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Investing in the unknown unknowable (2007 Harvard faculty paper)


biaggio
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Nice artifact of the last bull market. Tengion is down 99%, Gazprom is down over 50%, Davis Petroleum went bankrupt and Bill Miller's career outperformance was wiped out.

 

Based on the evidence, I think the paper far overstates the attractiveness of investing in unknown unknowables.

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Nice artifact of the last bull market. Tengion is down 99%, Gazprom is down over 50%, Davis Petroleum went bankrupt and Bill Miller's career outperformance was wiped out.

 

Based on the evidence, I think the paper far overstates the attractiveness of investing in unknown unknowables.

 

I didn't like his examples very much, but I tended to agree that uncertainty  is where a lot of the upside can be found. 

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I personally like simplistic arguments. Like with Outerwall, everyone jumps to conclusions without looking under the hood with their coinstar and dvd business about how DVD"s will die etc. But it is pretty easy to dismantle that and figure out if it really is true by looking at economics of streaming DVDand bluray sales and looking at what it takes to operate those coinstarr kiosks. Or with HPQ about how personal computers are dead and how shareholder money is wasted when there was plenty of strong indications neither will have really an impact when they were trading at less then 4x multiple.

 

Seems like a lot of people have this black and white thinking. It is either/or two extremes, and not somewhere in between. Usually over time it becomes somewhere in between when it is evident that is not either/or.

 

The thing I hate about Russia is that basicly 60-70% of population is paid by government. And where does the government get this money? Oil and gas. Because of this distorted system all innovation is killed, because all the bureaucrats want to protect their livelihood. And what happens when Oil and gas starts running out? More money is plundered from these company's to keep stability, because lifes are at stake at the top if there is instability.

 

So I wouldn't want to be in the first piggybank they will break if this happens.

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I think this is a great topic and I am still absorbing the article.

 

From this article and others, I am crystallizing my rationale for investing during times of very negative sentiment. I wrote (link below) that my best gains have been running into very unknown negative news. First example is in 2000 when US tobacco lost a $200 bil decision in florida. Unless overturned, the decision would bankrupt us tobacco. Fast forward today, MO and its spinoffs are up 7-10x. Second example, WLP dropped to $50 after the supreme court upheld obamacare. Today it is $100.

 

Obamacare and the Engels court ruling are both huge unknowns, so people just jump off, but to me that seems like the time to place my bet (with guidance from sources like the Harvard paper)....

 

Anyone else got other examples from recent memory? ...... My latest bet BTW is ERUS on Russia.....

 

http://bovinebear.blogspot.com/2012/08/why-i-own-wlp.html

 

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I think this is a great topic and I am still absorbing the article.

 

From this article and others, I am crystallizing my rationale for investing during times of very negative sentiment. I wrote (link below) that my best gains have been running into very unknown negative news. First example is in 2000 when US tobacco lost a $200 bil decision in florida. Unless overturned, the decision would bankrupt us tobacco. Fast forward today, MO and its spinoffs are up 7-10x. Second example, WLP dropped to $50 after the supreme court upheld obamacare. Today it is $100.

 

Obamacare and the Engels court ruling are both huge unknowns, so people just jump off, but to me that seems like the time to place my bet (with guidance from sources like the Harvard paper)....

 

Anyone else got other examples from recent memory? ...... My latest bet BTW is ERUS on Russia.....

 

http://bovinebear.blogspot.com/2012/08/why-i-own-wlp.html

 

Watchout tough, Berkowitz has the best approach in regards to crisis stock. Ask yourself if the business has an actual value for society. You might have been lucky with your tobacco picks.

 

Banks = Yes

Offshore Drillers = Yes

For profit education = No so much

Tobacco companies = No

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I think this is a great topic and I am still absorbing the article.

 

From this article and others, I am crystallizing my rationale for investing during times of very negative sentiment. I wrote (link below) that my best gains have been running into very unknown negative news. First example is in 2000 when US tobacco lost a $200 bil decision in florida. Unless overturned, the decision would bankrupt us tobacco. Fast forward today, MO and its spinoffs are up 7-10x. Second example, WLP dropped to $50 after the supreme court upheld obamacare. Today it is $100.

 

Obamacare and the Engels court ruling are both huge unknowns, so people just jump off, but to me that seems like the time to place my bet (with guidance from sources like the Harvard paper)....

 

Anyone else got other examples from recent memory? ...... My latest bet BTW is ERUS on Russia.....

 

http://bovinebear.blogspot.com/2012/08/why-i-own-wlp.html

 

Watchout tough, Berkowitz has the best approach in regards to crisis stock. Ask yourself if the business has an actual value for society. You might have been lucky with your tobacco picks.

 

Banks = Yes

Offshore Drillers = Yes

For profit education = No so much

Tobacco companies = No

 

I think that approach is too subjective to provide much value as a litmus test.

 

In the same vein I would argue that coca cola and krispy kreme's don't provide much value to society either...

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Tobacco doesnt provide value for society?

 

Humans have been smoking it for thousands of years. How is a business which supplies humans with a thousand year old desire not valuable?

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