Kraven

If you already understand Graham's investment philosophy (and you probably do if you read Memoirs) then there is really only a couple reasons to read this. One, the author did get some good interviews with a number of people like Graham's late daughter, Buffett, etc. But it doesn't really add anything to what you would already know except at the margins. It is interesting though to read those new tidbits if you have the time. And, two, if you are one of the few and proud who would read anything new that comes out on Graham, this isn't a waste of time, it's just not a fantastic read either. So the short answer is no, you probably don't need to, but you might or might not want to.

Only Seeking Alpha since the quality of the articles there is unquestionably superior to anything one can find elsewhere. I believe that if alive now Graham would probably be posting there as well, it's that good.

This is exactly right. I am sure a lot of the diehards will be offended by this statement as if it was preordained that Munger be in the pantheon of value investing gods. Munger was simply a very very smart guy who knew a good horse to ride in on. I think people forget he was a lawyer making a few extra bucks (or more than a few) on the side doing real estate deals. While I am sure he would have always become wealthy, perhaps very wealthy, he would just have been one of many. Buffett is so special because there is really only one of him. Well, two, if you ask Biglari, but that's another discussion.

Yes, the general assumption is that 10,000 hours is needed to master something. It's not a true line in the sand, but when they have determined how much time went into allowing experts to become experts it usually comes out to some very large number and 10,000 hours works as a proxy for that. Note too that "deliberate practice" is a broader concept than some make it out to be. Deliberate practice as it is truly defined is more or less impossible in the investment context. It requires a specific course of action determined by a coach/teacher/mentor with immediate feedback, etc. So, for example, Tiger Woods might practice putting from 3 feet over and over again. He has a coach with him watching his movements. He gets immediate feedback not from whether he made each put but from the coach talking to him. This type of thing isn't really possible in the investing world. No one is sitting with you designing a course of study. There isn't immediate feedback. Etc, etc. But that doesn't mean we can't broaden the definition of deliberate practice and make it work. The author in the book recognizes that sometimes one designs their own study and has to provide their own feedback. Also developing a large base of knowledge becomes part of it. So in this context simply reading, investing, discussing investments, etc all becomes part of one's 10,000 hours in my view. It's not one thing or another, it's all of it. Where I think people make mistakes in this area is doing things like blind evaluations. It doesn't hurt anything, but I don't believe it actually provides the practice that people think it does. Since nothing is actually analyzed blindly, how does it help to practice blindly? One could argue that practicing valuation techniques is important and that I can't argue with. However, I think we would all recognize that a proper valuation has to take into account more than just the numbers on the page. As a Grahamite, I do tend to place much more emphasis than most on the numbers, but even then, what multiple would you use, as an example? If I look at 2 companies that have pretty much identical numbers, but find out one is a steel company and one is a service oriented company, do I use the same multiple? In any case, I think that everyone simple does the best they can. Don't fret over the fact that Buffett was able to spend so much time reading every book in the library by the time he was 2. You're not going to be Buffett ever. You're not going to be Munger ever. Either will I or any of us. The funny thing is that the best course of action is to be yourself, but it takes time to figure out what that is. Interestingly as I think Burry pointed out if copying Buffett is so great how come there aren't a bunch of little Buffetts running around?

Excellent point, I agree and you gave great feedback for me to play around with. If I interpret what you are saying correctly then; just as you can't compensate for risk or create MoS by simply increasing the discount rate, you cant define risk of debt in absolute terms since it comes in different forms and variations. giofranchi, many thanks for input and putting value on the table. Kraven You provide very good arguments and I thank you for it. It is a pleasure to get inputs from other angles. That said, you know when Graham said that "investing is most intelligent when it is most businesslike" and then later Buffet said that "these are the nine most important words ever written about investing." Maybe I take this to the extreme but hear me out. I have a company that has cash as an asset (portfolio) and, if I use that asset to buy 100% of a company, it would be natural for both investors and accountants to consolidate that new capital structure into the company. So is it then not logical to think that buying 1% would should create the same pattern, even if accounting states it differently? When I invest, I write down how much my shares generate, ie I own 1/100 and the company earns 100 dollars, my shares generated 1 dollar, regardless of fluctuations in market price and where the price will be year end. I also sum up how much equity in x amount to see how much that is covered from company failure, it would be illogical to leave out the debt since all three financial statements are integrated. I might be wrong, but it helps me to view things as a businessman. Best, I do not want to sound as if I am trying to speak for Kraven, but I don't think he faults your logic. However, you have to be acutely aware of limitations of that thinking, because you can only take it so far. Overstep the boundaries and you will probably notice a funny smell when you get into the car ;D MrB has it right. I am not faulting your logic Anders. What you say is technically accurate. But while I think it is technically correct, I think the reality is you are misleading yourself. You can write down your pro rata portion of a company's earnings and cash or whatever all you want, but it's a fiction in that you don't have it and never will. So in that respect all you do own IS a piece of paper. Yes, Graham said investing is most successful when it's most businesslike, but you take those words to mean what you want them to. You have assumed he means only that one essentially brings on to their "personal" balance sheet their pro rata portion of all of their holdings. I don't think that's what he meant at all. I think he meant that stock ownership and investing should be conducted in a serious manner. He was making a point that many people simply will buy on a whim. In his day (and in ours), people didn't always take security analysis seriously. He was making a case for it as a profession and serious business. Further, I think he meant that when investing one should be act in a careful manner. This is part of his defintion of investing - that is, to invest after thorough analysis, etc. So one might envision a small store. Say a hardware store. The nails are in this aisle, the hammers over there, the rakes in back, etc. But one doesn't need to envision themselves as working in the factory that makes the nails and hammers. They arrive, they are placed in the appropriate spot and so forth. So when I buy a stock believe me it is serious business. I do envision what might happen if I bought the entire company as part of my valuation process, but I don't think I actually own it in the sense you mean. I am not actually getting a check with my pro rata portion of earnings. I can't call up the CFO and ask for a check for my portion of the cash in the bank. It's kind of funny in a way because there is ownership and there is ownership. Yes, by holding shares we own a part of a company. But it's kind of in name only. We can exercise only those rights given to us by the constituent documents of the company (articles, by-laws and such) and by law. That is it.

Know what we should do? Let's add a discussion about religion into the mix. Then the party will really get going!

I'll disagree....slightly. Because I don't agree with your example. Visibility is the issue your example illustrates, not control. Can the store manager of a random McDonalds get free burgers? Surely. If the portfolio manager whose fund owns 8% of the company walks into that same McDonalds, will he get a free burger? Probably not because nobody working there knows who he is. Sorry, I never answered the question about control. I don't disagree with you at all and my example wasn't related to control at all, only ownership. So Berkshire owns 10% of Coke or whatever percentage it is. Obviously Buffett can't stroll into the distributor and grab a 6 pack. When I was a kid my best friend's dad owned a Mobil gas station. We used to just walk in and grab a soda and a pack of gum. It's different obviously. My point about control was simply one of perception and degree. That is, if I own 100 shares of Coke do I really envision myself as having a pro rata portion of their debt? That's what the prior poster said (not about Coke, just generally). So Coke has 30 some odd billion in debt. So with my 100 shares do I have .000000001% of that debt (I am sure my math is wrong)? The stock goes up, it goes down. Whether to buy it, sell it or hold it is a multi faceted analysis of which debt levels is obviously a part. When one thinks "like an owner" I believe this means that one envisions themself as if they owned the company. What would they pay? That kind of thing. There is an amount of ownership (control wasn't the right word, I intended to mean level of ownership) where I think that one moves on the spectrum from a creative fiction to a reality. Just my 2 cents (and a few more).

Kraven, What is exactly the “level of ownership” you are referring to? And why above that level should it be safe to think of stocks as parts of a business, while below that level it is more harmful than helpful? Giofranchi - I am chuckling a bit. I think you took my post in directions all your own. I will admit, I kind of just skimmed your post as I don't have that much time, but it seems as if you wrote about how business owners think of their business. Yes? That's all fine. I think you missed my point. I don't think I disagree with what you said, but it's different from what I said. Remember I was responding to a post by someone who said that they view their portfolio as a company and that they attribute the underlying portfolio company's leverage, etc as being essentially part and parcel of the portfolio as a whole. My point was simply that while one can view their portfolio as a "company" with the pro rata attributes of the underlying companies, that would be at best incredibly misleading and at worst, just completely wrong. I believe I further said that if this was true, then if one owned some shares in GM, as and example, or say a bank with TARP outstanding should that person view themselves as having obligations under TARP? Are they restricted on the salary they can receive? Do they need to check in with Treasury constantly? This is where things get fuzzy. Clearly ownership of a share of stock is partial ownership of the company. But in some respects that's just a technicality. It's almost a fiction we create for ourselves. We own, but do we really own? To be or not to be? If I own shares of McDonald's can I walk in and get a free shake? I mean you refer to "actual" business owners. If I own a local diner, I sure can walk in and grab something without paying (since I already have paid). So while we need to think like owners in terms of when to buy, sell, etc., taking advantage of our rights, and such, I think it can be taken to an extreme. It's kind of like Buffett's 20 punches. Does he literally mean that one should own 20 stocks? Well, maybe, in some kind of utopian stock world. But if so, he hit his 20 punches about a million years ago. It's a way of thinking that I don't think is intended to be taken literally. Hope I made some sense.

I think that this kind of sentiment demonstrates how some value investors take certain things to the extreme. You may view your portfolio as a company. It is not. It is not anything close to it. You may view 100 shares of GM or whatever as part ownership of the car company, and yes, of course technically it is, but there is reality to deal with. Let's think about it for a second. So with that 100 shares would you view yourself as owing the US government your pro rata portion of the debt still outstanding? Are you limited in the amount of salary, etc you can receive? Is Treasury on the phone with you every day? Of course not. So then it must be that a true look through doesn't make complete sense. Graham said it best when, and I'm paraphrasing, stock ownership is the best of both worlds. It is both actual ownership of the company, but without the headaches of true ownership. If you want to be an owner you can try to act like one. If all you want is a piece of paper, well, you got that too. But it doesn't mean you should view the debts and leverage of a stock you own as your own debts and leverage. I suppose there is a level of ownership (well below actual control) where such a view makes sense at least on the basis of how one is affected by the economics. But unless that's where you're at I think that taking it to this kind of extreme is more harmful than helpful.

Sanjeev, just wanted to add my thanks for running a great board. This is a good place to hang out.

It's a pretty quick read and you can kind of skim through it. I don't know how much you know about Graham. If you are looking to just get some background on his life, it's worth the read. In terms of background on his philosophy about investing, that's ok too. When it gets more granular it runs into problems. If you accept that the writing isn't great and that he quotes from illustrious sources like Guru Focus articles, it's ok. It's like a big summer action move. If you go into it expecting art, you will be disappointed. If you expect to be entertained and eat some popcorn and get out of the heat outside, you'll be ok.

[amazonsearch]Einstein of Money: The Life and Timeless Financial Wisdom of Benjamin Graham[/amazonsearch] As a huge Graham fan I was really looking forward to this book. I mean other than Janet Lowe and one or 2 others, who has even written about Graham in years? The reality is that there hasn't been that much written about him. So a new book on Graham, I was all over that. I have to say it's somewhat disappointing. I was expecting fireworks and got one of those little snappers. I would recommend the book for one of 2 types of people: (1) Those with no real knowledge about Graham who would like an introduction or (2) Graham nuts, like me, who would read anything that came out about him. I guess a possible 3rd group are the Buffett fans who want to read anything he says. The author did get an interview with Buffett and some other people so there are some new Buffett quotes in here, although nothing earth shattering or that strikes me as actually "new". The book is set up as part biography and part discussion of Graham's methods and place in the investing world. The biography is more or less a summary of Graham's autobiograhpy, the Kahn and Milne short piece from 1977, and a few parts from Lowenstein's and Schroder's Buffett books. What I found interesting about it is that he did get interviews with Graham's daughter (now deceased) and some others who knew him. That kind of stuff layered in was worth the read. The other part of the book, Graham's methods, etc. is less satisfying and brings up another complaint about the book. It is poorly written and there are mistakes. For example, the author discusses how Graham "employed regularly" the DCF method. Which of course he didn't use at all. It discusses how he found his investments based on his "screens" - the defensive and enterprising investor criteria set out in the The Intelligent Investor - which weren't what he used exclusively or at all earlier in his career, but were intended as rules of thumb for the less initiated. Whole chapters are given to Mr. Market, etc. One thing that really bugged me was how everytime he mentions someone he re-introduces them. He refers to Jason Zweig as a "noted value investor" and that his treatment of The Intelligent Investor is brilliant (butchered in my view). Pat Dorsey is referred to repeatedly as a young, value investor (as opposed to a middle aged guy). Everyone is a "noted" something. The writing is strange in parts. After discussing Graham's divorce from his 1st wife Hazel the author mentions how Graham spent more time with his brothers and mother in one sentence. Then the next sentence is "Considering that Dora Graham was robbed and murdered on her way home from a bridge game in 1944, it is fortunate for Graham that he had the opportunity to spend more time with his mother in the early 1940s." Very breezy.

I had to google what life settlement was. I can only imagine what a terrible industry that would be to work in. It makes me queasy just thinking about the horror stories you probably have. It is an awful industry. Unfortunately I can't discuss some of the really good stories, but suffice it to say that there are some unbelievable stories there. It was the only thing I ever was even remotely involved with where background checks were done on the people in a deal. We'd see the reports and say this is who we're working with? Crazy.

Interesting. This kind of stuff has been going on in some form or another for a long time. It isn't that dissimilar from life settlements, an area that I unfortunately know something about. I never worked with more sketchy and disgusting people than in that area. Most working in the life settlements area would make used car salesman look like the pillars of the community.

I would add that this is going to be tough. You are going to be up against guys that have been coming up with ideas like what they're looking for since they were 8 years old. I would think your best bet is to try and come up with something out there and where the guy reading it says "this is crazy but it just might work". Just try your best, that's all you can do. Remember that the key to getting this kind of job, if it's what you really want, is to have lots of poles in the water in order to do your fishing. I used to hate this advice, but network. Hit up any contacts you have. Let as many people you know know that you want this type of job. Good luck.

I have 2 problems with it - I'll start with the lesser issue. One, these types of "promotions" are normally teaser type rates. That is, they will be in effect for a relatively short period of time and then revert back to a market rate. Two, of much more importance, is that in this market that is an extremely high rate on that type of product. Banks use the rate they pay on deposits as a mechanism for obtaining more (or less) deposit funds. When they need more, they raise the rate. When they don't, they will go with a market rate or even maybe less than a market rate in certain scenarios. A teaser rate at a strong bank might be 100 bp or something. A 2.78% rate tells me they need funds desperately and quickly. I would be very leery of this situation. If it was me and this was money that was important to me I'd want to check out whether this bank is safe and sound. I suspect you will find otherwise.

Very interesting. Thanks for sharing. The math on that is unbelievable.

The old appeal to authority. Prem is smart, Prem invested in RIMM, ergo RIMM is a good investment! It's possible people can make a mistake. I have no idea if he did or didn't here, but the fact that Prem made the investment means nothing to me. The Matlin Patterson guys are pretty smart, right? But they have taken a dump on Flagstar and continued to flush good money after bad on it. See, it doesn't always work. Smart guys can once in a blue moon make a mistake.

I chuckled at the intro where it said that they "paired up" with Bruce Berkowitz and Fairholme Funds. Otherwise known as they worked for Berkowitz. I knew then that this would be a piece with no fluff whatsoever.

There is certainly no harm in doing blind evaluations. Hell, it could be a finance geek party game or something. But if people really believe that this is going to help sharpen investing skills, well that I don't believe. Going to the putt putt and hitting in the batting cage doesn't get you ready to step up to the plate with a major league pitcher. Thinking it does I am not sure is really all that helpful, but knock yourself out.

Oddball - extremely good points. I've got to say the whole idea of blind evaluations is a bad idea and, frankly, bonkers. Do doctors get together and do blind evaluations? "Ok, there's a patient and he's got a fever and muscle aches. What does he have?" Do lawyers get together and say "Alright, there's a case out there where there's a breach of contract, let's say a rep was breached. One party is suing the other. What's the outcome?" There's got to be some context to all of this. Garbage in, garbage out.

Must be some kind glitch that hopefully they're fixing. The past couple of days it also hasn't brought up any kind of pink sheet stocks, etc. Annoying.

Agreed. The basic premises of the book are fine, but the book itself is truly awful in my opinion. For anyone interested in the book, just read a few reviews on Amazon or something and you will get the entire gist of the book. No need to read it.

I just ordered my copy. I look foward to it. Thanks. I haven't read the book. I did think it worthwhile to mention in case people don't know that Bank of America as it stands today really only shares a name with the Bank of America written about in that book. Today's Bank of America is the old Nationsbank out of Charlotte. Once they took over BA in 1998 the entire culture and spirt of the bank changed. So while the book may be interesting (it probably is), it isn't going to really give any clues as to where the present day Bank of America is going.

You seem to have put some thought into this issue. So what do you think the damages are? How would one calculate it? If the amounts have tracked fed funds, etc what is the real harm done? I am not being sarcastic. There are some smart people on this board. Perhaps we can attempt to figure out what the potential repurcussions might be to the banks. The fact that it's such an opaque issue that just strikes at our notions of fairness and operation of the financial system, but without anything really to grasp on to is what leads me to believe there will be heavy fines, some heads and not much else. I guess there could be some criminal sanctions, but it will be hard to pin that on the banks I would think as opposed to individuals within. A criminal violation by the bank itself could be the death penalty - see Drexel for a cautionary tale. I truly find it hard to believe though that just barely coming out of the worst financial crisis since the Great Depression any government, no matter how much bluster, is going to push a major bank in that way. That could cause issues of a whole different magnitude. So I stand by my prediction - heavy fines and a few heads. But I am curious as to what others think.