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Morningstar on FFH


bargainman
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Guest dealraker

Why does Morningstar give USB a wider moat than WFC?

 

Well, why did they upgrade the fair value of WaMu in the spring of 2007 after the bank began experiencing horrific loan losses?

 

Why did they have a "buy up to $30" price on Cathay Bancorp and now the buy price is $5 or so?

 

Why, very recently, did Bank of America have a sell price of well over $100?

 

Have you ever looked at the pictures of the analysts at Morningstar?  25 years old is simply too young to be a lead securities analyst.  I don't think any of Morningstar's analysts had seen a banking cycle until this year.

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If you can't learn something until you "live it" I don't think a 50 year old had any advantage over a 25 year old in this cycle.  In fact, I would argue that they had a tougher time given that they had 30 years of brainwashing by liquidity and calm markets whereas a 25 year old didn't have such a smooth ride.

 

If you don't learn from history in the text books, you won't learn from it in real life.

 

Ben - Biased as I'm 28.

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Guys, this is a "painting with a broad brush" discussion. Some of you will likely remember Shai Dardashti from the old MSN Board. He's not 25 yet I don't believe but I would wager he navigated through the past year better than most of the folks twice his age. As well, there are plenty of young buck who got their a**es kicked.

 

My point is best summarized by the fusion of knowledge of Martin Luther King and Ben Graham. Judge one's investing prowess not by one's age, or their gender, but by content of their logic and reasoning.

 

-Crip

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Guest dealraker

I'll agree to those posts.  Certainly good investment results require that you understand something without personally having to do it- or have it done- to yourself- at any age.

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experience counts.

it gives you a better sense for markets and how to take advantage of them. you see more patterns and models, and you can sense stuff like mgmt BS alot more.

experience is why ffh bet on cds in 2007 and won as the credit crunch unfolded.

however if you're 50 and still got clobbered then you haven't learnt from history at all.

most younger analysts in the industry are often accompanied by a more experienced lead analyst or portfolio manager.

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experience counts.

it gives you a better sense for markets and how to take advantage of them. you see more patterns and models, and you can sense stuff like mgmt BS alot more.

experience is why ffh bet on cds in 2007 and won as the credit crunch unfolded.

however if you're 50 and still got clobbered then you haven't learnt from history at all.

most younger analysts in the industry are often accompanied by a more experienced lead analyst or portfolio manager.

 

I would agree to this, I am 27, and last 12 month, I am up about 30% after-tax.  I would be up 100% if I had more experience with trading.  I hesitate too much when trading due to lack of understanding some patterns that i had a gut feeling for but lacked the experience to pull the trigger.

 

But I would also say that extreme mental concentration is the best best way to do any activity.  I also got too lazy since I was making money too easily prior. 

 

I am learning to change my attitude to "regardless of how much I make, I will not become more or less happy".  The idea is to do activity as well as you can do it, regardless of the payoff. 

 

I am slowly, slowly getting there.  Sometimes I still smile when I beat the market and others, but I am learning not to.  Every time I get happy, bad things happen.

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There is no substitute for experience.

Its not so much a matter of intelligence as it is the psychology of investing.

Certainly some have it right from the get go but many aquire it.

 

Experience coupled with intelligence and the proper frame of mind and learning from mistakes.

 

This may be why Buffet states: Investing is simple but not easy.

 

Like life itself, investing is all about How you react when things happen that you did not think would happen

 

because it will happen.

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There is no substitute for experience.

Its not so much a matter of intelligence as it is the psychology of investing.

Certainly some have it right from the get go but many aquire it.

 

Experience coupled with intelligence and the proper frame of mind and learning from mistakes.

 

This may be why Buffet states: Investing is simple but not easy.

 

Michael Sellers would famously disagree :-)

 

http://www.beearly.com/pdfFiles/Sellers24102004.pdf

 

"And the reason is that it doesnt much matter what your IQ is, or how many books or

magazines or newspapers you have read, or how much experience you have, or will have

later in your career. These are things that many people have and yet almost none of them

end up compounding at 20% or 25% over their careers."

 

 

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There is no substitute for experience.

Its not so much a matter of intelligence as it is the psychology of investing.

Certainly some have it right from the get go but many aquire it.

 

Experience coupled with intelligence and the proper frame of mind and learning from mistakes.

 

This may be why Buffet states: Investing is simple but not easy.

 

Michael Sellers would famously disagree :-)

 

http://www.beearly.com/pdfFiles/Sellers24102004.pdf

 

"And the reason is that it doesn’t much matter what your IQ is, or how many books or

magazines or newspapers you have read, or how much experience you have, or will have

later in your career. These are things that many people have and yet almost none of them

end up compounding at 20% or 25% over their careers."

 

He wouldnt be the first that disagreed with me

 

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Experience is learning from your mistakes. 

 

Experience is also learning to wait for the fat pitches.  These things can be learned.

 

The ability to go against the crowd is either learned young or just some sort of trait one has.  I for one have very little problem with avoiding the crowd. 

 

I think most of Mark Seller's comments are correct.

 

My observation is that most investors try to back their decisions with a huge analytical rationale.  Beyond the basics about a company such as debt load, cash flow, management, and basic ratios, analysis can actually become detrimental.  A crappy company in a crappy business (sfk.un) can look good on paper at at given point in time but things change.  A good company in a good business (GE) is essentially unanalyzable but I know through assorted intangibles that the stock price will at least double from this point.  This doesn't mean that I dont make an effort to have a reasonable understanding of the companies ops and liabilities.   

 

I always come back to AXP and Buffett in the 1960s.  He gathered anecdotal evidence that people were still using the card and travellers checks and bought mostly on that evidence (as far as we know). 

 

Where I disagree with Mr. Sellers is on his position weighting.  30 statistically cheap stocks with decent balance sheets can give you a long term 20% return if the investing is disciplined.  More than one of the Superinvestors of G&D used this method. 

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Experience is learning from your mistakes.

 

Yes! There is people who make a lot of mistakes, but don't realize they made some or don't remember them. So, I guess that some people have more experience after 5 years of investing than some have after 20 years of investing.

 

But I would add this.

 

Experience is:

 

- be able to be candid enough with yourself and be able to realize that you were wrong (not the market, the managers, the economy, etc. but you).

- identify as clearly as possible what went wrong with you (the mistake)

- memorize it next time you buy or sell something

 

and...

 

- learn from mistakes of others too! It's a very cheap way to gain experience  ;) I'll call this "deep value experience gathering". Ah!  :)

 

 

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