What a lovely frickin day....to be reducing risk!!

[StubbleJumper]

I will never, ever understand the confusion between valuing the market and timing the market. I am making a valuation call, NOT a timing call.

 

Zero different than not buying a $1 bill for $1 and waiting for it to sell for $.50. NOT timing, VALUING.

 

As Buffett did in his BPL days, when the market was overvalued, he put a good portion of his capital in controls and workout EVEN THOUGH HE WAS BUYING SANBORN/DEMPSTER/BERKSHIRE AT $.50 ON THE DOLLAR.

 

I happen to greatly admire his model and believe it's a prudent strategy especially considering the risks in the market.

 

Again, I'll be 100pc long at fair value, and will get crushed if the market pulls another March 2009. I'm not hedging against the extreme.

 

that's not what Buffett did. He stopped buying stocks when there were no values left. Subtle difference. He pretty much stated that if he was managing $10m a year he could ring up 50% appreciation year after year. He "worked" hard though. All he did was look for value in individual securities. I don't believe he spent a lot of time reading academic dissertations on why the market should be selling 30% cheaper. If you have less than $100m to invest there are plenty of situations that make sense today. But reading Hussman will keep you from "looking" for them.

 

 

Not only did Buffett spend time reading academic dissertations about why the market should be selling 30% cheaper, he actually WROTE such academic dissertations.  Of course, it didn't stop him from searching for attractive individual securities, but he sure as heck spent time thinking about how the broad market valuations compared to historical norms...

 

FWIW, if you haven't already done so, there are a great many worse ways that you could spend 3 hours of your time than reading some of Easterling's work.

 

 

SJ

[SharperDingaan]

We all might want to apply what we know.

 

Most would argue that what Europe does, its timing, & execution – cannot be reasonably predicted. We can say that if Europe comes up with a reasonable plan, global markets will probably rally strongly. We can also say that if it takes a while, the ongoing uncertainty is likely to lower markets. Market timing, & binary outcomes are usually addressed through the use of options/hedging.

 

The longer the investment horizon, the more the mathematics favour an equity versus option investment. The bias is especially strong when the carry cost is low (or can be reasonably expected to become positive) - as the comparable equity is a hedged, & leveraged investment.  Most would buy the dividend paying euro equity today, leverage & hedge once the European plan is executing; then sit on the investment for years. Classic WEB. Classic Watsa.

 

A lot of financial services people will very likely lose their jobs if markets do not rally strongly. Most markets are moderately down Year-To-Date. Were there not the current 10%+ rally based on ‘the plan to have a plan’ the Year-To-Date loss would be roughly 13%+ (TSX), & retail would be telling their advisors to sell & go to cash. Promotional self-interest.

 

Assuming the current global economic malaise is (hopefully) a once-in-a- lifetime opportunity – it should not be surprising that the punch cards are out in force.

 

SD 

 

[ubuy2wron]

I will never, ever understand the confusion between valuing the market and timing the market. I am making a valuation call, NOT a timing call.

 

Zero different than not buying a $1 bill for $1 and waiting for it to sell for $.50. NOT timing, VALUING.

 

As Buffett did in his BPL days, when the market was overvalued, he put a good portion of his capital in controls and workout EVEN THOUGH HE WAS BUYING SANBORN/DEMPSTER/BERKSHIRE AT $.50 ON THE DOLLAR.

 

I happen to greatly admire his model and believe it's a prudent strategy especially considering the risks in the market.

 

Again, I'll be 100pc long at fair value, and will get crushed if the market pulls another March 2009. I'm not hedging against the extreme.

 

that's not what Buffett did. He stopped buying stocks when there were no values left. Subtle difference. He pretty much stated that if he was managing $10m a year he could ring up 50% appreciation year after year. He "worked" hard though. All he did was look for value in individual securities. I don't believe he spent a lot of time reading academic dissertations on why the market should be selling 30% cheaper. If you have less than $100m to invest there are plenty of situations that make sense today. But reading Hussman will keep you from "looking" for them.

 

I always believe Buffett does things then gives you a reason why he does things. but it may not be the primary reason. I really believe he didn't want to do a partnership anymore and knew, even then, that investing in a corporate structure, with stealth leverage is the best vehicle. He could have kept the partnership going by investing in workouts and arbirtrage. But he took that moment in time when there wasn't as much to do, because there were not as many values, to transition to investing out of a C corp and owning entire businesses. Buffett makes market calls at extremes. Notice if anything he thinks stocks are cheap. His last market call was in 2008 I believe right before stocks got way cheaper. Had you bought when he made his call, and suffered a large decline, you'd be way ahead today, even after the 15% haircut from the top in 2011.

I believe that Warren changed to the corporate structure for a number of reasons. The number one reason I believe was because it created permant capital to invest as long as you have control no one can redeem you they can only sell shares and if they do so in a silly matter you can buy those shares. 2 I believe that he knew not everyone would follow him into BRK and he realised that the fewer that did the better off he was. I also believe he understood the advantage of having a currency namely BRK shares which he could use to make investments if it was to his advantage. Finaly I think since his favorite holding period was for ever, this allowed a much more tax efficient structure for him if he choose not to sell his shares which he never has.

[Guest Hester]

Santyana Misterstockwell and Bmichaud, this is not necessarily a fair argument, but I am willing to bet that the combined line you swing in the market in terms of assets is equal to maybe 1-2% of my personal net worth.

 

____

 

 

(drawn to scale)

[moore_capital54]

Santyana Misterstockwell and Bmichaud, this is not necessarily a fair argument, but I am willing to bet that the combined line you swing in the market in terms of assets is equal to maybe 1-2% of my personal net worth.

 

I am sorry I had to resort to this but you have to put things into perspective. I am a professional investor, a fiduciary and a capital allocator that serves clients who demand I allocate their capital and provide exposure to equities.

 

You guys are waiting to time the market with your small lines, but there is no doubt that even if you buy at the bottom of bottoms on the perfect low of the day of the lowest low the markets print, my nominal performance will be substantially better.

 

Now we can debate about this all we want, but I have absolutely never met a professional investor with your frame of mind, only small time RRSP style investors with $50-500k to invest, who go to sleep at night thinking they're the next buffets.

 

I get paid 2 and 20 to deploy capital on a daily and monthly basis.

 

Take this however you feel, but time will prove I was right. We can check back in a year or two.

 

You guys waste so much time thinking about capitulation wet dreams because you can afford to, your swinging a small line in the markets and your insignificant, you are retail investors, that most probably clip coupons as well.

 

Good Night.

 

Funny how you are associated the size of your wealth cock with your superior abilities....look what happened to John Paulson over this last year, look at Berkowitz. They made a huge call on the US economy and they are down big - they have huge net worths. Get the f$ck over yourself.

 

How about instead of your net worth you put up some performance numbers over the last 1, 3, 5, and 10 years, as well as performance from peak to trough October 2007 thru March 2009, then subsequent trough to peak March 2009 thru April 2011. Then we'll see what type of markets your strategy lends itself too.

 

I just saw Alexander Roepers' performance the other day and he was down 64% in 2008 - that is something I am interested in being down in a bear market. IMO, that type of decline is avoidable when the general securities market drops from being overvalued to fair/slightly undervalued. However, if we were to get down to a point where the market is fairly valued, THEN it drops 50% from there, I will be down even more than 50% b/c I will be 100% long if not 125% long in a fairly valued to slightly undervalued environment.

 

I NEVER SAID there are not bargains to be found in this market. I just am arguing that Buffett provided a good model back in his BPL days for buying stocks selling below liquidation while at the same time worrying about the overall level of the market, hence he put a portion of his portfolio in workouts - go read his BPL letters for the love of God. What I am advocating is no different.

 

Also - this is no different than any other hedge fund manager managing the net long exposure of his portfolio. You are a 2/20 manager, correct? You would know that HF managers manage the net exposure of their portfolio, I'm guessing.....

 

Call me provocative, but I just felt like I had to use a real world example to demonstrate to some of the other value investors that are finding value and don't hang on everything Tyler Durden says, that you can actually make a lot of real money. How is that any different than hearing about some of the members on the board killing their own food, or living on $6,000 a year. I genuinely believe that a lot of the head butting that goes on here is between professional capital allocations and retail/hobby investors, and that is evidenced by some of the PM I get as well.

 

You making fun of Paulson only reinforces my point, Paulson is still one of the top 20 wealthiest human beings on planet earth, and has compounded, even after 2011, at over 20% per annum since inception. What more, he has built a business from scratch and built up significant AUM (not an easy task at all) while waiting patiently for opportune moment to deploy it. So I think its intellectually dishonest to attack someone like John Paulson.

 

Santyana, you will be sad to know that I do not live in a 5x5 basement of my late Mothers house, actually an 8,000 square foot hoggs hollow mansion. Oh shit there is my wealth cock again!

 

 

[beerbaron]

BeerBaron says:

"What a lovely frickin day....to chill out"

[moore_capital54]

And btw of course we always have a short book, we are short LULU, NFLX, BIDU, LNKD and we even jumped on the GMCR trade after Einhorn. We always manage some short exposure. A value investor shorting is selling .50 cents for a dollar, it is no different than buying long, except that you can lose more than you put out. Our short book is maybe 5-10% of AUM and the net contribution is generally negligible.

 

On the other hand, what you are doing is in my opinion highly unrewarding. Its almost masochistic. You claim to be a net long value investor with 70-80% long concentration, but then spend all this time exploring overly bearish and pessimistic scenarios that at their core go against the fundamental tenets of being a value investor.

 

I have seen this argument here a few times, whether the Macro matters or not. It does matter of course it does, but not the extent that is being discussed here. Hell no professional investor could spend as much time discussing the Macro as some of you do and construct a long portfolio that is unique and contrarian.

 

Misterstockwell, I am not going to let this thing devolve any further, and I will admit that it was probably a mistake to say what I said about the 1-2%. That being said your rebuttal appears to portray you as a type of Private Wealth Manager with Managed Accounts and not a fully discretionary AUM to deploy, with the fees to boot, so I dont think I was that off relating to you as well.

 

The only guy here that I tend to worry about in terms of logic, brains, and aum to back it up is Munger. But from my discussions with him, he appears to be sufficiently long and unlike Santyana who at the lowest print of 2009 was still waiting for KO to drop so much it would have to be halted, Munger apparently was sufficiently long in 2009 recognizing the value and making some good change. (I am talking about the board member with the moniker Munger not Charlie Munger)

 

So the post that really set me off was Santyana, who said something along the lines of: "It's posts like Moore that just make me know that we have not bottomed yet"

 

 

 

 

 

 

 

 

[moore_capital54]

This is a wonderful message board, I just think I am doing some justice here and am on a sort of crusade because I think there are a lot of guys like me that love this board and enjoy engaging in intellectual discussions, but sometimes just need to know if the guy we are spending hours with has the same perspective or not or has the same stakes.

 

When you find that we are basically playing a different game, it allows everyone to understand the others position. A retail investor with an RRSP trading on the side to supplement business income, carries the same exact weight on this board as the Fund Manager who is actively trying to seek market truth. And this is a wonderful thing, but it should at least be identified and called out. And that is what has gone on in this thread.

 

Are any of you members of ValueInvestorsClub or SumZero? The strictly investment idea conversations are ones that I think end in higher quality debates and ones where market truth can be ultimately discovered a lot more efficiently. 

[rranjan]

I think we should calm down a bit with language. I guess goals of different people are different so they will see everything from their perspective.

 

I think, looking at market level is good thing but if you find enough bargains then why worry too much about the market as long as you are not managing money for others or don't need to access your money for 5-10 years. If you find businesses selling at 3-4 times of FCF without much leverage then why get worried about getting them priced even cheaper for a while.

 

I personally never pay any attention to market. It can be cheap or expensive. I simply buy when I find something cheap and sell it back when they become fully priced. yaah, no surprise that it is easier to find cheap stuff when whole market is cheap as well. Also, sometime things get cheaper for short duration if market drops a lot after my purchase. But Over all, focusing on buying cheap and selling full priced works fine.

 

I think, sometime we focus too much on things over we have no control. I feel only thing we have control over is to buy cheap and sell as they become full priced. We can all benefit from looking over whole market level or other things but main focus should be still individual securities unless you are an index investor.

 

Moor_capital54,

 

In my opinion,  we should keep out dollar figures from our discussions. Using percentage figures does the job.  Even percentage figure is more meaningful when looked at how it was achieved. Everyone starts at different age with different starting money as a base. I also feel Paulson or anyone else having high net worth does not tell us much about how good they are as an investor. Only thing it tells us that they were successful in their business.  Their long term investment record and how it was achieved should be only two factors to judge their investment skills.

 

 

 

[TorontoRaptorsFan]

I appreciate everyone's posts. But is it really necessary to compare everyone's net worth to one another. There is certainly a disparity in ages amongst all the members here. And experience will vary widely from one to another. I'm learning a lot from everyone who posts here. Hopefully no one feels insulted when subjects get heated.

 

I have to say I'm a fan of Moore Capital's posts. I think he's been a great asset to the board. I might not agree all the time with what he has to say. But, I deeply respect and admire his passion and willingness to help others on here.

 

[AZ_Value]

Dude... Seriously just chill, it's OK.

 

Whether you believe it or not some of us tend to agree with you a lot. For instance, I can't remember what the thread was and don't have time to look it up; but you recommended some European stocks like Telefonica and Carrefour that were totally unloved by the market and were paying you something like 8% and 11% in dividends and some of the rebuttals you got were from people saying stuff like "What if Europe this... What if Europe that..." and I remember thinking "I'm with Moore here, I've been to Europe and those are good franchises and whatever happens to Europe they're not going to stop using their cellphones or stop grocery shopping at Carrefour stores if they've been doing it for decades"; and I loved those recommendations so for me personally I've been much better off reading what you recommend believe me.

 

However you've got to stop with that big vs small talk, us small guys have the mental capacity to agree with you whether you like it or not that sometimes people will worry about some index hitting a formula driven valuation point to get excited and miss pretty good businesses being sold for cheap. Your AUM and your big mansion have no place in a discussion where someone is presenting his point of view that valuing the general market is a tool he uses.

 

And this business of telling people you've never met that they don't amount to 1% of your personal net worth is over the line and everybody else is right in comparing it to school boys arguing that one's d!ck is bigger than the other's.

 

[rranjan]

This is a wonderful message board, I just think I am doing some justice here and am on a sort of crusade because I think there are a lot of guys like me that love this board and enjoy engaging in intellectual discussions, but sometimes just need to know if the guy we are spending hours with has the same perspective or not or has the same stakes.

 

When you find that we are basically playing a different game, it allows everyone to understand the others position. A retail investor with an RRSP trading on the side to supplement business income, carries the same exact weight on this board as the Fund Manager who is actively trying to seek market truth. And this is a wonderful thing, but it should at least be identified and called out. And that is what has gone on in this thread.

 

Are any of you members of ValueInvestorsClub or SumZero? The strictly investment idea conversations are ones that I think end in higher quality debates and ones where market truth can be ultimately discovered a lot more efficiently.

 

I feel that we should take the seriousness of words based purely on arguments presented. It should not matter a bit if someone is managing 100 billion or 2 million or his personal money. We can hear the logic. We can agree or disagree after hearing the logic. How much money is managed by anyone does not make the arguments weak or strong. Same person might have different perspective when managing others money as compared to his own. So I agree that knowing the situation helps sometime but does not change the arguments presented. It should left to members what they want to disclose.

 

I don't know about the SumZero but ValueInvestorsClub might not have same quality now days so being a member does not tell you much. If you take aggregate returns of all authors there then total returns will be very average. Writing there does force you to present your ideas in fancy way. Having said that, I do read it but don't participate.

[moore_capital54]

Lets get back to this post for a second and see how my template of what causes these frictions is proven correct. Bmichaud made a sensational post:

 

Just to stir the pot a bit, here's why I believe it is a wonderful day to be reducing risk....

 

1. http://www.businesscycle.com/#    (see video on front page)

 

2. http://www.hussman.net/wmc/wmc111017.htm (see paragraph 3 in its entirety as well as list of Euro banks' leverage ratios)

 

3. http://pragcap.com/the-two-biggest-risks-in-europe

 

4. http://pragcap.com/those-darn-italian-bond-yields

 

My guess is that a downgrade of France's RIDICULOUS AAA rating is only a matter of weeks away if not days, which could be the trigger to a nasty domino effect.

 

Not at all saying to go to 100% cash as Hussman currently is - just trying to reiterate the dangers out there very much still lurking that are currently being hidden in plain site by the rallying stock market. There are plenty of individual opportunities out there, which I believe should be taken advantage of...but as Buffett demonstrated back in his BPL days, there is nothing wrong with pairing 50-cent dollar bills with cash and/or market-neutral special situations!

 

So lets break this post up. Bmichaud is knowingly stirring the pot, and then making some major claims such as the AAA rating of France will be downgraded within weeks, and contrary to his disclaimer of not giving investment advice he is in fact doing just that and saying that you should not necessarily be 100% cash but start thinking about being market neutral. Quite  a bold claim.

 

Now anybody on this board who does manage money professionally knows that the statements made by Bmichaud are impossible to effectuate, hence to engage in a quality conversation I need to understand who this person is and what is his perspective.

 

That is when I replied very respectively that I thought he was wasting his time, and that I felt that kind of speak only makes sense to retail investors, and after getting hit in the face with a baseball bat from Santyana who said: "And people talking like Moore is why I'm convinced we haven't seen capitulation yet." I took a few minutes to read his post history which again confirmed my original thesis, that not only was he a retail investor but he actually felt the same way about the markets in march of 2009. I take my time very seriously it is not some late night hobby for me, so why am I not allowed to call someone out after making such a statement?

 

So I thought it would be refreshing to remind Mr. Santyana and some of my other intellectual opponents that I am not a neophyte in this business and have a completely different perspective, which has actually worked.

 

Also I think the guys who have a big problem with me or anyone else stating we manage money professionally or have significant capital at stake are being major hypocrites. Unfortunately capitalism is measured based on financial success and so  when an investor is backing up his statements with financial success they should carry at least some weight. Is it that that you feel that under an alias nothing is verified? Hence I may be full of shit? Some message board hack?

 

I can't tell you guys who I am nor the funds I manage but I feel comfortable posting a screenshot of one of my PA's. Just to validate that I am not some kid in his mothers basement.

 

Enjoy!

[moore_capital54]

Misterstockwell,, I would like to extend a personal apology to you. I have taken the time to read your post history and the consistency, logic, and lack of emotion in your posts indicate to me that I was wrong and you are in fact not a retail investor.  What more you clearly recognized the market was cheap in 2009 and most likely deployed significant sums.

 

I disagree with your position of being more worried since 1995, but your posts are of high quality and I should not have grouped you together with the other two.

 

The problem with this board is that there are a ton of members and its not always so easy to know who you can trust and who you cannot.

 

I find going back and reading post history as the most effective method.

 

I think that if I have to summarize my position after this long debate, it is this:

 

Personally, I have no problem with debating and deconstructing specific investment ideas with anybody on this board. I believe that I can learn from anyone regardless of their size or age. But when it comes to Macro and doomsday please at least do me a favour and identify yourself as a retail investor, so I know to put things in perspective.

 

[rranjan]

 

Also I think the guys who have a big problem with me or anyone else stating we manage money professionally or have significant capital at stake are being major hypocrites. Unfortunately capitalism is measured based on financial success and so  when an investor is backing up his statements with financial success they should carry at least some weight. Is it that that you feel that under an alias nothing is verified? Hence I may be full of shit? Some message board hack?

 

I can't tell you guys who I am nor the funds I manage but I feel comfortable posting a screenshot of one of my PA's. Just to validate that I am not some kid in his mothers basement.

 

Enjoy!

 

I don't think that any one in this board will have problem with anyone stating that they manage money professionally or have significant capital at stake. Problems comes when anyone expects that words should carry more weight due to above reasons. I personally don't know  everyone's background here and neither I care about it but after reading several of their posts I can make my own judgement about how seriously I should take someone. Seriousness does not depend on their AUM or personal net worth at all.

 

And about you, I will not care even if you were staying in your mother's basement because I have read and found many of your posts having very good insight. While I might not agree with everything, your post's quality helps me to make up my mind, not your net worth or AUM.

 

Anyway, we are going in circles and I have nothing valuable to add to what I have already stated.

[moore_capital54]

I appreciate the good words, and can tell you that I have spent many hours through PMS with younger investors here who mostly had an interest in the resource sector, and I enjoy assisting and helping anybody I can with whatever knowledge I have.

 

That being said I would like to address this post to the younger guys on here, the guys just getting started, because I think I now have a good handle on the demographics of this board which is split into:

 

1) Professional Investors - Seeking Market Truth Love the Intellectual Exchanges and Occasionally even idea generation

2) High Net worth Private Investors - Same as above but enjoy the hobby aspect of posting as well.

3) RRSP/Retail Part Time Investors - Life wouldn't change if portfolio went to zero or generated no gains, mostly obsessed with the hobby aspect of posting and having a voice.

4) College or Young Adults that are just getting started and are enamoured by investing and Graham & Dodd.

 

Well this post is addressed to the fourth group.

 

Honestly, don't you guys just love reading about Buffett and some of the other superstar investors? Don't you live imagining that maybe one day you can obtain some of the success they have experienced. And don't you love the idea of making a lot of money as well? Is this not why you have decided to make this an important part of your life? For the financial independence as well?

 

Now if you agree with what I asked, let me ask you this?

 

Don't you think its fantastic that there are guys on here who have succeeded on a very very small level as compared to the great ones but nonetheless have succeeded and are willing to spend a lot of time engaging in debates and presenting their thoughts. I know that when I was your age there was absolutely nothing like this type of a medium. I know that when I was your age I would want to know who is part of the first or second group, and who is part of the third group.

 

To say that percentages are enough is highly naive. My nephew has an account with  a few thousand dollars I think he bought AAPL this year, is he a genius then?

 

I write my posts especially these ones where I am applying a lot more passion than is needed, for the guys in group #4, and I know you guys appreciate this. My advice to you is ALWAYS focus on the dollars, not just percent. Follow the money because people who can make money can teach you a lot more about how markets work than people who enjoy hearing themselves and blog all day. My 2 cents, case closed for me here!

 

[rranjan]

My nephew has an account with  a few thousand dollars I think he bought AAPL this year, is he a genius then?

 

If he puts his thought process behind buying  AAPL here and it looks great then why not?  :P

[stahleyp]

I'm #4 on your list, moore.

 

I started "investing" around 9 buying up baseball cards. After a few dirty nights and drifting through card conventions, I decided to try filthy world of action figures around 12 or so. Bumming around flea markets just looking for next next hit. I would buy Jurassic Park toys and ohhhh yeah, those Starting Lineup sport action figures.  After rehabbing through those, I decided to try a less risque investment opportunity and try these "stocks" I've heard so much.

 

My cousin helped me set up a good, old custodial account and I started reading Individual Investor.  Not including a brief relapse back into baseball cards, I've been clean ever since! Yeah, okay, so I had some "risque" moments with Internet stocks in the late 90s...but hey, who didn't! :P

[bmichaud]

Nothing drives me crazier than something I'm saying being twisted to fit one's rebuttal...

 

I was not at all knocking Paulson's wealth, strategy, success or his ___ size - ALL I SAID was that just bc he is worth XYZ does not automatically give him credibility when he says he thinks the economy is going to recover. He has a wonderful record and my strategy has benefited tremendously from reading and studying what he has done and how he approaches things. Not knocking him personally or professionally whatsoever - again, all I'm saying is that his current net worth does not give him any more credibility for his macro call than even you Moore, dare I say (I'm operating under the assumption Paulson's net worth wipes its a$s with yours). 

[moore_capital54]

Nothing drives me crazier than something I'm saying being twisted to fit one's rebuttal...

 

I was not at all knocking Paulson's wealth, strategy, success or his ___ size - ALL I SAID was that just bc he is worth XYZ does not automatically give him credibility when he says he thinks the economy is going to recover. He has a wonderful record and my strategy has benefited tremendously from reading and studying what he has done and how he approaches things. Not knocking him personally or professionally whatsoever - again, all I'm saying is that his current net worth does not give him any more credibility for his macro call than even you Moore, dare I say (I'm operating under the assumption Paulson's net worth wipes its a$s with yours).

 

Paulsons net worth wipes its a$$ with 6,999,999,980 of the other humans on this earth.

 

I dont want to drive you crazy, there is no anger here, just some healthy frustration.

 

There are three very good schools here in Toronto, UCC, Bishop Strachan and Branksome Hall. If I am not mistaken Prem's girls attend Branksome. Anyhow we don't have a son, but UCC is an all boys school, and they have a very very interesting way of educating boys. BSS is the sister school of UCC and they have a very interesting way of educating the girls as well.

 

Basically, they have established that men or boys perform better when competing. Girls on the other hand perform better in a collaborative environment. For this reason, the education at UCC places these boys in highly competitive environments, and what it does is really pull up the mediocre kids. BSS where my daughters attend, the girls sit in picnic style tables and collaborate.

 

What I am trying to say is this, frustration is healthy and competitiveness is good for us men, it makes us more passionate and helps us advance our skills and thoughts. I hope even with your anger you can see that point of view.

[StubbleJumper]

I will never, ever understand the confusion between valuing the market and timing the market. I am making a valuation call, NOT a timing call.

 

Zero different than not buying a $1 bill for $1 and waiting for it to sell for $.50. NOT timing, VALUING.

 

As Buffett did in his BPL days, when the market was overvalued, he put a good portion of his capital in controls and workout EVEN THOUGH HE WAS BUYING SANBORN/DEMPSTER/BERKSHIRE AT $.50 ON THE DOLLAR.

 

I happen to greatly admire his model and believe it's a prudent strategy especially considering the risks in the market.

 

Again, I'll be 100pc long at fair value, and will get crushed if the market pulls another March 2009. I'm not hedging against the extreme.

 

that's not what Buffett did. He stopped buying stocks when there were no values left. Subtle difference. He pretty much stated that if he was managing $10m a year he could ring up 50% appreciation year after year. He "worked" hard though. All he did was look for value in individual securities. I don't believe he spent a lot of time reading academic dissertations on why the market should be selling 30% cheaper. If you have less than $100m to invest there are plenty of situations that make sense today. But reading Hussman will keep you from "looking" for them.

 

 

Not only did Buffett spend time reading academic dissertations about why the market should be selling 30% cheaper, he actually WROTE such academic dissertations.  Of course, it didn't stop him from searching for attractive individual securities, but he sure as heck spent time thinking about how the broad market valuations compared to historical norms...

 

FWIW, if you haven't already done so, there are a great many worse ways that you could spend 3 hours of your time than reading some of Easterling's work.

 

 

SJ

 

he didn't need academic research to tell him stocks are cheap or expensive. he probably read it for a laugh. I can't imagine Buffett writing anythiing academic. He may have been published in academic journals but all his stuff is written so anybody with common sense can understand it.

 

He didn't write it in an academic journal (and to my knowledge, neither Shiller nor Easterling typically publish their mickey mouse valuation work in academic journals either).  He actually wrote a very prescient and accessible article in Fortune magazine :

 

http://money.cnn.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm

 

As is always the case with Buffett, it is written in an easily grasped, folksy manner, but do you doubt that he spent some of his precious time studying the history of markets prior to writing such a piece?

 

Nobody's saying that an investor should burn hours and hours per year looking at the past.  But if you're going to put your money on the line, it behooves you to understand something about where we are in the context of the past.

 

Of course, you should discount what I say as I'm one of those "low class" personal investors who only risks his entire financial future when he invests.  I'd love to scoop 2 and 20 from somebody else's capital, irrespective of what stupid investment decisions I might make...

 

 

SJ

 

 

ps. For those who are curious, when Buffett wrote that article, the S&P was ~1,400 while today it's ~1,200.  Happily enough, broad market valuations are nowhere near as silly now as they were then.

[bmichaud]

Moore, this whole process is phenomenal, no joke. My posts probably appear far more frustrated than I actually am. Unfortunately a message boards don't convey emotion very well - for example, my leading sentence regarding "stirring the pot" was more of a failed attempt at humor since I knew discussing raising cash and/or hedges on the board would in fact stir the pot since so few agree.

 

All that to say, the debate has been tremendously beneficial. Hopefully they don't stop!

[twacowfca]

Misterstockwell,, I would like to extend a personal apology to you. I have taken the time to read your post history and the consistency, logic, and lack of emotion in your posts indicate to me that I was wrong and you are in fact not a retail investor.  What more you clearly recognized the market was cheap in 2009 and most likely deployed significant sums.

 

I disagree with your position of being more worried since 1995, but your posts are of high quality and I should not have grouped you together with the other two.

 

The problem with this board is that there are a ton of members and its not always so easy to know who you can trust and who you cannot.

 

I find going back and reading post history as the most effective method.

 

I think that if I have to summarize my position after this long debate, it is this:

 

Personally, I have no problem with debating and deconstructing specific investment ideas with anybody on this board. I believe that I can learn from anyone regardless of their size or age. But when it comes to Macro and doomsday please at least do me a favour and identify yourself as a retail investor, so I know to put things in perspective.

 

I know a guy on this board who's a retail investor with >30% compounded returns from 2001 to present.  Would you discount his posts?  Ericopoly has even better returns as discussed many times on the board.  Would you dismiss his posts because he keeps chickens?

[RichardGibbons]

I know a guy on this board who's a retail investor with >30% compounded returns from 2001 to present.  Would you discount his posts?  Ericopoly has even better returns as discussed many times on the board.  Would you dismiss his posts because he keeps chickens?

 

I think he's answered that already.  :)

 

The great thing about this conversation is that, though only a couple people have actually talked about their net worth, the conversation itself is pretty useful in judging people's credibility.  I love the irony.

 

Personally, I'm in the camp of "the strength of someone's arguments is a better determinant of their credibility than the size of their paycheck".  So, I won't feel obliged to talk about my net worth.  (That said, I don't make that many strong arguments on this board either, so, in the absence of $$$ evidence, I suggest the people want to categorize me put me in the "bozo" camp.)

 

What I want to see now is a conversation between Moore and Harry.  I think they'd either be the best of friends or completely contemptuous of each other.  But I don't know which.  :)

[twacowfca]

Here's another bone to pick: the idea that a young guy should't save his money in an extreme fashion, living on rice and beans plus Mom's leftovers.  The truth is that frugalness is the road to riches.  Read about Buffett's early life. 

 

There is a recent academic study that showed even from a Markowitzian perspective of maximizing  the arithmetic mean that it's much better to save as much as possible and be fully invested in risk assets when you're young than to have a more balanced portfolio for a lifetime.