merkhet

I suspect that the number of people for whom concentration can consistently work is significantly lower than the number of people who think that they can make make concentration consistently work. (For a combination of reasons including deeper knowledge, gastrointestinal fortitude, etc.) There are a number of posters here that have said something along the lines of how they have "underinvested" in their "best ideas." However, the mind plays tricks on you. (Read Leonard Mlodinow's "Subliminal" for an excellent treatment on how this is the case.) In hindsight, your best ideas always seem to be your best ideas, but can you confidently state that those were your best ideas at the time? Or are they merely your best ideas because they have worked out the best so far? Unless you keep a written record somewhere, it becomes increasingly difficult to sort out whether your best ideas were truly your best ideas a priori. And this is, again, coming from someone who feels the most comfortable investing in four to eight names at a time. Essentially, you have to figure out your "hit rate" and conform your style accordingly. And, as another poster (Zenaida) once said to me in person, you always want to make sure your hit rate is really a good hit rate given the current environment. (We are, after all, in a pretty strong bull market.)

I actually like the building. I know some people think it's gaudy, but I like it.

The Economist discusses the future of books. http://www.economist.com/news/essays/21623373-which-something-old-and-powerful-encountered-vault?fsrc=scn/fb/te/pe/es/oaoyrustopixel Pretty interesting read thus far.

+1 "Someone will always be getting richer faster than you. This is not a tragedy." -- Munger So true. Envy is one those sins we should learn to remove. As long as we reach our goals, who cares what others do right? Another of my favorite Munger quotes is that "envy is the only sin that isn't any fun."

100% agree. I think that we have stumbled on to a pretty good compromise -- post results while having a few of us consistently whispering to the board "memento mori." (http://en.wikipedia.org/wiki/Roman_triumph)

I get your point, and it would be hard to disaggregate the factors for a variety of reasons. Again, I will point out two things though: (1) At the time of my post, there were 40 fewer votes for 2014 than 2013, so I dont know that much of this can be attributed to the board getting bigger. Though, we don't know how many people are repeat voters, etc. (2) There was a 6.5% swing towards underperforming the market between the two years and about 6.6% more people bunched towards the market this year. I would feel pretty confident in saying at least one person (and probably more) swung for the fences and whiffed, and I would be pretty confident (though slightly less so than the previous statement) that envy stoked by last year's results thread played a part in that person's performance.

I'd like to once again caution against envy on this thread, because I feel like I can see it building up even over the interwebs. I went searching for the returns thread last year, and I found two interesting things. The first one is the comparison year over year. Amount -- 2014 -- 2013 less than 10% -- 37.9% -- 9.2% b/t 10% & 25% -- 42.4% -- 22.2% b/t 25% & 40% -- 13.05% -- 35.8% b/t 40% & 60% -- 3.95% -- 17.1% b/t 60% & 100% -- 2.3% -- 9.2% greater than 100% -- 0.6% -- 6.5% The second one is that the first post that came up when I made a search for the 2013 returns happened to reference an extremely good post by Kraven. (http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/your-returns-in-2013/msg149602/) I'm a novice at this pursuit so thanks for the perspective. I think any year in which you do not lose your capital's purchasing power cannot be thought of as "bad" ... as for good - this is more subjective. I find that I sometimes enjoy the mental game far more than the actual returns! I think Gio is the same in this way ;) I wonder how many people in the middle brackets tried to chase the >100% bracket and ended up in the <10% bracket.

The problem with diversified vs. concentrated discussions is that there is often no discussion of the base rate. My guess, since I have no robust data set on the matter, is that the base rate of blowing up is lower on the diversified side than the concentrated side. (I mean, mathematically, that almost has to be the case -- and this is coming from someone who feels the most comfortable owning between 4 to 8 stocks at a time.) Mauboussin talks about this in his book "The Success Equation." Expected individual success is basically the base rate plus or minus a fudge factor for individual ability. The fudge factor on this forum is probably high across the board. The fudge factor for certain individual posters is probably significant deviations above the regular population. It all comes down to figuring out your personal fudge factor, which incorporates things like your understanding of your investments (as BG2008 correctly pointed out), etc.

Thank you very much for the detailed explanation! I am sure this year will prove to be the exception, while last year the rule! ;) Cheers, Gio Haha, one can only hope. :)

Sorry to hear that, LC.

Merry Christmas & Happy Holidays!

I feel like the poll should have been worded differently. When will there be a recession? -- After 2017 with 100%. Why? Because you didn't ask "When will we have our next recession?" There is a 100% chance that there will be a recession after 2017 and before the end of days. :)

I think you could call it partly differences in risk tolerance, but I've run very concentrated for about 7.5 years at 65%. But for instance this year I was a -10% vote. The way I look at it, if I'm not willing to put 50 or 100% of my money in a position I shouldn't be buying it anyway. You can buy a put to protect your downside while avoiding potentially devastating opportunity cost of not being concentrated - again becomes a risk tolerance question. Adding another 10 stocks would certainly not help my total performance and probably add some terrible emotional mistakes, and analysis oversights. Having read your some of your ideas, you could probably buy the best 3 or 4 a year with great long-term results if you don't mind being one of the poor votes on the poll every once and awhile. Wait, you had a 65% CAGR over 7.5 years? Curious how you achieved that.

Someone posted earlier that one-year returns aren't terribly instructive. I was one of the 100%+ people last year, and now I'm down 20%. It's the Michael Mauboussin book ("The Success Equation") in action -- individual years exhibit significant luck while longer periods tend to sort out the luck. I suspect that the sense that people knew things were going to work out is purely psychological. Good decisions are all from skill, and bad decisions were all bad luck. Additionally, in a thread like this, the underlying subconscious tendency is to puff oneself up and strut about, and so that adds an additional amount of psychological pressure to seem confident of one's abilities. That said, so long as it doesn't stir up too much envy (which Munger correctly deems the least fun sin), then it's entertaining nonetheless. This is interesting... Why? What has happened? Thank you, Gio I actually just did my "loss walk" on investments a week ago, so I have a pretty detailed answer on that one. I had four significant contributors to my loss this year. (1) Some of my companies' stock prices have done a whole lot of nothing this year. (2) I held General Motors warrants going into this year, and while I made the lucky decision to sell a bunch at the beginning of January @ $22 a warrant, I held on to some into and through the recall. I have since built the position back up over the last few weeks. (I sold originally to add capital to another idea.) (3) I held Sears common stock going into this year, which started the year @ $49 a share. I then made the idiotic decision (Read: unforced error) of selling my Land's End to buy more Sears. The smarter thing to do would have been to sell my Sears to buy more Land's End, and I don't think that's ex post rationalization. I think at the time, I could have surmised that Land's End was likely to do well given the characteristics of the business. (4) I picked up Fannie & Freddie preferreds and common stock before the Lamberth decision came down. This one comprises the clear majority of my losses thus far as the preferreds are down maybe 60%+ from my initial cost though I've since added to the preferreds and taken a tax loss on the common stock. So basically, I didn't have anything from (1) to help mask the effect of (2), (3) and (4). This is, of course, the problem of having a concentrated portfolio of around six holdings, there is a certain amount of volatility (I call it the vomit comet) that one needs to be willing to endure. From an analysis point of view, I don't think that I could have predicted (2) since the recall came out of nowhere, and, in fact, I ended up being lucky to sell a portion @ $22 to buy again recently at lower prices. I think that (3) was unambiguously my fault. As for (4), I think it's too soon to tell whether that will ultimately be a loss of capital or not. As I've detailed on the FNMA thread here, I think that there's a pretty good chance that it gets resolved in 2015 @ par.

Actually, there is at least one self-identified female poster on this board. I don't know if she's found this thread yet.

Ah, the airing of grievances. The highlight of the celebration. Here's several. 1. If you're part of the seemingly every growing contingent of younger posters still living at home, please don't offer life advice. 2. For newer posters, please don't feel the need to weigh in with your views on every single thread. 3. If you post about how much angst you have with your investments and you don't know if you're investing properly, etc, please don't then 5 minutes later offer advice to someone else who asked an investing question. 4. If you're under, say, 30, please feel free to get rid of the world weary tone like you've seen and done it all. Ah the good old sarcastic holier-than-thou tone, every time I look up for the poster's name it ends up being the same guy. Do you ever contribute anything besides complaining about other people's posts? This board is free to leave if it's such a drag on your life, you know. LOL. This forum is morphing into a strange beast. I don't know if it's the bull market, Sanjeev's more reduced role, or something else. As oddballstocks said, go read Kraven's post history - one of the sharpest guys in the forum, and probably has one of the best long-term records. My vote is the something else. I just had a convo with a few other posters yesterday about this very topic. It seems the noise to signal ratio has increased significantly on the noise side. I suspect that is what Kraven is targeting with his funnier comments.

Ah, the airing of grievances. The highlight of the celebration. Here's several. 1. If you're part of the seemingly every growing contingent of younger posters still living at home, please don't offer life advice. 2. For newer posters, please don't feel the need to weigh in with your views on every single thread. 3. If you post about how much angst you have with your investments and you don't know if you're investing properly, etc, please don't then 5 minutes later offer advice to someone else who asked an investing question. 4. If you're under, say, 30, please feel free to get rid of the world weary tone like you've seen and done it all. +1

Down maybe 20% or so.

Reasonable, yet as wiser men than me have said (hah! beat that!), that's a base rate bias. Consider the divorce rate (base rate) now consider your statistical chance to "not divorce". Everyone who marries including yours truly ignores this number which does not even include all the "not divorced, just miserably living together until we die". It's not pretty when you think about it. It's also reasonable to stash some money away as on your divorce day your spouse might see you nothing more than the lowliest dog and try to get far more than half (so I'm told). Personally, I don't care about the money, a far more important question IMNSHO is how to guarantee a joint custody of the kids in case of a divorce. Giving away half your asset is nothing compared to having no part in your kids' lives. EDIT: just to be clear, I wrote the above as per my own personal experience as a yacht partying billionaire. In addition, this post will be updated as soon as I can Google up some Buffett quote relating to this subject. +50 Base rate ignorance is a highly underrated as a source of significant cognitive error.

Why has no one mentioned that market cap increase is not the only path to a 100 bagger? You can also benefit from stock buybacks, public LBO, etc.

I don't really need to see for myself what Hawaii looks like before I book a $1,000 plane ticket and spend around $1,000 to stay in a hotel for a week. On the other hand, I probably want to walk around my future home if I'm going to be spending upwards of $200k and living there every day for at least a few years.

So I was finally able to find time to read the redacted response from Fairholme in the Court of Federal Appeals, and I found a few things to be rather interesting. (1) It looks like discovery production will be ending sooner rather than later. (2) As I stated before, the Takings Clause discussion in the Lamberth opinion was dicta, and Fairholme rightly points out that there's no reason to give it any weight. (3) There is, suspiciously, some pretty material evidence that has not been turned over. 2014-12-18_Fairholme_Redacted_Response.pdf

Thanks for that, reddog. That was very insightful.

I don't remember seeing a decision on whether they'd have oral arguments today or after the holidays. It's likely that she'll hear oral arguments after the holidays, IMO.

Liberty's being overly generous. :) My own guess on the talent vs. persistence issue is that talent is probably like putting you a bit ahead of the starting line of everyone else. It's a good advantage, but it's probably something that can be overcome by persistence. I'd be careful to draw a line between mental talents and physical talents. Sure, not everyone can be built like Michael Phelps, but I doubt that transfers to the mental realm. Let's not forget that even Feynman specifically points out that he has a pretty low IQ but he worked pretty hard at it -- and I doubt he was just being modest -- modesty wasn't exactly in his repertoire. As to the Buffett eye thing, I think it has to do with what you focus on, as Tim Eriksen stated. If you gear yourself towards looking at quantitative issues, then you see quantitative success. If you gear yourself towards looking at qualitative issues, then you see qualitative success -- not everyone focuses on putting together multiple frameworks, but if you work hard at it, you can figure out what a lollapalooza looks like.