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kiwing100

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    The Mistakes Made in Value Investing By The BigWigs and Ourselves

    in General Discussion

    Posted

     

     

     

    This is tangentially related.  I've never liked books about success because of what I mentioned above.  I think success is objective, some things work for some people and not for others.  But I LOVE books about failure. [Emphasis added] Failure is 100% repeatable.  If you take something that's working and engage in a series of steps you can ensure failure.  In a lot of ways I like to study failure, then look for ways to avoid it.  By avoiding failure I work to increase the odds of success.

     

     

    Oddball, do you have favorite books on failure you'd like to recommend?

     

    Billion Dollar Lessons, anything about Enron, When Genius Failed, The Match King, Invisible Giants (Van Sweringen Brothers book, very off the radar, engaging book)

     

     

     

    I'd add "Fools Rush In" as a great case study of the disastrous Time Warner/AOL merger. The personalities are fascinating.

     

    Oddball,

     

    Studying failure is great, fun, interesting and you learn what areas to avoid in the investment world.  My bookshelf is littered with books on company failures, investment failures and personal bankruptcies and I collect news stories of such failures. 

     

    As Charlie Munger says, "tell me where I'm going to die so I won't go there"  - classic Jakobi inversion - if you know how to lose money, then you stay away from those areas.  By only studying success, you overlook what can go wrong.  Klarman and Berkowitz focus on what can go wrong before what can go right.  I've heard Berkowitz say that they try and kill the company in his investment thesis before he invests

     

    Warren Buffett's favourite business book was "Business Adventures"  - it is a great read for investors and is a collection of stories - there's a story about business group think, cornering the stock market, currency peg devaluation.  They've reprinted the book recently so you can get a copy.

     

    Here is an article from Bill Gates on the book.

     

    http://www.marketwatch.com/story/gatess-and-buffetts-favorite-business-book-is-out-of-print-2014-07-17

     

    Quote from Berkowitz interview:

    What is your strategy for the fund? If I was to build a stock screen like Bruce Berkowitz, what would it look like?

     

    We start with this basis: The only thing you can spend is cash. We want companies that generate significant cash in most times. That is how we start. We don’t care much about what they make, but we have to understand it. The balance sheet has to be strong; we want to make sure there are no tricks in the accounting. Then we try and kill the company. We think of all the ways the company can die, whether it’s stupid management or overleveraged balance sheets. If we can’t figure out a way to kill the company, and its generating good cash even in difficult times, then you have the beginning of a good investment.

     

     

     

     

    Difficulty of Outperforming

    in General Discussion

    Posted

    I tend not to follow Guru's anymore.  What bought this to my attention right now though is John Paulson having to back his firms lines of credit with more of his own cash.  Also, the situation with Mohnish Pabrai.  Over the long term it is exceedingly difficult to outperform the markets by enough of a margin to justify ones existence, after fees and taxes.  By this I mean an outperformance of at least 2-4% over the SPY, over ten year periods, after fees and taxes. 

     

    Off the top of my head, I can think of Buffett (size is now an anchor but he got 50 years), Seth Klarman,  Bruce Berkowitz, and Walter Schloss (Is there anyone else whose flame hasn't eventually gone out?).  Some companies have had great long term performance, but reverse engineering this to predict the future is mostly luck.  Greenblatt's record is not public.  I cannot think of any others. 

     

    Can we collectively name those funds, investment type companies, or hedge funds who have:

     

    Beaten the S&P 500 by 4% per year pre tax BUT after fees, for 15 years. 

     

     

     

     

     

    For those of us who do not know, could you tell us what is the situation that you allude to with respect to Mohnish Pabrai?

     

    Thank you in advance for your insight. 

     

     

    Greece - some observations in human behaviour given current circumstances

    in General Discussion

    Posted

     

     

     

    Was listening to a Bloomberg news report from a reporter on the ground in Athens, yesterday. A couple of interesting comments. 

     

    The reporter noted some behaviour by Greeks given current circumstances;

     

    1. Some Greeks are maxing out their credit cards and buying TV's, electronic items (perhaps in fear that these imported items will become more expensive if Greece leaves single currency).  It seems that they believe that if the Greek banks go bankrupt, or if Greece leaves the Euro single currency, they believe that they will not have to pay the amount back to the bank ... (or to offset against their bank  balance which they are unable to currently access)

     

    2.  Greeks are buying Rolexes, jewellery as a store of value, in the event that Greece leaves the single currency union.

     

    Unusual things that happen in public markets

    in General Discussion

    Posted

     

     

    Also I suppose if you own shares in a company that has halted trading, then you sell your other shares that are still trading. 

     

    If you have a margin call, and need to put up more cash to maintain your position, and you don't have any spare cash and the only way to raise cash is to sell your shares, then this is even more urgent to sell your shares.

    Unusual things that happen in public markets

    in General Discussion

    Posted

     

    The figures just got bigger ...US$2.2trn of market cap affected or 33% of the market cap of the entire market ...

     

    This news itself could be fueling sales by investors / speculators for fear of being unable to sell their shareholdings in case their stocks are halted in trading ... (akin to a bank run where you fear that you are unable to get your money out of your bank, so you take it out in case)

     

     

    http://www.bloomberg.com/news/articles/2015-07-08/china-trade-halts-hit-2-2-trillion-as-state-intervention-fails

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