John Hjorth
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Posts posted by John Hjorth
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Just about a month ago, I received the book from Amazon.
I must admit, that I have severe problems with this book. I don't "like it", as posted earlier in this topic by Jeff. To me, there is a material difference between "don't "like it"" and "dislike it".
I have to carry back Rishi's review on Amazon to here - I hope you forgive me for doing this, Rishi:
Jeff Hood in his book Inefficient Market Theory goes beyond classical value investing of buying a dollar for 50c. In my opinion, it provides a solid framework for identifying great investments.In Part I of the book, Jeff describes the criteria required for a crowd to be "wise" -(1) proper incentives,
(2) independence,
(3) diversity of opinion,
(4) decentralization of decision making,
(4) knowledge, and
(5) rationality.
In the financial markets, all of the above criteria but knowledge are not met to varying degrees. This causes financial markets to be inefficient on certain occasions. This is contrary to what has been taught in academics - the efficient market theory - which holds the proposition that financial markets are always efficient.
The difference between markets being frequently efficient and always efficient is night and day. The opportunity to profit arises from this difference. Furthermore, Jeff describes lack of rationality as one of the primary reasons for the inefficiency. These arises from psychological biases such as greed, fear, loss aversion, uncertainty and recency bias, affect, endowment effect, anchoring, and herd mentality.
In Part II of the book, Jeff lays out a framework for profiting from the "Foolishness of the Crowd" in financial markets. Buying simply based on valuation discount is not enough. This is equivalent to what Warren Buffett calls "7-foot hurdles". Instead Jeff proposes a three legged framework that makes the investing decision making equivalent to Warren Buffett's "1-foot hurdles".
(1) Classical value investing - buy at a margin of safety based on fundamental analysis.
(2) Identify the variant perception, an intelligent and well-informed contrary opinion to that of the crowd, and the inefficient rationale, an understanding of "why" the crowd is incorrect,
(3) Take advantage of the wisdom of a smaller truly wise crowd of respected value investors (a.k.a cloning by Mohnish Pabrai).
Jeff supports his framework by citing many examples from the past - American Express in the 60s, Johnson & Johnson from the 80s, Wells Fargo from 2008, Disney from 2009, AIG and Bank of America from 2011, and Berkshire Hathaway from 2011.
Jeff is a practitioner of this framework and many of the recent examples are from his portfolio.
In my opinion, this is one of the most underrated books on investing. [My emphasis, - and I'll second that!, John]
I highly recommend it.
I'm trying to express, that I consider this book - for me, about five years into this non-zero game - the lever to get to be a better investor, in a style going forward, that fits me personally.
It's fairly easy to read the book, I suppose, but to read it, with the intent to adopt, adapt and thereby improve as an investor, is a totally different matter.
It's exhausting - very, - but at the same time good!
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The Lady of the House has actually taken notice of the process going on with me.
She: "What is it with you, and this book, that is following you everywhere?"
She has just noticed, that if my name was Linus van Pelt, this book would be my security blanket.
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The quote in this topic of Rishi's review is meant as a compliment. So are my other personal comments.
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The next thing is that I consider the price of the book ridiculous, compared to the value it provides to the reader. - That's meant as a compliment, too.
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Thank you for sharing your inner thoughts about investing here - in this book -, Jeff.
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Thank you for doing this split, longinvestor, - it's a great idea & initiative - for future ongoing discussion and information sharing about the insurance parts of Berkshire here on CoBF.
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I have attached a screen shot from the latest Berkshire Q-10, p. 24, lower part - please focus on the "Berkshire Hathaway Reinsurance Group" line.
What do you see?, and what do you think about what you see?
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Thank you, gents,
I'm actually trying to educate my self a bit on this matter by reading a lot of stuff about the situation. So I try to post what I find on my way, that I suppose could be of value for my fellow board members, too. I try to keep my posts right now without expression of personal opinions. However, I must say, that I also have expressed in another topic my concerns about this situation, and the needle in the feelings spectrum for me is moving in the "worried" range right now, with velocity towards "scared".
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This is definitely very, very bad & ugly.
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As always, I take your posts too seriously, Sailor!
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Edit 1, & off topic:
I really hate your investment style, being invested in NVO and a PBM at the same time is to me bordering to racketeering.
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You are being fooled here, DooDiligence.
The Twitter account is not confirmed.
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Great stuff, thank you for sharing, rkbabang.
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globalfinancepartners,
During the years, it has come to my attention, that you have a really deep and detailed knowledge, understanding and view of insurance operations of Berkshire [consistently & continuously hard work, to cut it to the bone .... - out of pure interest].
Personally, I would really appreciate, if you would share with me and our fellow board members the temperature of the Berkshire insurance operations, as you perceive them right now.
For my part, it would be really appreciated. We have a separate topic for the 2017Q2 on here, that I hope you will use, instead of this "general news" topic, so that what is on your mind does not "drown".
Thank you in advance, if you're in on it.
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I sincerely hope you buy them all, Jurgis.
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I haven't been that worried since the havoc in Europe after the fall of the Iron Wall.
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... I picked up Electronic Gadgets for the Evil Genius (looking forward to building a hydrogen howitzer...)
It reads like you are having a bad day today, DooDiligence.
I hope that's not the case. In case, just do a bit charting of your NVO US ADRs today on your Mac, and you will likely feel better.
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... Read it.
Aye Aye, sir. [: -) ]. Ordered the book the day you posted that, just got confirmation, that it'll arrive tomorrow. - Never go down on unread books [margin of safety, in some weird kind of way]!
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My visit to Indexville ended the weekend before the last, while reading The latest memo from Mr. Marks : There They Go Again . . . . Again.
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Greg Warren of Morningstar, who is quoted here represents the peanut gallery of analysts on the stage@the annual meeting. He sounds like a pompous ass when he opens his mouth. His bone to pick comes from the fact that BRK has blown right past his estimate of FV. Believe he had that at $ 250K for the A.
A couple of years ago, he asked Buffett if there would be a share buyback at the1.2x threshold, between quarterly earnings reports and Buffett clearly said no. That didn't stop Greg from reporting that "Buffett confirmed to us that they would buy shares back before reporting the BV to the public". That's kind of stupid because the exact BV number is in all likelihood unknown to anyone, including the CFO of BRK until just prior to release.
Greg's words are worthless to me. As far as I'm concerned, he wastes my time with the 6 questions he does get to ask at the annual meeting.
Hilarious. Love it. Made my day. [ : - ) ]
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I'm in your camp on this, longinvestor,
Furthermore, - say, you try to pick it up relatively cheap for two years - you are then subject to "the risk" of a large Berkshire aquisition in that period, creating a jump upwards in earnings going forward, which most likely will influence market price upwards, generating a miss out for the forward net Berkshire buyer.
We know the Oncor deal is in the mold right now, but generally we do not know what is going on at Mr. Buffetts desk.
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It's actually great advice, rb. Thank you. [: - ) ]
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Thank you for your elaboration, Uccmal, - It's much appreciated.
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On the 1st August I decided to do calls on basically all cash in time deposits in the family for liquidation, thereby pushing the cash into being investable at our investment bank, where the cash will pull nothing, the opportunity cost below 1 per cent. I will do the calls next week.
I expect to add a bit more to Berkshire in 4th quarter, if it does not run up too much. There are a few positions, that I also would like to reduce, because I consider them fragile in a correction or crisis. The rest of the long term positions I'm reasonable satisfied with, however not all positions are yet the size I want going forward, but the prices offered by the market right now are not reasonable to me, so I'll let that go for now.
After that my expectation is to do nothing - just to wait.
I don't know yet if I can do that. I will find out. I think it's time for me to learn to do so, to be prepared.
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Added more BRK.B in the opening today.
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[Yes, at about all time high for BRK.B, but USD/DKK, and USD/EUR is now down more than 10 per cent this year].
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I bought more Berkshire b shares yesterday and today.
Why are you buying shares in a company in terrible industry heading towards cyclical bottom?
Just kidding and teasing oddball. 8)
HA!! Although that argument could be made for some of BRK's holdings.
It is to me true. There is no such thing as a free lunch.
- Good luck, Charlie - We are in the same camp.
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Full respect for your last post, Artha158,
It is quite symptomatic for this board, that the daily ongoing discussion right now has switched to the discussion of the most crappy capital allocation of all: Cars. [Fellow board members active in that particular car topic: Please take no offense here].
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Pete & Jurgis,
The more I think of it, the more I come to the conclusion, that it's actually true what you are posting. It's so Fairfax specific on this board - for historical reasons.
It's cyclical push back on the board. I love it, because one always learn something from it, no matter where the sentiment pendulum is with regard to Fairfax.
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With Berkshire it is totally different on this board - Imagine the mud slinging from the Berkaholics that would take place if some presumptuous board member would dare to post in the separate Berkshire forum that he or she has started to short the heck out of Berkshire! - Perhaps even calling it a turd! Sanjeev would become soo busy! lol.
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Now back to Fairfax.
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You are just the concept of an extraordinary good person, Joel. The Fairfax story over time is just almost as impressive as the Berkshire story.
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Probably, Does it really matter?
At some point, something (see Mauldin article above) that has nothing to do with anything particularly important, will be the trigger to fix all this. By all metrics US markets are expensive. They are drunk on cheap oil, cheap debt, too much indexing, and phony EPS numbers.
2007/08 was an interesting case because markets were not that frothy. The correction came from a totally different direction. The ensuing panic had little to do with the S&P as a whole, or its valuations. The financial sector was obviously unsustainable (in retrospect) but we didn't have any idea of the extent of the damage until we were well into it.
So, put me in the category of who knows. But when I start thinking I should be buying Amazon, Goog, Facebook, Apple and so forth maybe thats a sign we are nearing a top.
I had to read your post three times, Uccmal, to get it it right. [Hopefully I got it right after the third reading.]
It is about being prepared for the next downturn. [ref. your separate topic about that.]
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Welcome back posting. If you're still in France, please enjoy your stay onwards with your family. If you're back in Toronto right now, welcome to reality. [ : - ) ]
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Added to JPM today.
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Buffett/Berkshire - general news
in Berkshire Hathaway
Posted
This is an entity, that connects economic idiots with people with cash, to make money. These entities run lean, and internet based in most cases. You can complain by leaving - by paying your balance [if you can] and close the card account.
The above is meant in general terms.
I'm not by that calling you an idiot, mbreject, nor even indirectly implying that you are.
In our household we have a few of those cards, too, because of the built in perks. I can't even get automated monthly payment in full of the balance [because the card issuers don't want us to pay monthly balance in full, so that they can charge interest on the balance], so I pay them manually - monthly, and in full, so we get our perks -, without any interest expenses on the card.