Drunken Thought

[doughishere]

Why dont activists(hedge funds) just out right buy out the company? I hate to keep going to the WEB model....but why not just buy good business' when they want to be sold to you then if the opportunity comes along then take a 10% stake at a killer discount....hedge funds make the assumption that they can keep making killer bets into infinity, at least the cheaper hedge funds...you cant. They think "if i get X richer then i can tap out" but no one actually has a product.

 

Waltons had a product. Gates had a product. Ford had a product. Exon has a product. Coors has a product.  Oracle has a product. Shit even the Koch bothers have a product. Number 21 on the Forbes list has Ball bearings as his claim to fame? Buffet just lucky enough to "hedge fund" his way into the business...adn even he make candy.

 

 

At some point you cant just keep hitting "cigar butts"...at some point there has to be some value added? Isnt that what corporations should do?'

 

 

And every once so often you get a good insight into some inefficiency it makes sense to pour cash into Geico....

[rkbabang]

If you provide a service that is your product (like a plumber or a money manager).  Hedge funds have a product.  They invest their partners'/investors' money to earn a return.  You can debate how well they succeed over the long term, but regardless of if each individual hedge fund offers a good product or a bad one, the investment services that they offer is a product.

 

[valuedontlie]

Buying private/public businesses is difficult. I have been looking at small private businesses to purchase for several years now without success and that is simply with my own capital. Doing so with other peoples' money would make it much more difficult. This is why private equity funds exist.

[eclecticvalue]

That's what PE funds should do in theory. Instead their model is to cut costs and increase leverage. Although KKR and Blackstone wanted to run their organization similar to Berkshire Hathaway.

[Junto]

Why dont activists(hedge funds) just out right buy out the company? I hate to keep going to the WEB model....but why not just buy good business' when they want to be sold to you then if the opportunity comes along then take a 10% stake at a killer discount....hedge funds make the assumption that they can keep making killer bets into infinity, at least the cheaper hedge funds...you cant. They think "if i get X richer then i can tap out" but no one actually has a product.

 

Waltons had a product. Gates had a product. Ford had a product. Exon has a product. Coors has a product.  Oracle has a product. Shit even the Koch bothers have a product. Number 21 on the Forbes list has Ball bearings as his claim to fame? Buffet just lucky enough to "hedge fund" his way into the business...adn even he make candy.

 

 

At some point you cant just keep hitting "cigar butts"...at some point there has to be some value added? Isnt that what corporations should do?'

 

 

And every once so often you get a good insight into some inefficiency it makes sense to pour cash into Geico....

 

The answer is liquidity. Buying a whole company is not liquid for its partners to meet redemptions et al in tough years or when their partners change portfolio allocations. I agree with rkbabang that they offer a product; however, a main feature to it is that it also is relatively liquid.

[rukawa]

at some point there has to be some value added? Isnt that what corporations should do?'

 

Investing is a zero sum game. Its not a socially useful activity (with the exception of VC and IPOs). We are parasites. Its quite possible to make a lot of money investing without adding any value.

 

I would say that if Buffet had never existed, the world would be more or less the same.

[Palantir]

at some point there has to be some value added? Isnt that what corporations should do?'

 

Investing is a zero sum game. Its not a socially useful activity (with the exception of VC and IPOs). We are parasites. Its quite possible to make a lot of money investing without adding any value.

 

I would say that if Buffet had never existed, the world would be more or less the same.

 

Not true, there is an expected return > 0 for market participants, meaning it is not zero sum. Alpha is zero sum.

[innerscorecard]

at some point there has to be some value added? Isnt that what corporations should do?'

 

Investing is a zero sum game. Its not a socially useful activity (with the exception of VC and IPOs). We are parasites. Its quite possible to make a lot of money investing without adding any value.

 

I would say that if Buffet had never existed, the world would be more or less the same.

 

Living in a world without pricing isn't very fun. You should try it sometime. Try to get something from a government bureau.

[ATLValue]

The simple answer is that they can't. Their fund structures have finite lives so at some point the money needs to be returned to the investor. Pension funds need the cash flow to fund actual obligations.

[doughishere]

Heres what i was getting at. From the man himself.

 

 

 

[APG12]

at some point there has to be some value added? Isnt that what corporations should do?'

 

Investing is a zero sum game. Its not a socially useful activity (with the exception of VC and IPOs). We are parasites. Its quite possible to make a lot of money investing without adding any value.

 

I would say that if Buffet had never existed, the world would be more or less the same.

 

Investing is much broader than the secondary market and it is ridiculous to call it zero-sum. Warren Buffett's existence has been beneficial to just about every human on the planet. He has created tremendous value by allocating capital to the highest valued use in both private investments and public investments. A secondary market that accurately reflects the intrinsic values of the underlying enterprises is extremely valuable for many reasons, one of which is the facilitation of a healthy primary market through the introduction of liquidity at a fair price.