peter1234

The intangible value of owning a part of a Munger biz and hearing him speak is priceless. :)

That's what I love about this forum, people trying to save every penny. Truly value conscious! ;) The good Buffett books are worth every cent, so $30 for the kindle version sounds like a good deal. :)

It does 'work', just not as well as in the book. He never disclosed the 'exact' formula. There are lots of people that did backtesting on it. One thing to note is that it is not a typical value strategy protecting on the downside as the drawdowns are vicious. If you can hold on to the portfolio, it should outperform the market. As a screen to generate ideas, it is pretty nice. His other books 'The little book that beats the market' and 'Genius' are better. :)

Big difference to today is certainly that it was buy and sell rather than buy and hold. Since holding period was much shorter, compounding was a smaller part, biggest part was multiple expansion. Making it kind of difficult to pay up for quality and have compounding increase business value. But yes, if he could find dirt cheap quality (like Western Insurance), I am sure he took it. ;)

from the VIC thread on good short ideas. Being overvalued and being a good short is slightly different. It just might run up another 37x and then being valued at 26b... ;D Just make sure price does not go in the wrong direction. ;D

If I understand the situation, it is a total of about $33k in monthly increments of $550. With these sums, trading fees will be important. Markets are currently not cheap, so not sure what I would advise a new investor. Certainly must be able to withstand a 20% drawdown in any year. Agree with other posters that this is a risky proposition. If you read Hussman and others, he would tell you that probability for :'( is high. Nevertheless, here are some thoughts: Easiest would be adding to a total market index every month (say Vanguard). Mutual fund wise, could select something with a value or small cap tilt. Possible Funds (some might be closed), need to check minimums and fees. Third Avenue Focused Credit Fairholme Akre Artisan FPA Crescent Oakmark Small International If she is new to investing, I would probably stay away from individual stocks and might go with something that is not very volatile.

Here is an interesting editorial by Seattle based entrepreneur Nick Hanauer. http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014.html

If anyone is still looking for summer reading, "The Money Game" by Adam Smith is fun. Very insightful and full of tongue in cheek, similar to "Where are the customers' yachts?" by Schwed. (Both are apparently some of Buffett's favorite books and his children recently talked about meeting the author when he met with Buffett while writing "Super Money"). :)

Seyhun studied trading by insiders and wrote a book about it in 2000. It is very fact and data based and focuses on which insiders in which situations provide good signals. http://www.amazon.com/Investment-Intelligence-Insider-Trading-Seyhun/dp/0262692341

west, thank you very much! :)

from the VIC thread on good short ideas. Being overvalued and being a good short is slightly different. It just might run up another 37x and then being valued at 26b... ;D

Here is how you turn $39 in assets into $700M. ;D http://seekingalpha.com/article/2274553-cynk-technology-promoters-push-market-cap-to-655-million-despite-39-in-assets-and-no-revenue-100-percent-downside

This is a very interesting question. Since you probably got interested in this idea by Berkowitz/Ackman and know their thesis, it makes sense to focus on the few variables that will determine the outcome here. Uncovering information that helps you quantify the odds should be your focus. Learning about the business and financials is less relevant here. Skimming the filings quickly might be helpful. After reading all the court filings, you probably know more details than are disclosed in the filings. Still, filings might give you a quick high level overview from the company's perspective.

What do you mean by 1-2 full cycles? I thought business cycles were around 5-7 years, which would mean you expect to hold 10-14 years or very close to 'forever'... TIA. ;)

I don't know, but it's a huge book. The full book is a collection of his weekly memos with tons of charts. The little book covers the same behavioral concepts but seems to be re-written and has much fewer charts. As far a little books go, this is quite long as well. ;D

Thank you. Very nice article and follow up on the original SmartMoney coverage. I wonder how much leverage he used for the Berkshire holding? :)

Thanks, very nice summary. :)

Damodaran has a good post on Market Timing :) http://aswathdamodaran.blogspot.ch/2014/06/bubble-bubble-toil-and-trouble-costs.html

I occasionally find them helpful in learning about a business I'm unfamiliar with. Sometimes weird metrics, legal analysis, or commentary can help me think about the business in a good way. And sometimes it helps for me to check my work against when I disagree. Nothing is as much fun as a report coming out that knocks down a core holding ~10% which, upon closer analysis, is severely flawed in one way or another. I find them useful to find industry and competitor info quickly. Some company info and the metrics the analysts look at are helpful as well. Helps you to understand where they are coming from and what your variant perception is.

During the partnership years in particular he made this claim due to work outs (Arbs, corporate actions, stocks like Sanborn Map) generating profits regardless of how the general market performed, thus he would outperform the market in bad years, but likely lag in good years. He clearly states that the generals will likely decline similar to the indices. During the last few decades, I believe he has said that Berkshire will function similarly. I don't think he says portfolio. So I take that as being based on his focus on Berkshire's book value continuing to grow since most of the business will still be profitable in down years. Agreed. I think in early years he meant that his arb/workout/special situations would not be correlated with the market. In his later years (and now) I think it is more that decline in book value would be much less than market in a down market. For example, in 2008, book value was only down 9.6% whereas the SP was down 37%. (Berkshire share price however was down something like 32% or similar to the S&P.)

Congratulations, this is a thoughtful gift. Amazing that he still replies personally. If you really contributed to prolonging his life and got some personal satisfaction from his reply, I think this is a wonderfully valuable contribution. :)

Fund talks about dividends being paid out accruing but not showing up in NAV. Meaning the actual NAV is a little bit higher than the NAV on the books (since you are being paid the dividends). It's only an issue during dividend season now. The other simpler solution is that as often with small illiquid emerging issues, there are just some data issues. Just a guess. ;)

Lot simpler than you would think ... - Prospects for significant dilution/BK 6 mo out? If not good - sell. - What is your EMV for XYZ coy 6 mo out? P(x) x Price(Optimistic) + P(y) x Price(Realistic) + P(z) x Price (Pessimistic) - Higher than price today? Dont hedge - Lower than price today? If there is a compelling reason to stay - 50% hedge; if not - sell & move on. Just keep in mind that you are taking the long view, & coining it by market making against crowd sentiment & investment horizon. As long as the underlying doesn't BK (ie: buy quality) you should essentially steam-roll to a successfull result. Not textbook, & not what your advisor wants you to practice ... SD Thank you, much appreciated. :)

Thank you. :) Fascinating. Looks like a serious piece of work. ::) I am sure we will hear from John on this. I wonder if he will take down GMO's 7 year model next? ;)

BTW not sure if it lists all drawdowns >10%. For example, seems like 2011 and 2010 had drops > 10% as well. By the way this is for the January 15 puts. We have June now. And at least as far as I'm concerned it's only interesting to look at the hedging cost on a per year basis. The June 15 155 puts trade around $2.85 which is more like 145 bps. Agreed. Also, would be interesting to see the differences in strategies about buying/ rolling different maturities (say, 3 months, 6 months, 12 months, 24 months). When you need it, volatility will be higher and your cost will be higher for new positions at that time. This is where it gets complicated and expensive with Puts. This is what makes Sharper's market timing methods of moving to cash attractive, simpler and cheaper. Except... when and how much do you move to cash? The Put buying strategy you would have to do continually (or above a certain Cape threshold for example) and just regard it as insurance you keep paying annually.