vinod1
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Posts posted by vinod1
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You're buying the same stock at the same price WEB would pay. How often does that happen?
Over the past 5 years: WFC, BNI, JNJ, USG, KFT, WMT, arguably even BAC at its lows. :)
Vinod
Yeah, but were you able to buy those before he did? Point is, he's telling the world, "I'm going to buy this stock at this price because its really really cheap", he didn't do that with BNI or JNJ or WFC.
He did tell the world that those stocks are cheap by buying aggressively and these stocks are available at lower prices after these purchases were reported.
Vinod
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You're buying the same stock at the same price WEB would pay. How often does that happen?
Over the past 5 years: WFC, BNI, JNJ, USG, KFT, WMT, arguably even BAC at its lows. :)
Vinod
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Why do you think we should not mix morality with good economic decision?
Why inflict suffering on the rest of the population via economic turmoil by bankrupting the companies, etc. Even though the policies bailout some of the people who took the risks, we should not let it implement policies that would benefit the overall economy.
We have been down this road before in 1930's. What you are proposing is what Herbert Hoover has tried with disastrous results.
http://www.mannmuseum.com/american-policies-during-the-great-depression/2/
Contemplating the wreck of his country's economy and his own political career, Herbert Hoover wrote bitterly in retrospect about those in his administration who had advised inaction during the downslide:
The 'leave-it-alone liquidationists' headed by Secretary of the Treasury Mellon felt that government must keep its hands off and let the slump liquidate itself. Mr. Mellon had only one formula: 'Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate'. He held that even panic was not altogether a bad thing. He said: 'It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people'
As to Japan, I agree it is not sustainable. Just saying all the "Doom and Gloom" about Japan has been 100% wrong for the past 12 years. It is likely to be wrong going forward as well as Japan would find a way to muddle through. If I had made a prediction and been wrong about something for 12 years, I would reconsider the thesis. You need to be able to put some realistic time frame and say if you was not proven right by that time, you am probably wrong. To me the Doom and Gloom thesis about Japan fits the bill.
Your statements contradict themselves: “Fed can buy as many bonds as it wants.” And “the only way inflation is going up is if economy is booming”. That’s not possible in my opinion; monetization of the debt is clearly inflationary in the long term. We live on earth and there is gravity. Again I grew up in France in the 80s and I’ve seen inflation. Believe me it was not due to a booming economy…
Inflation has to come from two sources
1. Cost push - via increase in input costs typically raw materials. Since services are taking up a larger share of the GDP, any such cost push inflation is likely to be modest. It might be a tad high but that would be within acceptable range.
2. Demand push - Inflation should come only when consumers are able to spend more money on goods/services. Unless government directly stuffs everyone's pocket directly with currency, literally throwing money from Helicopters, the only way consumers would be in this position is when economy improves and unemployment drops thus putting pressure on wages.
In the 1970s it is a combination of cost push (oil) and wage contracts/plensions that had built in inflation adjustments. Both of these risks are dramatically lower now - commodities make smaller percent of GDP; Lower percentage of workforce under unions, lower percentage of workforce having any built in wage inflation clauses, lower number of people with pensions that have built in wage increases. All this makes inflation less likely. Fed is going to suck up liquidity when it needs to i.e. when economy starts growing rapidly.
You are basically assuming that just because debt if monetized it automatically leads to inflation. It would not. Its effect has to flow through the two mechanisms above. Fed would act when needed so it would not lead to higher inflation.
Vinod
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Thanks! I would contact the broker.
Vinod
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I have a few HP options with a strike price ($30) way above the current price and expiring in Jan 2013. I have put a market sell for the last 2 weeks on IB but it is not getting executed. I would sell it for $0 or even even a negative price if I can to take advantage of the tax loss but IB does not allow me put any number below $0.01 if I do a limit order.
Does anyone know of a way to get rid of these options in a way I can claim tax loss? This is a minor amount so I can let it expire and take the tax loss for 2013 but just wanted to see if there is any other way.
Thanks
Vinod
Put a sell order at $0.01 and ask (pay) a friend to buy them.
Thanks! I had that thought but not sure if that would go through. I have seen the options trade at $0.02 while mine is not getting executed.
Vinod
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The nature of capitalism is that the competent people take the business or the market share of the incompetents. The incompetents lose market share or become bankrupt and hopefully they learn a lesson. This is how the system cleanses itself naturally with every economic cycle. However, if there is a systematic support through low interest rates or bailouts there is no failure possible… You just reward incompetency and you weaken the strong who cannot gain market share. It’s like pruning in your yard; you have to regularly cut the bad branches so that the nice ones can grow. If you don’t prune them, the beautiful ones cannot grow as much.
It’s also not moral as you help/reward the people who took risks that they should not have taken. At the same time, the savers, the people who consume less than they earn, are squeezed because they get a poor return on their investments… I don’t think it’s a very moral society to have a grand-mother who has saved $500k to get a 1% return on her CDs while the idiots who over-extend themselves and bought overpriced properties got helped through lower rates… And the grand mother is going to be financially squeezed by higher inflation…
Similarly the current low rates encourage the federal government to continue its insane spending. It pays about $200bn a year in interest with super low rates. They’d pay much more with higher rates and would be forced to get the spending under control…
The shareholders of the institutions have suffered. It is only the management that has not suffered and I do not see how punishing the companies further would teach the management any lessons. Management has made the money and even if they lose their jobs it is not really a big deal for them. In contrast the shareholders and the vast majority of the people via their pensions, 401k, etc would suffer if Government did not help save many of the companies. Take AIG, their shareholders have suffered, the managers have been fired (but they did keep all their money), so what would be the point of bankrupting it? To teach future shareholders?
Government has to act for the greater good and if it means some have not been punished so be it. There are other ways to deal with moral hazard. I do not think we should mix "morality" with good economic policy.
Iceland is the perfect example of what Japan and the US should have done in my opinion. It let the system cleanse itself. Its banks were over-leveraged and exploding, it let the capitalist code take care of the bank losses as it is set up to function. The bank bond holders ate the losses and the bank executives got prosecuted. It was ugly for a while but now the country is recovering nicely.
I think it is a more moral society and it pays off in the long term.
In contrast, Japan’s crisis is far from over. The day of reckoning is approaching. Sovereign debt to GDP is 220%. Japan’s balance sheet is a disaster. Abe, the new PM elected this weekend has already signaled that he wants the Japanese Central Bank to increase the monetization of the debt…. I suspect the Yen is ready to start a long downward slide…
Iceland is a tiny country and I do not think those lessons can be applied to US. Their currency collapsed by 80% which would give a boost to a small economy like Iceland without impacting other countries (since it constitutes only a very small part of the trade for larger countries). It looks like they have written off the debt of consumers (moral hazard, immoral, helping out the incompetent - all that you seem to oppose).
I have been hearing about the day of reckoning since 2001. I think they would manage just fine as US has done in 2009-2009. A little hiccup and business as usual.
Again they want the Yen to collapse.
Interest rates are super low right now and the federal spending is out of control. The annual deficit has averaged $1.3bn a year the past 4 years and the total deficit is $16bn. Total spending is about $3.7bn a year with a revenue of about $2.4bn. While better than Japan, nobody with a decent mind would lend money to such a business at current rates… Right now the Fed is monetizing some of the debt and many investors are stupid/sheepish/don’t know what is happening but there will be a moment when the bond will realize/decide that it is not sustainable…. Just like what happened in Spain or in Greece, the market will wake up one day and force the rates up. Nobody knows when it will happen, it’s not predictable imo. But it will happen just like there is gravity…
The interest payment that is about $200bn pa will shoot up, especially since most of the debt is short term and needs regular refinancing… Either the Fed will print even more (risk of very serious inflation) or the government decides to be serious and cut drastically the spending. Either way it’s pretty ugly.
It is not going to happen. Fed can buy as many bonds as it wants. Spain and Greece cannot. The only way interest rates are going to raise is if inflation raises. Cost push inflation (via a commodity inflation) is unlikely but even if it happens it would not be all that large as they constitute much smaller % of GDP now. Again to my point, the only way inflation is going up is if economy is booming. So we are not going to see pressure on the bond market until the economy booms.
Vinod
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I have a few HP options with a strike price ($30) way above the current price and expiring in Jan 2013. I have put a market sell for the last 2 weeks on IB but it is not getting executed. I would sell it for $0 or even even a negative price if I can to take advantage of the tax loss but IB does not allow me put any number below $0.01 if I do a limit order.
Does anyone know of a way to get rid of these options in a way I can claim tax loss? This is a minor amount so I can let it expire and take the tax loss for 2013 but just wanted to see if there is any other way.
Thanks
Vinod
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The moat is the sophistication of the devices. HDDs are complex devices and with former national champions consolidated at this point the knowledge is in primarily 2 firms. Thus I think the pricing will be better than in the past. The other moat like characteristic is this is yesterday's technology (with a smaller portion of consumer devices) and thus will not attract folks who want to develop the next tech super company.
Packer
Is it really that tough for a chinese firm to break into this say by buying Toshiba's HDD unit? You are right about this being yesterday's technology and it turning off potential competitors. But if they keep earning 30-40% ROE's I wonder how long it can continue without some competition.
Vinod
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I do not see major barriers to entry in this industry. These guys are earning very high ROA (>15%) and ROE (>25%) even after you add back the writeoffs of goodwill. What could be the moat that is enabling these companies to earn such high ROA and ROE? If these rates of return could be sustained I would think many other competitors would jump into this.
The main barrier could ironically be due to the growth of SSD and expectation that HDD would decline. This would prevent competitors from making major investments in this industry and thus leave the field open to WDC/STX to milk it as long as they can.
Now that the industry has consolidated, assuming both of these guys act rationally (likely since they have seen the benefits of it) they might very well continue to earn high rates.
Any idea of why they have been able to maintain such high ROA/ROE in the past (2000-2007)? Are there some real barriers to entry?
Thanks
Vinod
I thought so to and have heard a lot of people say that. However, technology/patents, reliability (we're talking backing up your data here!), vertical integration and OEM relationships create more of a barrier to entry than people give the companies credit for.
Following on that an related to your ROE question. That competitive position gives them pricing power. Maybe it is really as simple as that. Everyone seems to be looking for something more complicated than that, but maybe it is just as simple as...they have pricing power and the proof is right there infront of us.
You are probably right about the patents and OEM relationships creating some barrier to entry but they seem very similar to semiconductor memory makers where they do not have good profitability.
Thanks
Vinod
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Palantir,
There is an elephant in the room and you don’t see it.
You think monetary easing is the solution while it is the problem. You are advocating more of the same thinking it will solve the problem. But the initial problem was created by the Fed’s monetization.
What’s interest rate? It’s the price of money. Historically many countries have tried to control prices and it has never worked. Nixon implemented price controls in the early 70s; it led to instability and inflation. France also tried price controls in the early 80s when I grew up there; believe me the results were not pleasant…. By imposing interest rates, the Fed is actually trying to control the price of money, creating in the process huge misallocations of capital. History just keeps repeating itself.
You are saying that tightening right after a credit bubble would be disastrous. There is actually a precedent for that. Back in 1920-21 the Fed’s answer to the depression was to tighten. It was ugly for a few months with a sharp GDP contraction but it did not last long. It cleansed up the system and set the foundation for a strong expansion in the few years to come.
Look at Japan. They’ve kept loose monetary policies for more than 20 years and they never cleaned up the excesses of the late 80s. They lost two decades and in the meantime their monetization helped create incredible fiscal unbalances…
You are saying there is no evidence that the Fed created and fed the tech and real estate bubbles. Do you really think that we would have had the same bubbles without low interest rates? Would people have borrowed as much with higher interest rates? Sure, the Fed started to raise the rates in 2004 but not enough to break the momentum. This is just human nature, people wanted to keep up with their neighbors… Just don’t add fuel to the fire… Some could see the bubble started to grow in 2002 and 2003 and the reasons why but no one could know when it would burst.
Another example is the real estate bubbles in Spain and Ireland. The ECB policy was aligned for the German economy that was in a recession. Both Spain and Ireland economies were overheating at the time. Since they were part of the EZ they had to deal with low interest rates at a time when they should have been much higher. That fed the speculators and the bubbles…
Similarly the current policies are creating a bubble in the bond market. I don’t know how much longer it will last but I suspect we’ll know soon. The Fed is trapped: at one moment its monetization won’t lower rates anymore as the bond market will revolt and the value of the dollar will be questioned. More money printing cannot solve the problem; the more the Fed prints, the worst it becomes.
I understand where you are coming from since this is pretty much what I used to believe. I have changed my opinion since after reading Richard Koo's and Bernanke's writings.
1. I agree monetary easing is not the solution. The main solution would be via fiscal policy. But given the deadlock on fiscal policy, Fed is doing its bit, which is through monetary policy and they are keeping rates low when unemployment is high and inflation is low. Are they supposed to raise rates when both unemployment is high and inflation is low? QE is only an extension of this logic and it makes sense to me.
I do not understand how increasing interest rates would clense the system? How does that work?
2. Japan's stock market is down 75%, residential real estate is down 70% and commercial real estate is down 85%. I would think that if this happened in any country there would be a depression with very high employment (say over 20%). The fact that Japan has been able to keep its nominal GDP pretty stable and unemployment pretty low (less than 5%) seem to be an outstanding achievement.
I think they did an awesome job.
3. Do not disagree that continued low interest rate in mid 2000 contributed to the housing bubble. Fed did mess up.
4. I do not understand how the "bond market is going to revolt". What would cause it to revolt? The only way is via inflation, if not Fed would be buying as much debt as needed (Monetization basically). Barring a cost push inflation, inflation would only increase if GDP is booming. That would not be too bad.
As to the value of the dollar being questioned. That is part of the plan.
Vinod
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I do not see major barriers to entry in this industry. These guys are earning very high ROA (>15%) and ROE (>25%) even after you add back the writeoffs of goodwill. What could be the moat that is enabling these companies to earn such high ROA and ROE? If these rates of return could be sustained I would think many other competitors would jump into this.
The main barrier could ironically be due to the growth of SSD and expectation that HDD would decline. This would prevent competitors from making major investments in this industry and thus leave the field open to WDC/STX to milk it as long as they can.
Now that the industry has consolidated, assuming both of these guys act rationally (likely since they have seen the benefits of it) they might very well continue to earn high rates.
Any idea of why they have been able to maintain such high ROA/ROE in the past (2000-2007)? Are there some real barriers to entry?
Thanks
Vinod
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10x to 40x would rule out BAC, C, GM, GS. It would have to be CHK or ZINC. My guess is CHK but I have no idea about ZINC.
1. It's an unbelievable manager (CHK meets this requirement, Aubrey would qualify)
2. in a very misunderstood industry (CHK likely meets this requirement as well, Shale/O&G misunderstood?)
3. with just a wide disparity on valuations and (CHK meets this requirement, Gas prices between US and Rest of the world)
4. a lot of tailwinds that are very positive (CHK meets this requirement, Conversion to natural gas as fuel?)
Vinod
I do not think 10x optimistically rules out BAC over ten years, but you are right that 40x would seem to discredit the idea. Looks like I should bring myself back up-to-speed on CHK.
Yeah I think considering he gave it scale of 10-40, I think it rules out BAC. I agree its possible BAC could be a 10 bagger over the next 10 years or longer, but no way 40x.
CHK is at an 11B market cap today, a 40 bagger would mean if you owned the whole company and kept all the dividends that your stake would be worth around 440B divs included. It seems hard to believe that even between dividends and spin offs that CHK could generate that much value and the next XOM. So I think I retract my "its got to be CHK". Although I am long CHK so I would be more than happy for this play out :)
I don't follow ZINC but is much smaller and appears to be involved in nickel and recycling. Anyone know more about ZINC?
I think the assumption is there would be a buyback of significant number of shares. With a 50% buyback, I think CHK even at 40x might be within the realm of possibility.
Vinod
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"I would say that this particular business, I would just say, it's just a confluence of factors, it's an unbelievable manager in a very misunderstood industry with just a wide disparity on valuations and a lot of tailwinds that are very positive. It would not surprise me if we held this for ten years that we might have somewhere between a 10x and 40x return on it."
Safe to say it's in the Pabrai Fund's portfolio - although in the above context he was referring to a huge position in the Dakshana Foundation portfolio. It wouldn't have to be in the filings if it were a foreign company.
Thoughts? I'm assuming lots of people here would love for it to be Bank of America, and in fact, that'd be my guess if I had to make one.
10x to 40x would rule out BAC, C, GM, GS. It would have to be CHK or ZINC. My guess is CHK but I have no idea about ZINC.
1. It's an unbelievable manager (CHK meets this requirement, Aubrey would qualify)
2. in a very misunderstood industry (CHK likely meets this requirement as well, Shale/O&G misunderstood?)
3. with just a wide disparity on valuations and (CHK meets this requirement, Gas prices between US and Rest of the world)
4. a lot of tailwinds that are very positive (CHK meets this requirement, Conversion to natural gas as fuel?)
Vinod
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I personally found Grantham's recent letter relatively absurd - I don't believe commodities are permanently elevated, as they are likely moving through a very standard secular bull market running alongside the equity secular bear, and I don't see why once the developed world is appropriately deleveraged we cannot continue our historical rates of growth. Laurence Siegel outlines the anti-Grantham case pretty well here: http://www.advisorperspectives.com/newsletters12/48-critique4.php (h/t pragcap)....
Even more interesting, however, is that the oober-bearish John Hussman disagrees with Grantham's long-run growth projection ASSUMING we can appropriately get through the mess we are currently in....see here:
http://hussmanfunds.com/wmc/wmc121126.htm
As an avid Grantham reader I too am very disappointed with this article. Grantham has made his name from correctly forecasting asset class returns primarily based on mean reversion. Here we have a lot of good quality data of over 100 years and for which the forecasting time period (7-10 years) means we had 15-20 signals. When Grantham makes predictions on commodities, he does not have really good quality data on how much the price increases is suppressed due to productivity, etc. More problematically he is basing his prediction on the rise in price for the last 10 years out of 200 years. It is nothing more than guess work on his part.
His argument makes sense in the long term, the problem is we do not know if that occurs in 20 years or 200 years or even more. We know commodities would very likely rise in prices at some indeterminate point in the future due to depletion but I do not think we can pinpoint it with any precision.
Vinod
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I do believe Norquist does believe income should only be taxed once or if possible not at all ;D....
Personally I dont care what happens with this cliff, my only hope is that he loses his strangle hold on an entire political party. How one loser like him managed to take over the republican party says more about the party than him inmo. As he says though, this isnt his first rodeo, so time will tell.
Taxes on mostly the rich and upper middle would go up, loopholes would be closed, and Corporate tax rates would come down but not too much. Corporate loopholes would also be closed. AMT would be eliminated entirely and replaced with the BMT - Buffett Minimum Tax at 30% and 35%.
I am for spending cuts, and think the real bug bear is defense spending, its a very low return investment. Next I would prefer a public option to cut the % of GDP that healthcare gets (one of the highest in the world), finally I would fix up entitlements by cutting and means testing benefits.
I would also be hated by 100% of the country, managing to piss off just about every special interest group in existence.
Taxation is at its lowest point in modern times, spending at its highest. Sounds like everyone is winning but the federal balance sheet ;D.
My irritation is people talk about cuts, but never want to cut defense. It makes them appear a bit dis-ingeniousness.
Great post. Could not agree more with you.
I really have a tough time understanding how anyone can say we would need to spend more on defense when we already spend more than the next 15 countries combined.
Vinod
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Buffett barely "invests" to begin with. Most of his investment activity is in the secondary markets, and not the type of capital creation that drives real investment back into the economy.
But that doesn't stop him from giving sanctimonious lectures to the rest of the world.
EDIT: The above isn't there to intentionally start a flamewar, I actually mean it. :)
You do realize Berkshire is made up mostly of operating businesses now at this stage? That many of those businesses require enormous amounts of capital, which ultimately do employ tens of thousands, and probably hundreds of thousands over the next 10-15 years. How is expansion in MAE or the largest order of private jets in history at Netjets, not as effective as anyone else at creating jobs and wealth for this country? Berkshire is one of the largest public company employers in the world...that has a net wealth effect that trickles down ten fold. Cheers!
As much as I like and admire Buffett I do not think he deserves much credit for job creation. He can be credited maybe in an indirect manner as a result of improving capital market efficiency.
All Buffett did was extract profits based on superb investing acumen in identifying monopolies and competitively advantaged businesses that allowed those businesses to charge more from customers. It is neither wrong nor immoral but I do not see a great benefit to society as a result of this activity of charging more from consumers. BNSF, Geico, General Re, See's, etc all would have gone on creating jobs whether or not Buffett has invested in them or brought it under Berkshire's umbrella just as with Coke, Amex, PG, JNJ, etc.
You might argue that Buffett has saved jobs at Geico and Salmon Brothers by preventing them from going bankrupt but that business would have been picked up by other insurers and investment banks. So I do not really see all that benefit to society as a result of Buffett's activities via Berkshire.
His contribution to charity is of course a different story and he is a role model in many respects.
Vinod
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Anyone know if there's a logical explanation to why he has 86 million AIG and 24 million AIG-WT, and 102 million BAC and 10 million BAC-WTA? I guess that would explain which of the 4 he thinks are most attractive (or thought at the time of purchase).
If I remember correctly Bruce said in an interview that BAC is the stock people should own, however he owns ~3 times more of AIG than BAC.
I think as a mutual fund, there are restrictions how how much of his portfolio is allocated to stock in an individual broker/dealer (i.e. there would be a perverse incentive to use that broker/dealer instead of the one with the lowest cost to clients). I think I recall Berkowitz saying somewhere in an interview that he has the maximum legal position in BAC.
A quick google search seems to indicate that the limit is about 5% on broker/dealers. So I am not seeing how he is at a maximum for BAC. I think he might be at a maximum for the warrants.
Vinod
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Gio, did you use a lot of macro around 2007 or so?
It is just that most people choose to completely ignore it! Imo, they are right 90% of the time, but wrong the rest 10%.
giofranchi
Ben Graham pretty much said the same about Technical Analysis as well, though he did not specify it numerically and I think he would agree with you. I think at the extremes it does add value at least in terms of being able to recognize the risk that you are exposed to.
Vinod
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Cannot believe that guy who wrote "Valuing Wall Street" came up with this logic.
"Smithers recommends a simpler change. He suggests if bonuses are to continue they have to be linked to medium-term increases in physical output and investment. Nothing else."
This seems to be pretty much match the incentives of the Chinese Government. I would expect we would end up with value destroying "Growth" if such incentives are implemented. As long as GM produces "x" million cars and makes "y" dollars of capital investment the managers would be entitled to bonuses? Sales be damned?
Vinod
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Hussman is smart, but I don't think he is a great investor. His fund has trailed the market and even his peers over the past decade.
http://quote.morningstar.com/fund/f.aspx?t=HSGFX
He is actually in the bottom 100%.
Now, to be fair to him, he has done well since inception (2000).
stahleyp,
I don’t think you should judge Mr. Hussman’s return the way Morningstar suggests. First of all a 3-year timeframe is completely meaningless and deceiving. Second, they say the risk he runs is average. Vice versa, I think that the risk he runs, I mean the probability of incurring a permanent loss of capital, is extremely low. Think of it this way: if, investing in public companies, the two most significant risks are 1) business specific risk, and 2) market risk, he is very successful in minimizing both.
1) He employs a basket approach of investing in equities, so he puts a very small amount of capital in each idea, thus minimizing business specific risk. Anyway, the basket of equities he chooses has always beaten the S&P500 by an appreciable margin, so he also shows some business acumen!
2) He is very effective in controlling market risk through his options strategy. I find it interesting that both Mr. Hussman and Mr. Watsa went 100% market neutral together in April/May 2010.
So, as far as I can see, since inception Mr. Hussman has trounced the S&P500 (he has also beaten the Russell2000, albeit by a smaller amount), with a strategy that allows him (and his shareholders) to run almost no risk. So, if we agree that the true measure of performance is return/risk (beware, I don’t mean return/volatility!!), than Mr. Hussman is very good indeed!
giofranchi
I have been reading Hussman weekly comments for the last 10 years very religiously. He makes a lot of sense and I think he is a pretty good investor although I am highly skeptical of his belief in assessing short to medium term risk via "market action".
That said, the main mistake he made is that he did not follow his own mandate. During the market lows in 2009 when his investment approach called for increasing allocation for stocks, he chickened out. He came up with the "Two data set" problem. I think this is the only mistake that he made in the management of the fund but it is a pretty big one.
Vinod
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http://www.dallasfed.org/news/speeches/fisher/2012/fs120919.cfm (found off Value Investing World)
Every time I hear or read the commentary of Richard Fisher, I'm very impressed. I'm really glad we have people like Ben Bernanke and Richard Fisher on the Fed. Good people.
+1
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the performance during the last decade (1974-1984) is utterly amazing, walter schloss completely "destroyed" the s&p performance of 13% by generating a 35% annualized return during this decade.......
Good work rijk!
One thing to note is that during the 6/30/1973 - 7/31/1983 period small caps returned 27.9% annually vs 9.5% for large caps. I think Schloss invests primarily in small caps so some of the outperformance is due to this tailwind.
Data http://www.northlakecapital.com/clients/aa0140.pdf
Vinod
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[amazonsearch]Good to Great - Jim Collins[/amazonsearch]
Started reading this book a few days ago. About a chapter into it and enjoying it very much so far.
Seems like a great read to get to know what makes a "great" company "great". The type of circumstances, the type of people, the type of leadership (Collins talks about Level 5 Leaders; those with humility & will and a willingness to put the company ahead of their selfish motives.)
I'll post my review of the book once I'm done (though it might be a while now with school going) :) .
Anyone else read it yet?
You might want to first read "The halo effect" before wasting time on this book.
Vinod
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I posted the following in another thread. But it's something to think about. A couple of updates to throw out there. Now, SEQUX, too is trailing the S&P 500. Third Avenue Value (Marty Whitman's fund) has only beaten it's bogie (MSCI EAFE) by about .14%, annualized, over the past 10 years. Rich Pzena at John Hancock Classic Value has also trailed by about 2.4% annualized over the past decade. He's actually trailing since inception (1996).
"Even good value managers haven't beaten the market (S&P 500) over the past 10 years.. Berkshire has trailed, Bill Nygren at OAKLX, the guys at Longleaf LLPFX, Bill Miller at LMVTX, even the guys at Sequoia have barely squeaked past (SEQUX). Yeah, there are exceptions, but I'd think most people would think these guys would beat the market over 10 years or so. "
As Berkowitz might say, 10 cycles around the sun might not be a good way to measure performance of a fund manager. Two complete market cycles might be a better way to weed out the non performers.
Vinod
S&P has outperformed its hedge-fund rival for ten straight years.
in General Discussion
Posted
None in aggregate and in the long run - notable subgroups who I think are the exception are proprietary traders with benefit of front running/insider trading and Grahamites.
Index investors get the market return, all others get market return less fund expenses (transaction costs, fund fees, taxes, etc). So the total return for all active investors must by definition be less than the market.
Vinod