frommi
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Posts posted by frommi
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1. What Berkshire or any other insurance company does with cash has more to do with their need for liquidity for their business then with being liquid when the market falls. It should not guide you what you do in your own portfolio.
2. You can ignore all studies that show that low P/B, low EV/EBIT or smallcap stocks outperform the market or that holding cash dampens returns, but i doubt that you will be able to beat the market without that knowledge and usage.
3. I have never seen a study where you could identify a good manager after the fact is widely known and profiting from it and outperform the market with this knowledge by wide margins. I would bet that you get the same results like investing in the best mutual funds of the last years, and that is severe underperformance.
4. Market timing on a portfolio level doesn`t work, basta. Thats proven ad adsurdum, so why do so much people still do it? (It is not rational.)
....
5. The market will crash next week! :D (But i will still hold 107% stocks!)
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Side note: I really wanted to find out that holding cash was prudent and the right thing to do. It made sense in my head. I wanted to be contrarian and hold cash as the market went up and deploy it on the bottom. I've just not been able to confirm that it works better. I really don't like the fact that if you are 100% invested, that crash is going to hurt, and you likely won't be able to buy at the bottom, but that's what everything I've tested has said, unless your portfolio volatility is very very high (like Pabrai's was in 2008, and even with that, it was better for him to be 100% invested for his longer run, first fund).
Thank you! Now that leaves just one question, what is the optimum leverage for a given maximum portfolio drawdown? :)
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Perhaps its a better idea to focus on your own capital allocation skills, because that is something under your own control. You never know people 100% and you can only say in hindsight that someone has allocated capital really well. But is he/she able to do it in the future?
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I think it was Cundill and/or Schloss that got me started with chart reading and tasseography. I haven't learnt more than identifying the 10-year, 5-year and 52-week lows. Soon I'll start learning about candlestick charts and Ichimoku kinko hyo. I also admit that I like to look at charts from 2009 to see what absolute fear can do to a stock.
When you are really interested in technical analysis to detect stock bottoms you should learn about Elliott Wave Analysis, Fibonacci and Support/Resistance. Candlesticks work best for trendfollowing. Theres a trading technique a lot of successful daytraders use, which is called Ross trading/1-2-3 setups. This works in stocks to detect momentum turnarounds, too. But i guess that for the 99.9% members of this forum this is unnessecary hokus-pokus. :D (and it is, when you can replace it with experience.)
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My amazing charting skills suggest that it should at least dip to 26 ;D
How do you come to that number? I can only "see" that it has a high chance of falling further, but i don`t "see" yet how far. At 20 there is a massive support, but that doesn`t mean it drops that low.
After looking at this again, it has now a high chance of turning when the daily high of yesterday is beaten. But probably its best to ignore me with so much stupid shit that i post. :)
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My amazing charting skills suggest that it should at least dip to 26 ;D
How do you come to that number? I can only "see" that it has a high chance of falling further, but i don`t "see" yet how far. At 20 there is a massive support, but that doesn`t mean it drops that low.
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One should always consider his personal portfolio situation. I am 100% long (and 16-17% short) with almost 75% of my portfolio noted on the NASDAQ. If I assume the NASDAQ as a whole is overvalued it might make sense to hedge some of that risk away. Anyone who disagrees should look at what happened to GNCMA on Friday.
Most value investors that apply a long/short strategy are probably doing it this way. But what you are doing is hedging a value strategy with a -growth strategy. But you have to admit that these two types can be strongly correlated at times. When you are levering this up, you will not get a better risk adjusted return. Its better to diversify across asset classes, world markets and interest/inflation sensitive/insensitive investments and then levering this up. In the end what you earn is the geometric return of all your uncorrelated investments. But shorting has most of the time a negative return and when you multiply that with a positive return the end result will not be greater than the positive return alone.
The argument that you have cash available when your value investments tank is only true when your investments are 100% perfectly negativ correlated. But in this case (which does not exist) you could just take more value investments and lever it up for the same result.
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Its very dangerous to think that you reduce volatility or your maximum possible drawdown and then lever the whole portfolio up.
Look at the numbers JEast has posted here: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/benjamin-graham-quality-dimension-of-value-investing/
The drawdowns for long/short portfolios were in some backtests higher than a normal long only strategy. That was not done with obviously fraud stocks, but i have seen pumped pennystocks going up 20 fold before they crashed. On margin your whole account can be killed with one such stock. And it just has to happen one time in x years to kill all your profits you made on the long side. And when options are available they are most of the time so expensive that you will not make money in the long run, even if you are right.
For me long/short strategies are fragile and therefore not something that is prudent to do, but i understand that there is a demand for that kind of hedgefunds.
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Thank you, i love these kind of papers.
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NWH.ASX
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I doubt that there is a link between time spend on an investment and return. And when there is one its probably the other way round, the longer i need to convince myself the worse the opportunity. When good things come around you know it the second you look at the numbers.
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Just read all threads. :)
I learned the most by posting some ideas and reading the Ask Packer and Ask Eric Threads 10 times.
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Completed my buys of RSXJ today. Bought kholy and rsxj last week and hoped to complete it this week, but kholy has run away. I am now at nearly 25% allocation to emerging market, with 10% russia and 10% china.
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Now are you entirely sure about this? I will let the board membership be the judges.
advice from Kraven
1. Unbutton 3-4 buttons on your shirt and wear lots of gold chains.
2. If you have various tattoos, make sure to show them off.
3. Order for her and if she says she doesn't like what you ordered shush her and tell her you know what you're doing.
4. Flex your muscles as often as possible. For example, if asked where the ladies room is make sure that when you point you show off the guns a little bit.
5. Talk about various "fantasies" you have and ask her to describe hers. Women enjoy talking about possible escapades on the first date.
6. Get very, very drunk to demonstrate that you are able to hold your liquor.
7. Start a fight with a guy sitting at a table near you. Women love to feel protected.
8. Swear a lot. Women like a man who talks like a man.
9. Talk only about sports and money. Like #8, women like this.
And finally, 10. At the end of the date, tell her you had a great time and that she is exactly like your mother and that that is a very good thing (and wink).
Side note: You forgot the part about inviting her back to your place in the bedroom next to your parents....
Looking at some gangsta rap vids with hot girls i am under the impression that these are some really great tips!
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And there is pressure onto european and us politicians, too. Last week managers of Siemens and other european companies went to moscow to speak directly with Putin and after their talks they attacked the sanctions and the reactions of the eu politicians. And i don`t think that Mastercard and Visa are really happy when russia builds its own credit card system, so i think they are already talking to Obama to find a quick solution to this crisis behind the scenes.
And did you know that none of the russian oil companies is hit by the sanctions? I would bet that is because the us oil companies are working with them, like every major eu oil company. They will do what they can to de-escalate this crisis.
In this end in my eyes the most likely outcome will be that europe and the us see crimea as a part of russia and russia agrees not to attack the ukraine and perhaps allows NATO troops on ukrainian ground.
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Sorry but this whole thread is full of bullshit. Nobody has an interest in going to war, and when nobody has there is no war. Putin is not stupid, there is enough financial pressure that forces him to talk to the other nations and he said already that he has no interest in the eastern ukraine.
Enough pressure? You must be referring to this: http://www.newyorker.com/online/blogs/borowitzreport/2014/03/us-freezes-putins-netflix-account.html
:D. Its not pressure from the US or EU that i mean, but the pressure from inside. Do you think the oligarchs are amused about their networth crunch and not being able to live their "normal" lifes with holidays abroad? And now think about what their wifes are crying about all day, not being able to go shopping in Milano, Rome, London or New York?
And I don`t think Putin will let the russian economy take a big hit again after the last weeks. That will be food for his russian enemies.
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Research has shown that a disproportionately high percentage of millionaires were in long-term stable marriages. The book did not speculate on the cause and effect of this (i.e. whether professional success begat a stable home life or whether the same dedication to a successful marriage begat a successful professional life....or...whether the lack of a divorce complete with blood-sucking lawyers for both combatants allowed sufficient compounding), but the correlation is unmistakable.
From my perspective, I have to say that what limited professional success I've been able to attain would have been far more difficult had I not had a wonderful, supportive, demanding wife. I can laugh at the Charlie Chaplin story, but know full well that reality suggests that a solid marriage does wonders for professional success and personal satisfaction with life.
-Steve
+1
My wife is my emotional counterpart, when i am euphoric she brings me down to earth and when i am depressed she makes me smile. Both emotions are the enemy of a good investor, so i would say my wife makes me a better investor. :)
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Sorry but this whole thread is full of bullshit. Nobody has an interest in going to war, and when nobody has there is no war. Putin is not stupid, there is enough financial pressure that forces him to talk to the other nations and he said already that he has no interest in the eastern ukraine.
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When 90% of the portfolio is in low beta stocks, its logical to outperform the market in down years. Especially because the index has stocks of companies that go bankrupt in these "down" years.
In his first years it was probably that in crashes normally high valued stocks correct more than cheap things. You see this effect live in the last week, growth stocks have plunged while most value stocks have performed well or gone sideways.
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Yes i looked myself but i was wrong it hasn't worked there.
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Where did you get the 2008 one from, another paper?
I looked it up myself on multpl.com.
I'm working on recreating the model on a yearly basis from 1871 to see how it does.
Very nice. I can`t wait to see it. :)
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But the tbill yield is artificially low because of financial repression?
The beauty of numbers and statistics is that you don`t have to argue with them. ;D
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Here's a paper on that. It is the only one that I've found with actual outperformance. However, it does not take into account transaction costs or taxes. I think this may erase the outperformance, but I'm not too sure.
https://www.dropbox.com/s/cm788kdkxdwwp0r/Spread%20Timing.pdf
They have done it with 1% spread costs and stil came out ahead. Today you should not have a lot of spread or transaction costs. Taxes are surely a concern, but i don`t intend to hold my value investments forever so its a good hint at when to switch to cash and you have a good timing method to hedge with puts to avoid taxes. It worked in 1974, 1987, 1999 and 2008 and it makes totally sense, when i would time the market i would do it exactly that way and i think WB did it that way either when he has done it.
Why invest in a risky asset when the riskfree asset gives a greater return?
The short spread (S&P Earnings yield - tbill yield) under -1% looks like a good barrier to act and at 0% we should start to be very careful. This implies that we are currently in safe waters and are at least 1-2 years away from a major downmove. :D
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Here's a paper on that. It is the only one that I've found with actual outperformance. However, it does not take into account transaction costs or taxes. I think this may erase the outperformance, but I'm not too sure.
https://www.dropbox.com/s/cm788kdkxdwwp0r/Spread%20Timing.pdf
Thanks, thats my evening lecture, that was exactly what i was searching for. :)
Good blog post on FFH
in Fairfax Financial
Posted
My experience and numbers tell me that it works where nobody else is doing it, but doesn`t work where everybody else does it. And this makes sense to me because it is a pure alpha thing. But for the global indices you have much too much competition to make correct timing calls consistently. It is like the physical problem with schrödinger's cat, where you change the outcome of the experiment when you look into the box. When too many people see the crash coming, they prevent it by not being invested and investing when the market goes down by 5%.