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I think when cash went in, they simply pocketed it. That is why there is a $20+ million net cash deficit (this part is completely unexplained so far, and not many people seem to be picking up on it). They didn't buy bitcoin with it, they just made gox coins. When people put bitcoin in, he pocketed most of that too, they got gox dollars that they couldn't withdraw without an extended wait period. Of course, when people started getting suspicious that they can't take their cash out quickly, they started withdrawing bitcoin to try to get money from other exchanges or dealers. I think Mt Gox artificially raised their quoted price of bitcoin to get more people to deposit their coins with them to keep the ponzi scheme going, because the only reason why people still used them was because they had the highest quoted price. Smarter people took a haircut to get their bitcoin out to cash out at other exchanges/dealers at lower conversion rates. When the news headlines said bitcoin was trading at $1000, that was the Mt. Gox price that nobody could actually cash out at. At some point, when people started getting suspicious, they started taking all their bitcoin out and ironically it was running out of bitcoin that blew them up (they could blame government intervention or money laundering laws causing the delays in money withdrawal, but they can't make up any excuse for delaying bitcoin withdrawal). The crazy thing is, I think he's going to get away with it. The U.S. doesn't care because Mt. Gox is located in Japan. The Japanese doesn't seem to really care as most of the people who lost money were Americans, they've only recently started to "investigate" due to all the news headlines, so they have to look like they are doing something. And I bet it is impossible to pin any crime on Mt. Gox because if they are unregulated, they don't need to keep extensive records. Stupidity and incompetence isn't a crime, and that is the story they are going with right now and nobody can prove them wrong. I actually wouldn't be surprised if he ends up launching Gox 2.0 and the same thing happens again.

Does anybody other than me think that Mt. Gox has been a ponzi scheme for a long time? It looked really obvious to me once they started limiting withdrawals. It's hard to imagine that they would continue operating if bitcoins were slowly being stolen from them. Also, hackers should not be able to get to the bitcoins in cold storage that are disconnected from the network. Also, if the leaked documents are true, there seems to be about $20 million in missing cash too. If all the bitcoins are stolen, they should be able to return the cash in the accounts, because hackers cannot get to the cash. I don't think that will happen.

I think he mentions it in almost all his talks to business school students. There are a lot of ways to easy beat the market: 1) Zero time / zero effort. Just buy Berkshire Hathaway. 2) Little effort. Blindly replicate what Buffett (or other known value guru) does on each 13F, regardless of how the price has moved or whether there is new data since Buffett made his purchase. Because you are dealing with a smaller portfolio, you can concentrate more on his highest allocations and likely do better. Historically, this has worked out well because the Buffett picks usually take more than 3 months to play out. 3) Little more effort. Get the top ideas from several gurus and actually do a little research on them. Maybe one of the stocks went up 100% since the last 13F so it isn't as attractive any more. You don't want to indiscriminately buy. Pick from this pool. Even if you make mistakes in your analysis and you are, in effect, blindly throwing darts, you are expected to do as well as the gurus on average.

Believing in the long term future of America doesn't necessarily mean he believes that the current price of American assets (stocks, currency, etc) are attractive. Just as great companies can be overvalued, assets in a great country can be overvalued too.

Seems like Ackman is getting in as a common shareholder instead of a preferred. Very interesting.

That response looks similar to the response Buffett gives to anybody who asks if they can work with him or work for him. When I was younger I wrote Buffett a letter asking if I could intern for him and got a similar response. I'm guessing Mohnish asked Buffett something similar since the letter was dated in 1999, which I think is right before Mohnish started his own investing career.

People think Buffett is working nonstop all the time, but that isn't value investing. He probably spends a lot of time watching movies and TV with a Cherry Coke in hand. Value investing is more about being able to do nothing when stuff is expensive. It is Munger's "sit on your ass investing".

Market returns are not exactly normal or symmetrical. A lot of the market's returns is often driven by a few stocks. How many mutual fund managers have felt the pain of not owning Apple when it ran all the way up to 700+? For every company like Apple, there are a lot of underperformers. If you pick a couple of random stocks in a risky sector, you will most likely underperform the market. But keep in mind, if you shorted Apple, you would have been killed many times over. I remember a Buffett interview where mentioned that out of the 2000 auto companies before cars become popular, only 3 of them survived (Ford, GM, and Chrysler). So if you were to pick a couple of auto companies, you would mostly likely have underperformed the index greatly. If you are actually trying to short such a portfolio though, you will have to deal with the cost of borrowing because such risky companies are often less liquid and hard to borrow. If the cost of borrowing were very cheap, you can rack up a lot of management fees shorting highly speculative stocks that typically underperform the index, but on that one time you choose the next Apple, you get killed.

I think it would make more sense to increase cash, because I can't imagine how the long term rates will go down if the economy improves. If the economy goes bad, then I have cash to put to work when prices go down. Getting the long term treasury bet wrong can result in pretty big losses and I can't predict the economy with high confidence, so I rather pass and wait for an easier pitch than to take a position.

I think BAC was more predictable of the two, especially after BAC announced their cost cutting initiative. They made it clear that they were going back to the basics. It was much more uncertain what Citi was going to do at that point. So in my portfolio, I had a 3:1 allocation between BAC and C. BAC also had more favorable warrant strike prices because the C ones were way further out of the money (couldn't see the margin of safety, although I did see the value). Berkowitz also liked C and owned a lot of C when he had $20 billion AUM (I think he couldn't buy more BAC because it is a broker dealer, or he needed to split it for liquidity reasons), but sold C off when the redemptions came.

Be sure to read the prospectus very carefully and think about the levels of credit risk you are actually taking. If I remember correctly from my quick read through a while ago, you don't actually own the loans. Lending Club owns the loans. So you face the credit risk of the borrower and of Lending Club. Most of these companies (Lending Club and Prosper) are not even profitable yet. So is 14% really that good of a risk adjusted return? VCs would certainly not be satisfied with those types of returns when betting on a new company like Lending Club. Also, the loans are the riskiest at the beginning and at the end, because that is when defaults most likely happen. As long as more loan originations are accelerating, it will mask statistics of defaults that happen at the end in a Ponzi-like manner (because there are far more new loans, the statistics are dominated by new loans that haven't defaulted yet). It's the same trick that was done by banks towards the end of the financial crisis. Peer to peer loans may be a good idea. But, as with all investments, there is no such thing as easy money. It is a very hot area and a lot of retail investors are participating (just look on forums like Reddit's /r/investing, they love it), which is usually a sign that you need to be very careful.

Just have to listen to Munger's lessons on cognitive biases. In this case, incentive bias. Clooney doesn't star in the "safe" movies (ex: the mediocre action movies guaranteed to draw an audience) easy money makers. Loeb wants Sony to make more of those movies and take less risk, which would reduce opportunities for Clooney. Not very surprising that Clooney is against it, even though he is typically a lot smarter than that.

I just passed Level 2! Somehow I ranked on the top on the Ethics section even though I was sure I did poorly. However, it is a relative comparison based on other people who took the test, maybe that says something about the type of people who go into finance.

He mentioned in one of his talks to a business school that he was buying some CDS for something like 1 basis point and talked about how insane it would be to insure anything (even US treasuries) for that cheap. He talked about how the people learned nothing about the financial crisis and now some 25 year old kid is selling him this CDS and will probably get a big bonus before everything goes to hell. I'm wondering which bank this is.

There will very likely be a day in the near future where the U.S. government will crack down on Bitcoin. It is inevitable. When the government makes it difficult for people to convert Bitcoins back to cash (they will likely target the exchanges, and they'll start going after people who use Bitcoin for illegal activities), the value of Bitcoins will plummet.

I think this is one of those things that sounds cool, but is actually completely useless. I'd rather have the phone save battery than to be using the front camera to record my eyes.

That was painful to watch--even if those two stocks worked out, I doubt they would stop until it all came crashing down... According to the comments section in YouTube, one of the stocks mentioned was AMLN, which went from $14 down to $0.43 by the end of 1998. Ouch. But I agree that some people have that gambling instinct that makes them go for the "double or nothing" option over and over again until they have nothing.

Both of them will allow you to get interviews at all the top investment management firms and hedge funds. It is extremely hard to find talent and the most obvious places to look are at the top business schools, particularly Harvard (brand name), Columbia and Wharton (both known for the finance/investing focus). You will get the interviews regardless of whether you choose Harvard or Columbia. I think if you are dead serious about doing investment management, what matters most is that you learn the curriculum before you go to business school. You should try to be like Warren Buffett when he read Security Analysis nine times and memorized it before taking his first course with Ben Graham at Columbia. My brother graduated from HBS last year, and he said the internship interviews start about a month or two into the first year. You literally have no time to learn anything and you are looking for your job already. Ideally, you get into the firm you intend to work at as a intern and then get a job offer from them by the end of the summer or beginning of your second year. If you fail to get an internship at a buyside firm (and I'm assuming you don't have buyside job experience, which is why you are thinking about business school), it will be far harder to get a full-time offer in your second year. The true value of business school is networking and the prestige of the degree that will automatically open doors. Harvard is probably better for the networking, but both will open all the doors in the investment management world. If I were accepted into both and I had to choose between the two, I would choose HBS because there is no guarantee that you can get into Columbia's value investing program, and it would suck to go to Columbia and not be in that program if that is your intended career path (you would be better off going to HBS). Columbia's value investing curriculum is probably far superior to HBS's curriculum which is far more general as it doesn't have the focused program. But the investing curriculum is fluff anyways. You can easily learn it yourself by picking up a book and reading it. I might be a little biased because I went to MIT and started off as a rocket scientist before switching to investment management, so I find all the math in finance to be trivial. But keep in mind that Buffett says that investing should be easy and Munger openly mocks most business school curriculums. My recommendation is to learn how to invest first. Read Intelligent Investor, Security Analysis, and the relevant books. Read some 10-Ks. Reverse engineer some of the investment theses of the gurus. And actually invest your money. According to my brother, you'd be surprised how many kids going to HBS who want to go into investment management never touched Security Analysis or a 10-K. The number one thing you can do in a job interview is to say "I invest my own money, I am currently invested in XYZ because ...," and you can't do that at the end of your first month of business school when recruiting begins if you haven't done it already well before business school. Also, if you went to a good undergraduate school (you probably did if you are thinking about HBS or Columbia), consider skipping business school all together and trying to get into buyside firm directly. Use your alumni network and the career offices at your alma mater. I almost went to business school because I thought that nobody would hire an engineer/programmer with no academic finance background. However, I managed to get some interviews, some of them at elite firms like Bridgewater, because I was able to convince people that I knew how to invest. That is worth more than having a degree. I raised eyebrows by pointing out that, at the time, the former Merrill Lynch preferred trusts were trading at a 25% discount to Bank of America preferred trusts even though according to both prospectuses, they were pretty much the same thing after the merger. If you have a pretty good undergraduate background, and you say something like that, how can they ignore you? You would stand out more than the business school students. EDIT: I Just saw your previous post indicating that you were accepted to both and not just curious about the difference between the schools. Congratulations! I would recommend that you start preparing for your interviews right now, because recruiting season will start in the Fall as soon as you start school. You want to get an internship at a place that you would be happy to work for after you graduate. That would be the smoothest road in.

Most places that I know of don't force you to sell shares, because both buying and selling are direct actions that may be insider trading. Think about what it looks like to outsiders if I had a lot of money in XYZ stock and I join a consulting company that has business relationships with XYZ. I sell all my shares because I am "forced" to do so, and XYZ implodes and the stock plunges. DO NOT sell your shares until you reread all the rules and understand them, because selling them might be a violation of the rules (it would be at the firm that I work at). At most companies, open-ended mutual funds like Fairholme are okay, but read the rules carefully. If you can't own any of the stocks directly and you can't own mutual funds, then you might be happy owning the financials ETF. Remember that Berkowitz is betting on the entire financial system. If the BAC and AIG thesis plays out, JPM, WFC, C, GS, MS, etc will all do extremely well, and those big banks make up most of the financial sector. Remember that Berkowitz had or still has them in some form (warrants or common) before his clients withdrew their funds.

You can also see that FAAFX has an asset allocation that is closer to what I think Berkowitz would allocate all his money if it were completely private (meaning a far higher position in various bank warrants and probably a little more BAC relative to AIG). Berkowitz said in recent interviews that he likes AIG's liquidty, and that is probably the reason why the AIG to BAC ratio in FAIRX is a lot higher than it is in FAAFX (which has a far more levered position in the warrants). BAC is fairly liquid, but far more volatile than AIG, particularly to the downside whenever there are negative headlines. FAAFX probably has more of the older long term investors and less of the "hot money", so he can afford to be more aggressive with the asset allocation. I can actually imagine that Berkowitz would, if he were only managing his own money, allocate as much as half of his portfolio to a basket of TARP warrants, because he seems to have that much conviction in financials.

To be fair to a lot of hedge funds that are not 100% net long, because they have some short positions, they are expected to underperform in a market that goes straight up. However, it is very concerning when some of the funds that are levered long end up underperforming in an up market. If I remember correctly, Paulson was making a pretty big bet on a US recovery a while back and he got killed on BAC and C, and he seemed to have gotten out right when those two stocks bottomed and now his original thesis is actually playing out. His Advantage Plus fund is down about 60% in two years when the market is up about 25%. People who got in 2 years ago have $0.40 instead of $1.25, there is almost no realistic compound rate where they will ever make their money back. Investors should also raise their eyebrows when the black swan or tail risk funds lose 10-15% in one year. That is some really expensive insurance if you are trying to protect against a once every 20-30 year event.

Credit scores seem to be more of an indication that you are willing to take on debt and pay interest. If you have too much assets and too much income, then you pose prepayment risk. What they want are people who have stable jobs and the type who believe it is their moral obligation to pay off debt (rather the one people who are happy doing strategic defaults). Logically, bankruptcy should actually increase someone's ability to take on new debt and pay off new debt. If the income is the same, would you rather loan money to someone who has $1M of debt or someone with 0 debt? Funny thing is, the former is likely to have a great credit score while the latter has a terrible one. It might actually be a red flag if someone knows their exact credit score off the top of their head. I have no idea what my credit score is because I don't borrow money (except on my credit card that I repay immediately).

I have been doing the exact opposite of what Whalen says for the last few years now, starting with when he was saying that Buffett was insane for buying WFC in 2009 (I think Whalen said that WFC was the worst bank of all the big ones, now history shows that it was probably the best big bank). Now that Whalen has switched stance, I am feeling paranoid.

This agrees with what I have been seeing in the funds that I work for. Our funds are crushing the index this year, generating pretty big outperformance. But our assets under management if plummetting. It really sucks to be up 25% and have -10% in total assets under management in the same period. I mean, if you have $1B under management and you gain 25%, you would think that you would have at least $1.25B under management (or more due to new customers being attracted by outperformance). It would be quite disappointing if you have $0.9B under management instead. It is certainly disappointing when you are paid by assets under management, which means you are taking a pay cut on a year you make +25%. Maybe people have wised up and they are just rebalancing and getting out after seeing their stocks run up so much. In theory, it makes more sense to have a lower weight in stocks today than it did in 2009. But bonds have been doing pretty well too, and the amount of assets in bonds relative to stocks is pretty shocking considering how low bonds yield. At least, this is an indicator that we are not at a top yet. That happens when funds come flooding back in.

While Amazon makes the least money, I think it is the safest of the 3. Nobody else can recreate their distribution network without a ridiculous investment. Apple is probably the most vulnerable (despite being the most profitable right now) of the three. Their products become outdated very quickly. Remember when iPods were extremely popular? I don't know many people who carry MP3 players any more, it's all embedded into phones (which Apple happens to dominate too). Stuff changes so fast in tech hardware. Five years down the road, Apple's #1 product probably will be something that is not the iPhone or iPad. Google's data centers are some of the most advanced in the world. It's not cheap or easy to replicate. But it is possible for their search business to lose dominance, but I think they will find products that dominate due to the fact that they can do more computing than anybody else, although those products might not be nearly as profitable as search.