Jurgis

I'm pretty sure that Todd and Ted both invest without supervision, at least in 'their' accounts. Right. What I was saying is that maybe Warren was involved in HCG (and maybe Store) just for the weight of his name even though it was Ted's position/idea. I have no clue if "supervision" is bigger in such case.

+1. Couple more points: Someone working in structured finance does not necessarily has interest, knowledge or expected alpha to switch to value investing. They may be getting great money in the big bank while even if they demonstrated alpha in value investing, they might not get huge AUM and huge monetary rewards. They might not be interested in business fundamentals. I think it's rather simplistic to assume that someone super smart to understand complex products somehow automatically should be able to do great in value/Buffetty investing. I think it's also rather dismissive to suggest that if they don't that they are somehow inferior to value mavens. I'm sure there are other reasons why smart people in structured finance might not go out and setup value shop. 8) They may never become multibillionaires like Buffett, but then pretty much all value investors won't either. Buffett's stock picks have not been super great lately - stocks are expensive and even he can't find great investments. So even if someone tried to move to Buffetty way, they'll probably not find "golden nuggets laying on the street" (sic) and "make huge returns on". I'm sure there are exceptions. Some people may move to value investing and make great money. Maybe thelads has some stories about that. ;) Peace. 8)

I don't do macro, but it feels like 1999. Buffett is making mediocre investments since market is too high and nothing else is available. Alternative explanation for this and HCG might be that it's all Ted's ideas and Warren just signs off without much supervision. That's also not very believable, but just throwing it out there. I base this on the size of the positions which are really small for Warren.

So you are saying hedges were costing 4% annual return? That's not what Prem told us. 8) ::)

I agree with the rest you wrote, so I cut it out. I think it's a good idea. I have to look back at Quicken and see if their per-security IRR has gotten correct. Might be a good thing to study for me sometime when I have time. Yeah, as you say, there are issues in terms of risks taken, but maybe looking at this will give some ideas how to deal with the issues. Thanks

Funny ICO idea from MIT mailing list: This is humor. Do try it at home. 8)

Expert predictions: https://www.technologyreview.com/s/607970/experts-predict-when-artificial-intelligence-will-exceed-human-performance/?set=607997 Link to original paper: https://arxiv.org/pdf/1705.08807.pdf Note though that the prediction for Go was 2027 and it actually happened in 2016-17. So "predictions are hard, especially the ones about the future". 8)

at $.10? 8)

Below may sound like nitpicking, so please skip if you're not interested. Right. Although even for "gross" or "approximate" one, it's probably harder than you said. I thought about BRK and likely the curve is much flatter - less certain - than I suggested. I.e. we don't know more than we think we don't know. Also with CBI or Fannie or SHLD, you think that there's binomial distribution, but likely the curve is quite flat too. I.e. everyone who argued that SHLD is zero or huge gainer in the last ?8? years have been wrong. Same mostly with Fannie. So maybe there was a hump towards zero, but likely much flatter than people expected. It's likely SHLD hit a probability spot that people thought was something like <1% chance (sorry this is a bit inaccurate given continuous prob distribution, but you know what I mean). Sure there are steep fall-offs at certain points, e.g. there's probably almost no scenario for BRK to return 20%+ for 5 years annualized, but overall being certain of the humps is hard. I think this relates to the behavioral economics question/test where people are asked to estimate weight of the 747 or distance to the moon with 99% confidence interval and they choose way too narrow range. The illusion of certainty. I find this topic interesting, since I wonder if it's worthwhile for me as investor to try to come up with an approximately-right curve. And how much approximately-right. Anyway, thanks for article and thanks for comments.

Yes, this is great. Confirms what I knew, but adds some specific insights/details on EM and Europe and their revenue on mods. You remember it correctly that they are paid differently based on product category. Thanks.

The problem is that humans and AI are judged using different standards. If human kills someone by accident it's OK'ish since you know it's human what can you do... If AI kills someone by accident, it's clearly broken, nefarious, and should be never used again. At least regulatory agencies subscribe to this fallacy less than regular people. Otherwise we would not have seen cruise control, autopilot or industrial robots at all. ::) Of course you are correct. Humans are not rational, which is just one more reason why they shouldn't be running things. When either a human or an AI makes a mistake you could say that it is in a way broken, but when a human makes a mistake (s)he might learn from that mistake, get better, and never do it again. When an AI makes a mistake, it might learn from the mistake and upload the new info to millions of other similar AIs who all learn from it and never make it again. AIs are superior in every way. Humans should never touch heavy machinery. I'm reading a fascinating book ("The Righteous Mind" by Jonathan Haidt) about how humans react emotionally to just about everything and use reason only later in an attempt to justify their emotional reaction. Reason is just a post hoc tool we use to explain what we already want to think. You could be that old blind guy with the super long soul patch on Kung Fu (.) I can only point the way, Grasshopper. You must walk the path yourself. Just jack into the cloud, feed the data into your daemon ML, and the path will appear. 8)

Great posts, thelads. Considering your area and your thoughts about US and EM debt, do you have an opinion about MCO as stock? One of the bearish lines on it is that the debt issuance is toppy here (as you said, there's been debt explosion). On the other hand, the bulls say that there are still secular tailwinds in debt move from banks to market (as you mentioned too). Thoughts?

I could wait more, but I think I'm gonna conclude that nobody gives a f**k about the investment outcome graphs. Which I expected. 8) OK, to raise the bar a bit, I'm gonna present an 5 year annualized return probability distribution graph for an easy stock. BRK. 8) I can't draw graphs for shit, so here's a description (someone with some math graphing package can probably draw it from description): It's not symmetrical graph. Maximum probability is at 9%. Pretty symmetrical normal distribution decline to 6.5% and 11.5%. This covers about 80% of the distribution area. Rapid decline towards zero probability as we go over 11.5%. Really close to zero above 15%. Slower decline towards 0%. A shallow hump up with a max around 1% that extends both up and down towards -5% (minus here). This mostly represents Buffett dying and/or mega cat(s). The area covers about 10% or so total probability area. Probability goes to near zero at around -9%. So there. Probably a good illustration why this is fricking hard. Have fun. 8)

I confess to never really understanding it. Here's the conclusion: (my bolding). Isn't it tautological that one should prefer "compelling" investments over cash? That's just what a compelling investment means. It's not completely tautological. Or at least not tautological for everyone. 8) E.g. I've held about 20% cash since 2009. Clearly through all this time there were compelling investments available. So I should have not held it, yes? OTOH if we consider that 20% a portion of portfolio dedicated to "fixed income" then perhaps I should have held it. Though perhaps I should have put it into better fixed income funds than "cash". (Which I partially did, but that's another story).

I read through "Know Your Graph" piece. I agree with the arguments there that the manager/investor should not be evaluated just based on their results. In fact, I mostly agree that evaluation based on graph would be better. I disagree that the graph is easy or even possible to create in most cases. In fact, even for a single investment - single stock - I have not seen anyone draw a graph distribution for expected outcomes. (OK, OK, I think Ed Thorp could have done the graph for some of his arbitrage investments. This is still an exception). I'd like to see someone present an investment with a graph of outcomes and argue for the distribution used. Or if someone is up for harder challenge, take any public portfolio (maybe something simpler than BRK... maybe top 5 positions of some investment manager) and draw a graph. IMHO, this is extremely hard and likely not possible at any useful accuracy. But maybe I'm too negative and someone can prove me wrong. ;) Thanks for the article. 8)

8% annual on stocks for next 10 years is likely optimistic. If it's 8%-above-inflation, then superoptimistic. I'd go with 3-6% annual for next 10 years on broad market. Maybe a bit more with international mix, since international has gone nowhere for a long time and is somewhat cheaper. I don't think they use 8% stock return a lot. They mostly focus on the bond side non-returns. But yeah, even with their assumptions, the portfolio likely needs to be quite bigger than most people expect.

Good paper.

What cherzeca said. 8)

I would guess this http://seinfeld.wikia.com/wiki/Kramerica_Industries

Wait until oddballstocks comments in this thread or just PM him. 8) Then buy him a beer and you'll get all the scoop on the data sources. 8) This message was not paid for by oddballstocks or anyone else.

The problem is that humans and AI are judged using different standards. If human kills someone by accident it's OK'ish since you know it's human what can you do... If AI kills someone by accident, it's clearly broken, nefarious, and should be never used again. At least regulatory agencies subscribe to this fallacy less than regular people. Otherwise we would not have seen cruise control, autopilot or industrial robots at all. ::)

I would rather be immortal in co.co.co.co.co.co.co.co.co.co.co.

Uccmal, you clearly don't use a car... Cause you know: microprocessors for fuel injection, cruise control, getting to brakes too... a recipe for disaster according to you, no? 8) Take a big breath. Edit: And then I forgot about planes... don't even try to get into one of these bastards. Tons of electronics and code. And definitely mobile. ;) Edit 2: And BTW, US Navy... was running Windows... on ships... around 1998... what can go wrong... ;) Apparently nothing so far. ::) Software is in everything. And it's there to stay. So the apocalyptic scenarios of runaway lawnmowers... might happen... but then when was the last time Roomba killed anyone? Or your car's cruise control?

So CoBF devolved into a forum of FANG-hate and backslapping based on 2 days of market behavior. Can the last serious investor turn off the light please?

I got a mortgage in 2007. Refi couple times down to 3.5%. I'm sure that if I had paid cash instead, I'd be at least 1x that amount poorer (i.e. that cash invested probably has gone up 2x if not more).