APG12

It is usually a good idea to come off as condescending when trying to explain something. It creates the right tone and environment for explanation and learning. So you are saying sarcasm is more effective? :) But yes, you are correct (or at least the opposite of what you wrote being what you meant is correct) , I should have left all of that out of my post. I've found sarcasm is best for giving advice. nyuck nyuck nyuck ;D Anyways, a lot of folks seem to forget the fundamental fact that you never pay more for a security than you agree to pay. Many of the arguments against HFT amount to: 'I want to pay less than the price at which people interacting on a voluntary basis (ie. without force and fraud) are willing to offer me stock.' Well woopedy do. There's all sorts of fees and transaction expenses I don't like or don't think are efficient. So what?

OK, but why do people keep equivocating the fraudulent and the non-fraudulent? I'm glad to see you are recognizing the difference but I see this everywhere! HFT is not fraudulent. There are all sorts of fees and expenses I pay in life that I'd prefer not to pay. Or transactions that take place that I'd prefer didn't. The standard in a free society by which we decide what is allowed and what isn't does not consist of the following: What does Mary Jo White think about this? How does the 'little man' feel? Which would I personally prefer? What will make the market less volatile? What will increase 'efficiency'? etc. The standard is: Are the transactions voluntary? Again, HFT is not fraudulent. Use limit orders.

This is not true and I wish people would quit saying it. Are management fees legalized theft? Give me a break! Front running is FRAUDULENT.

I think the issue is one of rights. Is anyone being defrauded? I haven't seen anyone discuss this but it's more than just a tangential question, in my opinion.

Is anyone being defrauded by HFT? Why do exchanges allow it?

Maybe if the SEC weren't so concerned with 13Ds/Fs/3s/4s/5s/etc. they could actually catch people committing fraud.

So what? If Buffett flipped directions and became a market timer it wouldn't make any difference. It's a statement of fact that his being ideologically pure allowed him to miss the destructive effects of the dot com bubble. Again, I don't care to argue whether Buffett is completely principled or not. Point is, his purity DID help him even when it appeared that value investing had stopped working. Again, there is definitely a performance benefit. Look at all the value investors who suffer during bull markets and make it back and then some on a relative basis during bear markets. I do agree with this to some extent. However, just because there is a minority of people who can time the market doesn't mean that you personally can throw your principles out the window when you feel like it. My opinion only applies to people that can't time the market or don't have a better way to make money investing. I think this includes 99% of investors. If you have some other rational way to make money- good for you! :D But you are making statements that appear to apply to the general population of investors and I really don't think they do. I agree, but all of these strategies are value strategies (ie. strategies that treat stocks as businesses). They don't contradict anything Graham wrote or Buffett believes. Timing the market, on the other hand, does.

I think the follow up article shows that what Buffett did was not market timing and that he had an absolute standard that caused him to stay fully invested when he could find opportunities. http://brooklyninvestor.blogspot.ca/2014/03/buffett-market-timer-part-1-partnership.html The way you use the term ideological purity makes it sound like a bad thing. It's definitely not a bad thing to believe in principles and follow them. When Buffett refused to invest in dot com stocks he was being ideologically pure even though the value strategy was not producing results. Yet in the long run he absolutely did get a performance benefit from being principled. There are all sorts of principles that don't provide immediate benefits when you follow them. Stealing is a good example. Robbing a bank can give you short term satisfaction in certain circumstances (like when you get away scot-free) but is disastrous as a strategy for your long-term self interest. There are also times when momentum strategies work and value investing doesn't work but those are the times you need to be the most 'ideologically pure.' I just don't agree that there's no performance benefit from being a principled value investor. The point of value investing is that it is timeless and applicable across all geographies because it is logically derived from the very meaning of what investing is- hence Munger's quote, 'all intelligent investing is value investing.' Even if there are some instances of people timing the market successfully, the fact is that it's dangerous for 99.9% of people to try. If you think you can switch from strategy to strategy based on what's working at the time... best of luck to you. Try living your life that way and see how THAT turns out!

Should the standard of what's "good" be helping other people or making your life a happy/successful/ flourishing one? If the former, there are probably better ways than good investing. If the latter, I think a lot of the people on this board are doing a whole lot of good. :)

You only consider it to be market timing if it doesn't involve fundamental analysis? I can see why you would define it that way but I don't think that's the widely accepted definition. From Wikipedia: "Market timing is the strategy of making buy or sell decisions of financial assets (often stocks) by attempting to predict future market price movements. The prediction may be based on an outlook of market or economic conditions resulting from technical or fundamental analysis" As talked about in the original article, The Prudent Bear Fund was managed in accordance with market valuation and their timing strategy has been a disaster. The thing is, not even Ben Graham's market valuation/timing techniques were reliable, if I remember correctly. Prices can look high and stay high while fundamentals catch up, interest rates can continue to drop thereby increasing multiples, etc. I think this is why it's recommended that you choose a given stock/bond allocation and rebalance to maintain the ratio rather than try to pick your own ratios based on what you think each asset class will do. If pulling 100% of your portfolio out of the market because you think the valuation is too high is considered market timing why is doing the same thing with a lesser percent any different? It's the same principle. The reasoning, purpose, and outcome of both decisions are the same. As you said, if you have an absolute standard you'll find fewer investments that clear your hurdle as the market goes higher naturally building a cash position. Or maybe the more important implication for us folks with small portfolios is that we should always be invested since we can almost always find opportunities. Buffett's 'retirement' in 1969 was on account of him being unable to find good investments.

+1 I think almost all value investors recognize that market timing doesn't work, yet they seem to do it with their cash positions all the time. Decreeing that 15% of your portfolio should be in cash, for example, because the market looks frothy is still market timing.

A little more on the compare function: http://www.oldschoolvalue.com/blog/investment-tools/tutorial-to-quickly-detect-changes-in-the-footnotes/

This is the largest excerpt I've seen yet: http://www.gurufocus.com/news/250403/seth-klarman-2013-letter-to-investors-the-truman-show

Ugh, I don't know about this. There's just something goofy going on here. If I say I'm lucky to have been born doesn't that imply that the unborn weren't lucky? The unborn don't exist so that doesn't make sense. It's like we're starting at the wrong place in our contemplation of luck. I need to think about this more. :-[

Hmmm, I was thinking more about this last night and now I'm pretty convinced that the genetic lottery argument doesn't make sense. The idea of 'luck' and 'probability' arise from the fact that there are contingent events in reality. So, for example it doesn't make sense to say, 'how unlucky it is that gravity exists' or to contemplate the probability that pine trees are green. These are simply facts of reality. They don't belong to the same category as a coin flip. That's what I meant by "metaphysically given". Probability doesn't pertain to them because they are just inherent to reality. Similarly, the body and time you're 'born into' is metaphysically given. A person (the consciousness and body) is the result of two specific parents. If you're white, there's no such thing as a probability of you being born black. There was no probability that Buffett was born in prehistoric times. He comes from Howard and Leila Buffett and they lived in the 20th century. He was necessarily a product of them. Does that make sense? Anyways, it doesn't say anything about luck after birth or how we should treat people in different circumstances.

The 1983 appendix did it for me. It's so well reasoned: http://www.berkshirehathaway.com/letters/1983.html

Hmm, well with no way to talk to Mr. Klarman we may have to agree to disagree. One thing to keep in mind is the extraordinary intelligence and thoughtfulness Mr. Klarman must have/exhibit to be in the position he's in today. Does this jive with the idea that he's economically ignorant? I mean they control the U.S. currency through a federal entity. Banks no longer issue their own notes because the government now controls the monetary system. It seems like a fairly uncontroversial statement to me. People don't generally put it in those explicit terms I guess. Independent in what sense? It's clearly not a private entity so what is it? When the Fed 'makes money', it goes to the treasury. I guess I'm just confused about what your point is. Are you saying the fed isn't a government entity and therefore what they're doing shouldn't be considered central planning? Or are you saying that politically their decision making is independent of other branches of government? If the you're saying the latter, I agree but don't understand the relevancy to the discussion. If you're saying the former I think it's clear that the fed IS a government entity (hence the name lol). Our disagreement probably stems from different ideas of what central planning is. Stealing from Wikipedia: "Economic planning refers to a coordinating mechanism outside the mechanisms of the market." Again, I don't see how the federal government setting price controls over money (adjusting interest rates) is not central planning. Maybe you could describe what you consider to be central planning. Could you also explain what you mean by mental models? I've never seen a definition of mental models but when I use the term I mean: a set of principles with cross disciplinary applicability that are formed for the purpose of understanding a complex situation. That's just a definition I made up so I welcome any commentary regarding it. Is this generally what you mean by mental models? What models is Klarman missing? Yes, I agree with you to a certain extent. In the closing statements of this event, Grant made the point that people's economic views are always interrelated with their political views. I don't see this as an obstacle to objectivity, though. In fact, I think it's necessary that your political views and your economic views are in agreement because if they weren't that would imply a logical inconsistency somewhere.

Could you expand on this more? Buffett also refers to the 'genetic lottery' quite often. Maybe you're familiar with his spiel on being born a white man, in America, in the 20th century, under capitalism, etc. I think that this idea was most recently espoused by John Rawls, although I'm not too sure about that. There seems to me to be some very serious flaws in this line of reasoning. For one, we aren't a bunch of consciousnesses floating around somewhere waiting to be plucked out and put into a body. Does probability as a concept even apply to the metaphysically given?

I finished this book the other day and was going to put a short review in the books sub forum. I bought it because I was interested in Keynes's view on concentrated portfolios since I knew he was an early practitioner of the focused fund. Unfortunately, the book didn't contain much investment insight. It briefly went through his investment career. What was astounding to me was the volatility he experienced. Completely insane by today's standards. He went bust several times too thanks to leverage. All in all, it was an interesting book and a light read but I don't feel like I learned a whole lot. I haven't read the other books mentioned but if I were you I'd skip this one and just watch the author's lecture (where he gives away most of the interesting parts of his book anyways):

Klarman is obviously very educated on the subject. It seems way too simplistic to assume his views are due to a lack of mental models. His views are too precise and well thought out to be the result of ignorance. Judging from his support of Jim Grant I think that his opinions probably stem from the fact that he subscribes to an Austrian-esque economic philosophy. The government has nationalized the monetary system and influences the price of money across the entire economy. If the concept of central planning is to have any meaning it must apply here.

Anyone have the link to the full interview? This is the closest I've found: http://www.valueinvestingworld.com/2014/03/warren-buffett-on-cnbc.html

Pffft, that was four pages ago. Ancient history now. ;)

Guys guys guys. Y'all are missing the point. The point isn't whether the earth's warming is man-made or not. That is irrelevant! The point is that the only way to allow human beings to survive and flourish in the context of a changing climate is by leaving them free from coercion to exercise the mind. To discover, create, and implement technology freely and voluntarily. Remember that whole individual rights thing? Ya know... America?? Life, liberty, and pursuit of happiness are so passe these days.

It happens. http://graphics8.nytimes.com/images/2008/12/24/us/25sludge2_600.JPG Coal ash spill.. Shocking! If only we made it MORE illegal. lol ps. If I don't get the last word in, it's like admitting defeat. ;D

Oh jeebus. Why doesn't anyone dump their trash on my lawn already? ::) Anyways, I agree let's call it quits. I am an ideologue in defense of reason and reality. There's nothing wrong with ideology, there's something wrong with evil ideology.