeted gays
- Later he claimed that American Bishops were being unknowingly being manipulated by leftists and they were being snookered into not supporting wars and and militarism.
- He has claimed that slaves in America were treated well because they were property.
- That Abu Ghraib was the fault of liberalism
- That liberals were responsible for 9/11
- and on and on...
I'm not making this up. He is one of those Munger talks about being blinded by ideology.
- When he was at Dartmouth he outed some closeted gays
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Incidentally, MAJC has just announced that it signed a definitive agreement to be acquired by Bayside Capital for $0.45/share.
http://finance.yahoo.com/news/Majestic-Capital-to-Be-bw-3472550300.html?x=0&.v=1
Do you know why the market is so skeptical about the transaction? It's trading at a 22% discount to the offer price.
By the way, Sanjeev, your patience with people like Rick_V is way beyond my capabilities.
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If there is insider selling from multiple players, I don't buy. Insider buying is always nice, but is not an infallible signal--Ken Lay's purchases at Enron come to mind. If the company checks out on other dimensions, then insider buys is a nice confirmation.
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netnet - I think you got it wrong.
Well we clearly disagree here.
To your point on Munger - why the hell would any foreign corporation open a plant here in the U.S.? That is the big problem with being protectionist and anit-business and decreasing incentives for capital allocation.China quite regularly penalizes capital and capitalists, yet we, running dog fools, to quote from another era, are willing to give capital and even our IP (intellectual property) to open plants there. Go figure.
To my point on investors - say you own a pharma company. Let's say it merges with another company. One US plant closes and an Irish plant is expanded. Do you feel the U.S. has the right to tax that Irish plant?Near as I can tell you are forgetting the little matter of externalities, i.e. cost that accrue to the country and labor force. Again, why should these be subsidized. One can make a theoretical argument for subsidizing opening a plant (as opposed to the Chinese method of force) but to subsidize a closing????
Do you think this situation happens in the real world? Do you like your investments getting punished?I'm more concerned about people than capital frankly. Taking out a dollar bill and shooting it kind of pales in comparison to taking Tibetans or even a capitalist who has made a minor transgression and shooting them, that would be China not Chicago! Don't get me wrong I love to make money but I'm not going to go to the barricades and shout liberty and capital. (If I were the shouting type.)
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Where is written that anyone has the "divine right" to write off costs? It is not a human right! The tax code is a political expression for good or ill, and I for one see no reason why a company should be able to expense that which is deemed to be a detriment to the country. By analogy, cigarettes are taxed relatively heavily in North America. So too (tax) Depreciation schedules vary. Is my writing off a plant and equipment a right. I think not.
There is another argument about how the tax code distorts markets in unplanned ways, which is certainly true, but not your argument.
Your political perspective is that domestic tax payers should subsidize plant closing. (Yeah and it creates jobs, just not in the U.S.) Okay, this is fine to believe, but that does not mean that to oppose this is per se business unfriendly, any more than say having any tax is unfriendly. Taxes are the price you pay for civilization.
To echo Munger, why the hell should the US be helping China grow and supplant us? They seem to be able to do this quite nicely all by themselves!
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I don't think of people's behaviors in terms of "how did they fool us". Rather I choose to view it as "what prompted them to behave in such a way?" Your question should be "Why did Sardar do what he did?" And the revelation to everyone involved, including Sardar, is simply "Was it worth it?" Cheers!
Remember Parsad, to paraphrase Munger, the incentives are often there for CEO's to be too greedy. So it takes a special CEO not to indulge. Perhaps the fault was in expecting Sadar not to succumb and be that special CEO. But the point remains for me why did I not anticipate/see the behavior coming? Or should I expect greedy bastards everywhere?
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Cant Biglari be similar to buffet with an inflated salary? Only thing that has changed since last year when there was biglari mania is the comp plan. His returns are still pretty stellar.
The problem with an inflated salary is that he is stealing from his partners. And if he does it once, what is going to stop him from going back into the till for seconds? And yes his returns are good, but he is lopping off shareholder returns to augment his.
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In the interests of improving myself and my decision making, I was trying to figure out why and how Biglari fooled me and by extension us. (I also had the opposite problem in that I was suspicious of Watsa, unjustifiably so.)
So I have the following reasons for being fooled:
1) I wanted to find a young Buffett, which is not in and of itself a bad thing, but you often think you find what you want or at least twist reality so that you think you have found it.
2) A bit of group think, which is not a critique of this board, as a thinking adult (hopefully) I have to assess for myself whether a stock or the CEO of a company is the "real deal".
3) I must admit I never actually met him. (Of course, I've never met Buffett either, unless you count going to meetings.)
4) Track record was too short, i.e. not enough evidence.
I guess the fundamental upshot is the lack of evidence, #4, is the real reason, although all the other reason contributed, group think certainly did play a role. Other than his over weaning greed and megalomania, he still might be a decent jockey, but Buffett he ain't.
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Pardon the ignorance of non-Canadian, but I don't know anything about the business career of Paul Desmarais and a quick search and his Wikipedia article were not very informative. Apparently someone on the board, Hugh, was quite interested. What is a thumb nail version of his career? Obviously he is extremely well connected, but that is no reason to read a biography of the guy.
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One of the reasons I started this thread was to get more ideas about where to look. Thanks BenHacker for the FDIC SEC mismatch. I smacked my head on reading that because I have actually gone through FDIC filings, so I should have thought about the mismatch.
On generating ideas--where do people find the best arbitrage and liquidations. I do a periodic news search, with liquidation, spinoff as the search term; this is a bit tedious,which is okay, but it is not particularly efficient.
Think about this for a minute. If one could do this over 10 years one would grow from 100 k to 5.6 M; another 10 years and 332 M.It is not doable. No one has a public record of success picking stocks like this.
Sorry, but to paraphrase Taleb, saying there is no black swan does not mean no such exists. In this case the "swan" is compounding small amounts of money, and small amount is a crucial part of the point. It is unlikely and hard to compound at that rate but not impossible. Apparently we have our own Ericopoly as evidence. Furthermore, the point was that above a certain amount say 10m, most agree that it goes from improbable to well nigh impossible.
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50% can be done in a low-risk way, but god would it be hard.
There is no doubt that it is hard. Munger has a particularly apt quote about this, something to the effect that you can't get there with smooth, uncalloused hands. You have to work really, really hard. But then he says (rightly) that about any well done endeavor!
One interesting question what kinds of returns would a young Buffett or Munger get today? Or are the claims of 50% just a kind of hindsight bias plus the 70 years of experience? We do have Greenblatt, as an example, who seemed to get those kinds of returns.
I didn't know Carnegie was an investor, I'll have to pick up a biography. Thanks for that.Carnegie's annual compounded return was 23% after he went into the steel business, but his compounded return was much higher early in his investing career.
That's why I use the Magic Formula as my hurdle rate. (Unfortunately, if the S&P is stagnant for another decade, 10% better than the S&P is good, but 10% per year isn't great! But it is better not to be greedy)I think if you're consistently outperforming the S&P by 10-15% per year, you don't need to change a thing, you'll be rich in no time. -
Buffett has famously said that he and other great investors can and would make 50% per year on small sums, i.e. on 1 million or so. (See article/blog quoted below)
Buffett, of course, says that his (and other great investors') returns would drop off significantly with greater sums--say 100 million. His point is that your universe of stocks and things to do varies inversely with the size of your portfolio.
Now personally, I use the Magic Formula returns as my hurdle rate--generally the Magic formula beats the S&P by 10 to 15 points per year. (And I assume that realistically Buffett really means that he or other "super investors" would beat the S&P by 30 to 40 points per year.) but an 30% to 40% hurdle, well let's just say I'm not there yet!!
So now my question is, for those of you willing to divulge, in what obscure corners of the markets are you looking to get outsized returns? As The thread on Tronox indicates, bankruptcy plays are one area.
Thoughts?
Netnet
Here is the first part of the blog found at: http://valuevista.blogspot.com/2007/06/warren-buffett-50-returns.html
Warren Buffett -- 50% Returns
Much attention has surrounded reports that Warren Buffett said he could generate 50% returms on small sums of money. Typically, three immediate questions arise:
Did he really say that? Did he really mean it? And, how would he (or me or my favorite money manager) do it?
Looking at the record of his comments, it's pretty clear that he said it (and repeated it) and he really means it.
Buffett seems to have got the set this ball rolling in 1999. At that year's BRK shareholder meeting, he was aked:
Shareholder: Recently, at Wharton, Mr. Buffett, you talked about the problems of compounding large sums of money. You were quoted in the local paper as saying that you're confident that if you were working with a small sum closer to $1 million, you could compounded at a 50% rate. For those of us not saddled with a $100 million problem, could you talk about what types of investments you'd be looking at and where in today's market, you think significant inefficiencies exist?
Buffett: I may have been very slightly misquoted, but I certainly said something to that effect. I talked about how I polled this group of 60 or so people I get together with every couple of years as to what rate they think they can compound money at if they were investing small sums: $100,000, $1million, $100 million, $1 billion, etc. And I pointed out how the return expectations of the members of this group go very rapidly down the slope.
But it's true. I could name half a dozen people that I think can compound $1 million at 50% per year -- at least they'd have that return expectation -- if they needed it. They'd have to give that $1 million their full attention. But they couldn't compound $100 million or $1 billion at anything remotely like that rate.
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Although you indicate that you were not paying close attention to the covered call discussion. Can you elaborate on his strategy. You seem to say that he wrote them 1 month out and then bought 30 before expiration! So that can't be it.
thanks for the notes!
Netnet
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I think it's amusing that Jim Rogers has been talking about agriculture and gold for years, yet some here regard him with a little derision....
Because Jim Rogers is like a one-trick-pony (commodities), Michael Bury is not.
Rogers is many things; a one trick pony he is not. He made his money w/Soros in the Quantum fund way back when. I believe he was up 40x in 10 years.
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You can always buy some shares of DJCO and see Charlie up close. This year, there were only 30 people at the DJCO's annual meeting. The DJCO meeting was held in a conference room at DJCO's HQ downtown LA.
What time of year is this held? Does Charlie actually speak? I've looked at their site, but the investor relation sections simply links to the SEC filings. Thanks!
I was wondering that myself, whether or not Charlie talked at length during that meeting.
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Here is another excellent article from Mauboussin. (For those of you who do not know him, he is the "thought leader" at Legg Mason.) This article is a continuation of one of the themes of his book Think Twice, separating luck and skill.
Excellent Carol Loomis & Buffett Interview
in Berkshire Hathaway
Posted
What's the tough question you have in mind?