Ballinvarosig Investors

Listened to the meeting again yesterday. Am I the only person that thinks Munger has slowed down a bit? He's still a killer at the one line quips, but I thought he struggled a little to articulate himself at times. It felt especially painful when just before the half time break he was asked about China, and he stumbled so badly that Warren cut him off and they went straight to a break. He's obviously a company treasure, but if he's in pain (he complained about a sore back) then maybe it's time that he calls it a day? The second thing I picked up on was a possible market forecast from Buffett when asked about what he thought Berkshire's intrinsic value would grow at over the next ten years. As we all know, Buffett will say that future returns are often dictated by interest rates, and he did say he thought that sooner rather than later over the next 10 years, interest rates would rise. So when Buffett previously says "markets are cheap if interest rates stay low" - I think that confirms what I thought in that the current low rate environment isn't going to last into the medium term, and that stocks are at very least, not cheap. I think the questions as a whole were actually a little better than in previous years (not by much).

I am not arguing that the traditional hedge fund structure isn't a disaster. It's definitely very, very bad for investors. What I am saying, is that the bet wasn't even remotely fair. Buffett is an absolute genius who picked the right index to put a 100% weighting into at the right time. This was not luck, he did it because he is smarter than nearly everyone else out there and knew it'd be impossible to beat. Looking at the performance of the opposition, their returns weren't even mediocre, they were diabolical before the ridiculously high fee structure was considered. I take umbrage with his comment the fact that indexing is always great and that active is always bad (except presumably for himself and the 10 other people he talked about as being able to outperform).

Close enough, frrom the NY Times in October 2008 - http://www.nytimes.com/2008/10/17/opinion/17buffett.html

You do have to feel some sympathy for him here. The wager was constructed in such a way that the hedges almost certainly couldn't win. I think when Buffett placed his bet, he knew the S&P 500 would generate out-sized returns (actually, he came out and publicly said the S&P was cheap around the time). Considering he had a 100% weighting to the best performing asset class in the world over the 10 year period, it's hardly surprising that he beat the pants of the hedge funds. As Alice Schroeder would probably say, this bet was like Buffett playing the role of the class handicapper when at the races. Because he picked what was by far the best horse in the race, he was almost certain to win.

Thanks again Dr. Malone.

http://www.irishtimes.com/business/financial-services/us-fund-giant-will-use-machines-not-humans-to-pick-stocks-1.3030623 Ok, it's only 11% of their assets that are going to be moving to the algo-driven process, but quite frankly I am amazed that Blackrock have decided to entrust client assets into such an unproven strategy.

It proves nothing obviously. It's just a warning that when you see private debt and the banking sector grow at a much faster rate than the economy then something eventually has to give.

Ireland's banking sector had about 25 years of similar out-performance before imploding and losing investors 99%-100% of their investment.

https://www.hussmanfunds.com/wmc/wmc170306.htm

When asked about market valuations, he said stocks were cheap if long-term treasury rates remained at their current levels. This is something he has said several times before, so nothing new. However this time, he did also add that if the 10 year treasury was to remain at near the current rate for the next ten years, then you would regret not buying stocks. Does this not sound like a small market forecast to you guys?

Apparently Ted or Todd bought the American Airlines position and Buffett bought the rest. http://video.cnbc.com/gallery/?video=3000596531&play=1

Awkward.

Honestly? I think it's going to be very difficult for a young person with no experience to break into value investing as a career. I don't mean to be negative, but in today's climate, firms are more likely to be letting people go rather than hiring. That is the reality of the situation here in London, and I suspect the same is true in the US. I am not saying finding employment is impossible - good people will always find a way, but I think the days of ordinary MBA's just floating into the business without experience or a real passion for investing is dead (if they ever even existed!). I think one way you can increase your chances is to maybe consider doing your own investment blog. Off the top of my head, I can think of at least a dozen people who have found gainful employment through someone discovering their blog, or else by being able to point to it as a track record. It gives you a track record, it means you can stand out, and it can also be a great way of networking and learning about the business. Of course, to be useful in finding employment, I suspect you'd want to be able to show some sort of decent returns - easier said than done in this climate.

He really does go to town on hedge funds and their high fee model, most of the rest of the letter seems to be filler. When he talks about hundreds, or maybe thousands of manager (in the entire world) who are capable of beating the index, he is basically telling us that most of us are wasting our time and that we would be better off in index funds. Maybe Prasad should close the forum and redirect the URL to Bogleheads?

I am guessing he didn't buy Sandridge, rather some of the debt he held was converted to equity.

25 years ago Klarman talked about this sort of effect that indexing would have on the market, he even called it a fad. Same with Stahl and other active managers. As Dwight from the Office once said: " They’re going to be screwed once this whole Internet fad is over." Haha, I agree that Klarman's statement sounds pretty foolish at the moment. The indexing strategy has been on a multi-decade bull run and shows no signs of slowing if outflows from active to indexing strategies continue. However, I think at some stage in the future, Klarman will be proved right, dumb human behaviour combined with mindless indexing is going to lead to inferior market returns. At some stage the wall of money that's pushing over-valued, US mega-cap companies on an ever upward trend will abate. If we saw a substantial market decline, we could see a rush for the exits that would exacerbate any market decline as investors decide that indexing is no longer a good strategy. Indexing is a great strategy for most investors, but I think just like we saw with the Magellan fund (where most investors saw very little gains because they bought and sold at the wrong times), human psychology can be relied upon in wrecking decent strategies.

25 years ago Klarman talked about this sort of effect that indexing would have on the market, he even called it a fad.

According to POTUS, "integrity" is an alt fact for losers. I for one fully support Wikileaks on Boston financiers. People above are doing god's Trump's libertarian work. The person who put this online is violating an agreement they made and that is wrong. But once it is online already, reading it doesn't violate any agreement, because if you are already an investor you have already read it, and if you are not you have made no secrecy agreement with anyone. By posting a link to copyrighted material, are you exposing the owner of this board to a claim of contributory copyright infringement? No.

https://www.bloomberg.com/news/articles/2017-01-31/buffett-bought-12-billion-of-stock-from-election-through-friday Wow, so Warren did have some sort of input into buying the airlines.

http://www.canadianbusiness.com/investing/francis-chou-value-investing/

https://www.sec.gov/Archives/edgar/data/1067983/000119312517002728/d287902dfwp.htm When in Rome.

Don't know about you guys, but I have mostly been cutting/trimming positions in oil and financials over the last two weeks. I was 35% cash before the election and since then my portfolio which is heavily weighted towards financials has just been unreal. I wish I could say that I was an investing genius and that I foresaw the value in major holdings I have like Wells Fargo, Lloyds and Uniqa, but the reality is that I have been at least partly lucky. The uplift we're seeing in financials is mainly due to a shift in sentiment in the treasury market. When I look back at the write-up's I did on the financial companies I own, while I did say an insurance company like Uniqa were getting killed by long-term bond yields wrecking returns on their investment portfolio, it was never core or central to my investing thesis. Same thing happened with the two oil stocks I own. I was mostly going by the value of the assets, then OPEC come out and announce a production cut, whoosh the stocks go up. I recommend that everyone reviews what Mauboussin had to say about investors confusing luck with skill in order to keep themselves grounded. https://www.bloomberg.com/view/articles/2016-08-16/michael-mauboussin-on-skill-and-luck FWIW and I know this will not be popular to say, I think the US market in particular is now grossly over valued. You only need to look at large cap American stocks and their European counter-parts to see the extreme divergence. For example, take a look at Nestle and Kraft Heinz. We all know the story here, two huge companies in similar established industries with limited growth prospects. The divergence in valuation makes no sense to me and that is why I am nearly 50% cash.

I have no skin in this game, because quite frankly I don't like investment decisions to hinge on personalities, politics, or an implicit government guarantee. However, in this instance I was an investor in FNMA/FMCC - I would absolutely sitting on my hands with this one. I think Trump has enough incentive from his campaign backer to make you whole.

Speaking of Whitney, I don't often find myself agreeing with him, but has anyone looked at his short position on Wingstop?

Not much there, but I did think that this bit was interesting.