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PMT Forum's MOST POPULAR Discussion Boards => Stocks and Stock Trading => Topic started by: Wills on May 13, 2013, 03:01 PM

Title: Wisdom From People Who've Been There, Done That
Post by: Wills on May 13, 2013, 03:01 PM
.......
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: TSO on May 14, 2013, 01:52 AM
1. It means it's pointless to differentiate a "value" stock from a "growth" stock because "value" is the reason why people invest their money, regardless of time horizon or intentions.
2. Means a bull market makes everyone look like a winner and bears reveal who is lucky and who is operating on skill.
3. No, he's not talking about circle of competence. He's talking about the follies of pursuing precison or reducing everything to mathematics.
4. I know what he's discussing here and you've made the right interpretation. However, I disagree with it. Empirical research has shown that 50% of long-term returns come from the price you pay for a business, and 30% from the company's underlying performance over time. Ergo, a company that makes 6% a year or 20% a year for ten, twenty, thirty, or forty years will have value or not depending on the price you pay for it.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: pocoyo on May 14, 2013, 03:05 AM
1. It means it's pointless to differentiate a "value" stock from a "growth" stock because "value" is the reason why people invest their money, regardless of time horizon or intentions.
2. Means a bull market makes everyone look like a winner and bears reveal who is lucky and who is operating on skill.
3. No, he's not talking about circle of competence. He's talking about the follies of pursuing precison or reducing everything to mathematics.
4. I know what he's discussing here and you've made the right interpretation. However, I disagree with it. Empirical research has shown that 50% of long-term returns come from the price you pay for a business, and 30% from the company's underlying performance over time. Ergo, a company that makes 6% a year or 20% a year for ten, twenty, thirty, or forty years will have value or not depending on the price you pay for it.

 :applause: :applause: very well said boss TSO  :cool2: :cool2: :cool2:
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: TSO on May 16, 2013, 12:38 AM
My interpretation of

- Buffett's two rules: establish a process to minimize long-term capital losses, and never stray from it.

- The pole-jumping analogy: similar to the Aesop fable Tortoise and the Hare. Going with the herd and focusing on short-term gains (instant gratificatin) will more than likely result in catastrophe than plodding along at a constant speed in the long run.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 16, 2013, 08:12 PM
"Someone's sitting in the shade today because someone planted a tree a long time ago." Warren Buffett


This is one of Catt's favourite Buffett quotes and illustrates perfectly why taking a long-term view is important.

"We should never forget why we enjoy some of today's luxuries - most of them are because someone else had a long-term vision and was prepared to invest for the future," Catt says.

Orlando uses a bank savings account as an example.
"Saving $50 a week over 10 years will allow you to save $26,000, not including interest, and like the tree it has taken years to grow," he says.


From www.news.com.au
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 16, 2013, 08:31 PM
"Price is what you pay. Value is what you get." - Warren Buffett


The price of an investment can mask its true value because of factors such as emotion, market booms or busts, and even tax considerations. "Sadly, all most people see is the price," Whitford says. "They are often unable to perceive value."
Orlando suggests following Buffett's strategy of seeking undervalued assets.
"Sometimes buying the worst house in the best street may provide good value for money," he says.


From www.news.com.au

Parang mali ang interpretation nito?
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: TSO on May 16, 2013, 09:24 PM
The first: Businessmen and policymakers (ideally) are long-term thinkers.
The second: Value is determined by the price you pay for a business.

To add to the second, I should mention that Societe Generale has done empirical research on the sources of returns over one and five year periods in the stock market and has determined:

- over the short-term (one year), 60% of your returns come from market sentiment and the remainder from growth in the underlying business and the price you pay for it, equally.
- over the long-term (five years in the study), 50% and 30% of your returns come from the price you pay and growth in the underlying business respectively, with market sentiments taking up the final 20%.-
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 16, 2013, 09:46 PM
My question Sir is can we lean/depend on that 5 year research? Because from what I understand, Buffett buys stock in a very long term view like say 20 to a hundred years.

So it's like maybe if we will look at it that way the results of the research would be different and will prove Munger's case "Buying great businesses in an average price"

As an example Heinz.
Heinz with high P/E but also high ROE.

Am I making sense here? I'm sorry if my question is obvious
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 16, 2013, 10:02 PM

3. No, he's not talking about circle of competence. He's talking about the follies of pursuing precison or reducing everything to mathematics.

I really like your answer here.

It just makes sense! It's very hard to pursue precision in this arena plus it's very stressful.

That is why Buffett often jokes "IF CALCULUS OR ALGEBRA WERE REQUIRED TO BE A GREAT INVESTOR, I’D HAVE TO GO BACK TO DELIVERING NEWSPAPERS."

Mathematical methods used in stock market today doesn’t stand up to the test of time.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: TSO on May 17, 2013, 03:26 AM
My question Sir is can we lean/depend on that 5 year research? Because from what I understand, Buffett buys stock in a very long term view like say 20 to a hundred years.

So it's like maybe if we will look at it that way the results of the research would be different and will prove Munger's case "Buying great businesses in an average price"

As an example Heinz.
Heinz with high P/E but also high ROE.

Am I making sense here? I'm sorry if my question is obvious

Yes, I'm aware Buffett is speaking from the viewpoint of "permanent capital", where he'd have no qualms owning a company for decades on end. The fact of the matter is, the purchase price ALWAYS determines the value you're going to get from the stock. They understand that and is a reason why they harp on "fair" or "average" price, not excessive price.

The problem with high P/E's is that the market -- the investing community -- also expects high growth from the company. Whether high P/E is excessive or not depends on the growth prospects surrounding that company, or at least speculations surrounding its near future. Benjamin Graham recommends 16x P/E as the ceiling, but from my experience, fixation on an immobile number results in missed opportunities. What you want is growth at a reasonable price (GARP, which is another form of value investing), or growth for free or at a discount (which is 16 PE and lower at a 6.25% discount rate, 10 PE and below at 10%, or 8.33 and below at 12%).

Let's say you have two companies. One trading at 30 PE, and the other at 17.

Growth prospects, again, MATTER. ROE is directly tied to the growth rate of the business? How so? Because a company must sustain a growth rate equal to its current ROE to maintain it over the long-term. For example, if ROE is 50% (as is the case in a small business in the Philippines), then an equity investment of P100,000 will be P150,000 after year 1. In year 2, to maintain 50% ROE, it must grow at the same percentage, with retained earnings going up from P50,000 to P75,000.

So let's say the 30 PE company has a 25% ROE (to reflect the stronger economic moat and the higher valuation by the market) and the 17 PE one has a more pathetic 12%. Assume EPS at 15. Obviously, 30 PE co. is priced at 450. The other one, at 255.

Over a five year period, if EPS grows at 25% a year, you'd have EPS of roughly 45.78. If PE remains the same, then the price is at 1373 -- 305% return or 25% a year. For the other company, EPS would be 26.44. Price would be 449 -- 76% return or 12% a year.

Now, what if this growth does not materialize at all? A very mature company with few growth prospects other than making acquisitions would have a very hard time growing at 25% a year to maintain this 25% ROE over the long run. And most exec officers are horrible investors, overpaying for other businesses to the extent they increase total assets and end up deflating ROE. If earnings growth was 15% instead of 25%, then you'd have an EPS of 30.17  by year 5. IF PE miraculously remains the same (which is a VERY BIG "IF" given that earnings growth is declining and failing to meet past expectations), then the current price is 905. A 200% return or 15% a year. Not the expected 25%. If PE happens to drop from 30 to 20, which is likely to be the case, the price would be a little bit over 600 -- 34% return or 6% a year. Eew.

On the other hand, if the smaller company surprises the market and ends up with 15% returns (remember that the assumption was 12% based on ROE), at the 17 PE the market might price this one at 513 -- 201% or 15% a year. If the PE rises to 20 (because it was beating growth expectations), the price would be 603 -- 237% return or 19% a year.

All because you paid a lower price!

What if you were buying stock in the meantime? You'd no doubt be accumulating shares, and at the same time, increasing your average cost per share. This dilutes your overall ROI from THAT one company. If your average cost per share in the second company rises from 255 to 350 over that five year period, your returns fall from cumulative 237% to 172%. A massive drop of 30%, because of the price you paid. As you can CLEARLY see, it doesn't matter if PE went up or down!

Let's put it in a 20 year period then. Inflation in the Phil's roughly 5%. EPS of 10, 5% growth rate, 20 years = 26.53 EPS after 20 years. PE of 10 = P100 at the beginning and P265 at the end. If the company happens to grow twice as fast over this time frame, you'd have 67.27 EPS after 20 years, and an ending price of 673 if the market doesn't adjust the PE multiple upwards. The rates of return are extremely high, of course, and are even higher if the market reappraises the company. If you happen to buy enough to have an average cost of P270 by two decades' end, you would've earned nothing at the first scenario. At the other, you would've made a cumulative 150%. One hell of a drop from the massive 570% you would've made had you stuck to one giant buy near the very beginning. Even if PE dropped to 8 just because of the market (let's say it's a 1.0 beta stock), then the price would be P538. At P100, that's a 438% return. At 270, that's 200%. In both cases (where PE falls by 2 points or it is unaffected at all), the difference between cost averaging and making all your purchases early and then holding it for the long run except possibly on major dips, is enormous. (150 percent is 74% less than 570; 200 percent is 54% less than 438; 438 percent is 23% less than 570.)

My point is, the absolute price you pay for a company determines everything. The results of this 5-year study can be extended to extremely long-term records of 20 or 30 years. Changes in market sentiment (the PE ratio) is obviously a small matter, because what matters is the future growth of the company. The PE is factored in as a proxy for expected growth, which you can compare against what you think the company can achieve over the long run.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 17, 2013, 12:15 PM
Sir TSO you should write a book!

My Gawd! ito ang hinahanap ko! Para mo na rin ako binigyan ng cash dahil sa post mo na to, you saved me Mannn!hehehe

Btw Heinz has a 5yr average of 40+ ROE!haha Lupit ni Buffett! Kaya pala sabi niya sa interview e very very cheap daw ang pagkabili niya sa Heinz.

Ang linaw na ng mata ko, grateful for your generosity Mannn!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: TSO on May 17, 2013, 02:40 PM
^ Be aware that Heinz already had a very high P/E ratio to begin with. I had thought of purchasing shares in the company, but being a mature business I wasn't sure how else it could grow.

Remember that Berk is a multibillion company in size. I have no idea what Heinz's sales are but the acquisition itself may not move the needle. Plus, iirc Warby got prefereed shares, not outright common. The short seller he invited to the ASM early this month was wondering if Berk got the better deal than the common shares, to which both Warby and Charlie were quick to refute.

I don't know anything about Heinz's future prospects, so whether or not Berk's investment in the company sustaining double-digit growth in the long run remains to be seen. They HAVE mentioned after all that they are being forced to fork over the higher premiums for companies of better quality.

Warby's reputation and discipline should protect Berk from the overpayment risks every serial acquirer is subjected to, so long as he still lives.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: vicces on May 17, 2013, 03:02 PM
Makikisabat..

What can you say about berk's credit rating downgrade by fitch last night... Everyone was like, #WTF?!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 17, 2013, 05:06 PM
^ Be aware that Heinz already had a very high P/E ratio to begin with. I had thought of purchasing shares in the company, but being a mature business I wasn't sure how else it could grow.

Remember that Berk is a multibillion company in size. I have no idea what Heinz's sales are but the acquisition itself may not move the needle. Plus, iirc Warby got prefereed shares, not outright common. The short seller he invited to the ASM early this month was wondering if Berk got the better deal than the common shares, to which both Warby and Charlie were quick to refute.

I don't know anything about Heinz's future prospects, so whether or not Berk's investment in the company sustaining double-digit growth in the long run remains to be seen. They HAVE mentioned after all that they are being forced to fork over the higher premiums for companies of better quality.

Warby's reputation and discipline should protect Berk from the overpayment risks every serial acquirer is subjected to, so long as he still lives.

Since Heinz maintained 40+ ROE for the last 5 years, do you think the price Warren paid for Heinz can be justified if The company maintain an average of 25-30 ROE for the next 15 years?

Or Warren is not expecting performance like Coke? It's like he bought Heinz just for stable long term earnings only?

Because I remember Warren expressed that they are a victim of their own size.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: TSO on May 17, 2013, 09:47 PM
Oh, I'm not worried about the price he paid for it. Again, he's gotten the preferred shares, and Heinz's business has a very strong moat so whatever yield he gets will definitely realize over time.

The problem is clearly for small people like us. If average ROE has remained at 40 or so, sooner or later the company will either slow down in growth or intensify acquisitional expansion to maintain it, both of which results in lower ROE. (Slower revenue growth = lower turnover = lower ROE; acquisitional expansion = risk of overpayment = higher assets = lower turnover = lower ROE.)

Of course, if the market sentiment from missed growth expectations shifts down enough to underestimate potential growth in the medium-term... that's good for us, and for Berk to accumulate ownership if needed. (He has permanent capital after all.)

@ vicces

Wow, srsly? Ano ung mga rason?
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 17, 2013, 09:53 PM
OK gets ko na Sir.

Hindi pala tugma ang una kong take sa post mo hehe.


The problem is clearly for small people like us. If average ROE has remained at 40 or so, sooner or later the company will either slow down in growth or intensify acquisitional expansion to maintain it, both of which results in lower ROE. (Slower revenue growth = lower turnover = lower ROE; acquisitional expansion = risk of overpayment = higher assets = lower turnover = lower ROE.)


Thank You for this Sir!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 17, 2013, 10:06 PM
Yes, I'm aware Buffett is speaking from the viewpoint of "permanent capital", where he'd have no qualms owning a company for decades on end. The fact of the matter is, the purchase price ALWAYS determines the value you're going to get from the stock. They understand that and is a reason why they harp on "fair" or "average" price, not excessive price.

The problem with high P/E's is that the market -- the investing community -- also expects high growth from the company. Whether high P/E is excessive or not depends on the growth prospects surrounding that company, or at least speculations surrounding its near future. Benjamin Graham recommends 16x P/E as the ceiling, but from my experience, fixation on an immobile number results in missed opportunities. What you want is growth at a reasonable price (GARP, which is another form of value investing), or growth for free or at a discount (which is 16 PE and lower at a 6.25% discount rate, 10 PE and below at 10%, or 8.33 and below at 12%).

Let's say you have two companies. One trading at 30 PE, and the other at 17.

Growth prospects, again, MATTER. ROE is directly tied to the growth rate of the business? How so? Because a company must sustain a growth rate equal to its current ROE to maintain it over the long-term. For example, if ROE is 50% (as is the case in a small business in the Philippines), then an equity investment of P100,000 will be P150,000 after year 1. In year 2, to maintain 50% ROE, it must grow at the same percentage, with retained earnings going up from P50,000 to P75,000.

So let's say the 30 PE company has a 25% ROE (to reflect the stronger economic moat and the higher valuation by the market) and the 17 PE one has a more pathetic 12%. Assume EPS at 15. Obviously, 30 PE co. is priced at 450. The other one, at 255.

Over a five year period, if EPS grows at 25% a year, you'd have EPS of roughly 45.78. If PE remains the same, then the price is at 1373 -- 305% return or 25% a year. For the other company, EPS would be 26.44. Price would be 449 -- 76% return or 12% a year.

Now, what if this growth does not materialize at all? A very mature company with few growth prospects other than making acquisitions would have a very hard time growing at 25% a year to maintain this 25% ROE over the long run. And most exec officers are horrible investors, overpaying for other businesses to the extent they increase total assets and end up deflating ROE. If earnings growth was 15% instead of 25%, then you'd have an EPS of 30.17  by year 5. IF PE miraculously remains the same (which is a VERY BIG "IF" given that earnings growth is declining and failing to meet past expectations), then the current price is 905. A 200% return or 15% a year. Not the expected 25%. If PE happens to drop from 30 to 20, which is likely to be the case, the price would be a little bit over 600 -- 34% return or 6% a year. Eew.

On the other hand, if the smaller company surprises the market and ends up with 15% returns (remember that the assumption was 12% based on ROE), at the 17 PE the market might price this one at 513 -- 201% or 15% a year. If the PE rises to 20 (because it was beating growth expectations), the price would be 603 -- 237% return or 19% a year.

All because you paid a lower price!

What if you were buying stock in the meantime? You'd no doubt be accumulating shares, and at the same time, increasing your average cost per share. This dilutes your overall ROI from THAT one company. If your average cost per share in the second company rises from 255 to 350 over that five year period, your returns fall from cumulative 237% to 172%. A massive drop of 30%, because of the price you paid. As you can CLEARLY see, it doesn't matter if PE went up or down!

Let's put it in a 20 year period then. Inflation in the Phil's roughly 5%. EPS of 10, 5% growth rate, 20 years = 26.53 EPS after 20 years. PE of 10 = P100 at the beginning and P265 at the end. If the company happens to grow twice as fast over this time frame, you'd have 67.27 EPS after 20 years, and an ending price of 673 if the market doesn't adjust the PE multiple upwards. The rates of return are extremely high, of course, and are even higher if the market reappraises the company. If you happen to buy enough to have an average cost of P270 by two decades' end, you would've earned nothing at the first scenario. At the other, you would've made a cumulative 150%. One hell of a drop from the massive 570% you would've made had you stuck to one giant buy near the very beginning. Even if PE dropped to 8 just because of the market (let's say it's a 1.0 beta stock), then the price would be P538. At P100, that's a 438% return. At 270, that's 200%. In both cases (where PE falls by 2 points or it is unaffected at all), the difference between cost averaging and making all your purchases early and then holding it for the long run except possibly on major dips, is enormous. (150 percent is 74% less than 570; 200 percent is 54% less than 438; 438 percent is 23% less than 570.)

My point is, the absolute price you pay for a company determines everything. The results of this 5-year study can be extended to extremely long-term records of 20 or 30 years. Changes in market sentiment (the PE ratio) is obviously a small matter, because what matters is the future growth of the company. The PE is factored in as a proxy for expected growth, which you can compare against what you think the company can achieve over the long run.

After I realised lesson from this post I sold my position at MEG and MPI hehe. From now on I will never TIME the market and focus on One strategy only.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: vicces on May 17, 2013, 10:50 PM
@ vicces

Wow, srsly? Ano ung mga rason?
ooopps, erratum.. not Fitch, but S&P.. i think S&P revised their criteria or sumthin'... nadaanan lang ng mata ko yung headline sa bloomberg.. but real question is who's got more cred, berkshire or these credit rating agencies? anyway, here's the article..

http://bloomberg.com/news/2013-05-16/berkshire-hathaway-cut-by-s-p-as-rating-firm-revises-criteria.html (http://bloomberg.com/news/2013-05-16/berkshire-hathaway-cut-by-s-p-as-rating-firm-revises-criteria.html)
Berkshire Cut to AA by S&P as Ratings Firm Revises Criteria
By Noah Buhayar and Zachary Tracer
May 16, 2013 4:22 PM

Warren Buffett’s Berkshire (BRK/A) Hathaway Inc. had its credit grade lowered one level by Standard & Poor’s after the ratings firm revised its criteria for evaluating insurance holding companies.

Berkshire was cut to AA from AA+, S&P said today in a statement about the Omaha, Nebraska-based company. The ratings firm said its outlook on all of Berkshire’s ratings is negative.

“The lower credit rating on BRK better reflects our view of BRK’s dependence on its core insurance operations for most of its dividend income,” John Iten, an S&P analyst, said in the statement, referring to Buffett’s company by its stock ticker.

Berkshire held the highest credit rating from S&P, Fitch Ratings and Moody’s Investors Service as recently as 2009. A plunging equity market following the 2008 financial crisis hurt the value of its stock portfolio and boosted liabilities on derivatives, leading to cuts by Moody’s and Fitch. The company was stripped of its last AAA rating in February 2010 by S&P after agreeing to buy railroad Burlington Northern Santa Fe for $26.5 billion.

Today’s cut brings S&P’s rating in line with Moody’s, which rates Berkshire Aa2. Fitch rates Buffett’s company one level lower. Berkshire is the largest shareholder in Moody’s parent Moody’s Corp. (MCO) Buffett didn’t respond to a request for comment sent to an assistant.
Bond Markets

The downgrades haven’t hurt Berkshire’s standing in the bond markets. The company’s finance unit sold 5- and 30-year debt at its lowest coupons ever last week, according to data compiled by Bloomberg. Its $500 million of 4.3 percent bonds due May 2043 rose 0.7 cents at 9:53 a.m. in New York to trade at 99.25 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The extra yield investors demand to hold the 30-year bond rather than government debt was 125 basis points, or 1.25 percentage points, Trace data show. That compares with a 144 basis-point spread on a Bank of America Merrill Lynch index for AA rated U.S. corporate debt maturing in 15 years or longer.

Berkshire’s Class A shares fell 1 percent to $167,303 at 4 p.m. in New York, trimming their gain this year to 25 percent. That follows a 17 percent advance in 2012.

As Berkshire’s chairman and chief executive officer for more than four decades, Buffett, 82, built the firm from a textile maker into a company that sells insurance, hauls freight, generates electricity, manufactures chemicals and sells products from diamonds to underwear. The billionaire has used funds from insurance units including Geico to buy stocks and make acquisitions.
Insurance Operations

Berkshire’s non-insurance operating units, other than BNSF, typically don’t provide a significant portion of dividends to the holding company, Iten said. That makes the company dependent on insurance operations to meet obligations.

The new ratings criteria increased scrutiny of holding companies that own insurers, said Kevin Ahern, a managing director at S&P. At Berkshire, S&P was concerned that payments from insurance units to the holding company could be limited if the insurers face claims or suffer investment losses, he said. BNSF is owned by one of Berkshire’s insurers, making its payouts subject to regulatory oversight.

“There’s an element of risk, but I wouldn’t say that there’s a concern today that there’s going to be a regulatory chokehold,” Ahern said. If BNSF wasn’t held by an insurance unit, “we probably wouldn’t have this discussion.”
‘It’s Silly’

The concern that Berkshire could run short of funds to pay its obligations is overdone, said Jeff Matthews, a shareholder who has written books about Buffett. Berkshire had about $49 billion in cash at the end of March.

“It’s silly,” Matthews said in a phone interview. “If Buffett wanted a dividend from any one of his companies, he could pick up the phone and get it right now.”

S&P also cited the riskiness of Berkshire’s stock investments and questions over who will replace Buffett as reasons for the downgrade.

The billionaire has said his roles will be divided when he’s no longer leading Berkshire. The board has selected a candidate to succeed him as CEO, without identifying the person, he said in 2012. Investments will be overseen by Todd Combs and Ted Weschler, former hedge-fund managers who were hired in the past three years. Buffett has said his son, Howard, a Berkshire director since 1993, could be non-executive chairman.
Capital Concern

The negative outlook reflects the potential that a large acquisition or investment losses could drain capital, S&P said. It’s also tied to S&P’s negative outlook on the U.S. government’s rating, according to the statement.

Buffett and Jorge Paulo Lemann’s 3G Capital agreed in February to a deal to take ketchup maker HJ Heinz Co. (HNZ) private. Berkshire will get half the common equity for about $4 billion and preferred shares for another $8 billion. Debt issued for the deal won a record low coupon for similar-maturity and rated securities in March.

S&P published its revised ratings criteria for insurers last week. At the time, S&P said a majority of ratings would not change and that positive ratings actions would exceed negative ones.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 20, 2013, 06:17 AM
From www.Forbes.com
Warren Buffett: 7 New Bits of Wisdom for Your Life
By Brent Beshore
 
Warren Buffett speaking to a group of students from the Kansas University School of Business

Disclaimer: Warren Buffett is the person I try (largely unsuccessfully) to emulate the most. I find his transparency, thoughtfulness, generosity, principled approach, and general life philosophy to be sublime. In short, I’m a Buffett fanboy.

Every year, Warren Buffett writes a shareholder letter explaining his rationale, the company’s yearly performance, and what people should expect at the Berkshire annual meeting (aptly dubbed the “Woodstock of Capitalism”). Every year, it’s packed with insights, pithy sayings, and genuine wisdom. This year’s letter is no different. Here are my highlights and takeaways, as well as a few ways you can implement his strategies in your life.

1. It’s ALWAYS about fundamentals: In what many have called a series of strange decisions, Berkshire has started acquiring newspapers. Why? Because the fundamentals make sense. “News, to put it simply, is what people don’t know that they want to know. And people will seek their news — what’s important to them — from whatever sources provide the best combination of immediacy, ease of access, reliability, comprehensiveness and low cost,” as Buffett says. Decisions don’t always have to make sense to others, but they must make sense to you. Understand the fundamentals, and everything else will fall into place.

2. Optionality creates opportunity: Optionality is your ability to choose a successful path from an assortment of potential choices. The more options you have, the greater your ability to select a beneficial one. “Because we operate in so many areas of the economy, we enjoy a range of choices far wider than that open to most corporations. In deciding what to do, we can water the flowers and skip over the weeds,” the letter explains. Debt, a lack of imagination, or being overly niched removes optionality. Diversification, savings, and an open mind increase optionality. More options are better than fewer options.

 
The Non-Entrepreneur's Guide to Startup Funding
Brent Beshore
Contributor
 
What's Your Credibility Score?
John Hall
Contributor
3. Fantasy vs. reality: You can’t wish yourself into a better position. As Buffett would tell you, “Wishing makes dreams come true only in Disney movies; it’s poison in business.” You have made mistakes. You have debts. You have regrets. We all do. Ignoring bills, personal defects, or business facts won’t change them. Own them, learn from them, work hard at getting better, and move on to a better life.

4. Risk mitigation ensures sleep and survival: Risk is tricky. It is necessary (except in arbitrage situations) to produce returns, but too much ultimately leads to complete destruction. “Charlie and I believe in operating with many redundant layers of liquidity, and we avoid any sort of obligation that could drain our cash in a material way. That reduces our returns in 99 years out of 100,” Buffet says. “But we will survive in the 100th while many others fail. And we will sleep well in all 100.” Take what Nassim Taleb calls the “antifragile approach” by being extremely risky, allowing you to be able to afford to lose (and earn big returns), while always maintaining a highly risk-averse base.

5. Excellence always beats a bargain: While there are certainly exceptions, in the long run, bargains never outperform solid investments. “More than 50 years ago, Charlie told me that it was far better to buy a wonderful business at a fair price than to buy a fair business at a wonderful price,” Buffett says. This simple, yet powerful, principle can be applied to virtually every area of life. Diets, discounts, dishonesty, bargains, and shortcuts can work well for a while, but they’re never sustainable.

6. Consistently play the game: Berkshire’s “secret” is actually no secret at all. Sound strategy, based on fundamentals, executed consistently, produces excellent results. It’s not sexy. It’s not trendy. It just works, every single time. “Since the basic game is so favorable, Charlie and I believe it’s a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of ‘experts,’ or the ebb and flow of business activity,” Buffett maintains. “The risks of being out of the game are huge compared to the risks of being in it.”

7. Embrace uncertainty, gain clarity: Life is not immediately certain, and that’s okay. Buffett explains, “Every tomorrow has been uncertain. America’s destiny, however, has always been clear: ever-increasing abundance.” Uncertainty creates variety and opportunity. Instead of looking at uncertainty as a point of anxiety, embrace it and, in doing so, you’ll gain clarity and create far more certainty in the future. Buffett says:

 “A thought for my fellow CEOs: Of course, the immediate future is uncertain; America has faced the unknown since 1776. It’s just that sometimes people focus on the myriad of uncertainties that always exist while at other times they ignore them (usually because the recent past has been uneventful). American business will do fine over time.”

I don’t consider Warren Buffett’s greatest contribution to be his unbelievable investment track record or incredibly generous philanthropic contributions. His greatest gift to humanity is a well-documented life, proving that integrity, transparency, hard work, and continual learning lead to a life worth living.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: freefront on May 20, 2013, 09:48 AM
@Wills--- your #1. Acquiring Newspapers- I would have thought that this industry is going to bite the dust soon. At least, the physical newspaper. Almost everything is duplicated online already. Right? 
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: L3 on May 20, 2013, 10:59 AM
After I realised lesson from this post I sold my position at MEG and MPI hehe. From now on I will never TIME the market and focus on One strategy only.

Umaygad! i have both meg and mpi.. sir Wills care to share the reason why? thanks
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 20, 2013, 11:29 AM
Umaygad! i have both meg and mpi.. sir Wills care to share the reason why? thanks
Naku Sir L3 wag niyo siryosohin yung stock picks ko.

May basihan ako kung bakit yun ang desisyon ko, I found a company with high returns and cheaper. The only reason I bought MEG and MPI is for speculative purposes only(bull run kasi) I drop it na lang since I realised na hindi wise move iyon for me.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: L3 on May 20, 2013, 12:09 PM
^

ah akala ko me alam ka na hindi maganda sa funda ng 2 puro long term ko kc to.

anong company kaya yang cheaper na yan  :D
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 20, 2013, 01:37 PM
Sir nabili mo ba stocks mo thru tip? Or you are using FA?
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: L3 on May 20, 2013, 02:09 PM
not tip sir. i use my very own unreliable FA, five-year forecast on real estate (for meg) or infras project (for mpi), company itself, who the person behind (tan, manny). some are rumors, news, from other persons in the forum pero mostly sa mga to subject for analysis ko pa rin. tama ba tong gnagawa ko? i first heard megaworld when i am a college stud in iloilo. i also want a conglomerate so i select mpi kc un lng kaya ko sa ngayon. ang problema ko lng hindi ako marunog kumuha ng PE, EPS, ROE. ung bang mas mahal pa pala ang P5 price ng company kaysa P20 ng isang company. eto ang gusto ko sanang pag aralan nakalimutan ko lang pano ulit gagawin. hindi kc nakikinig sa seminar sa col  :D . i hope walang mali sa kind ng analysis na ginagawa ko. painput na lng po kung my kailangan talagang baguhin  :thankyou:
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: alx on May 20, 2013, 02:24 PM
kaya pala downtrend MEG. laki siguro nilabas mo sir?

kidding aside, I am enjoying this  very informative thread. keep on posting sirs..
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: rds on May 20, 2013, 03:15 PM
not tip sir. i use my very own unreliable FA, five-year forecast on real estate (for meg) or infras project (for mpi), company itself, who the person behind (tan, manny). some are rumors, news, from other persons in the forum pero mostly sa mga to subject for analysis ko pa rin. tama ba tong gnagawa ko? i first heard megaworld when i am a college stud in iloilo. i also want a conglomerate so i select mpi kc un lng kaya ko sa ngayon. ang problema ko lng hindi ako marunog kumuha ng PE, EPS, ROE. ung bang mas mahal pa pala ang P5 price ng company kaysa P20 ng isang company. eto ang gusto ko sanang pag aralan nakalimutan ko lang pano ulit gagawin. hindi kc nakikinig sa seminar sa col  :D . i hope walang mali sa kind ng analysis na ginagawa ko. painput na lng po kung my kailangan talagang baguhin  :thankyou:

you can do 5 year forecast of the company, you mean their potential earning? that's great!

yung PE, EPS at ROE would be very easy. Just go to PSE, bloomberg, COL etc. website and look for "no. of shares outstanding".

EPS (Earnings per share) = company's profit / no. of shares
PE (Price per earnings) = price (current) / EPS
ROE (Return on Equity) = earnings / shareholder's funds - in %
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: bauer on May 20, 2013, 03:27 PM
Makikisabat..

What can you say about berk's credit rating downgrade by fitch last night... Everyone was like, #WTF?!

S & P had a very valid point in their credit rating downgrade i believe.  First, long term management outlook, Sino papalit kina Buffett at Munger when they die?

Second point, over reliance ng berkshire sa dividend income ng kanilang insurance business which makes up more than 60% of their income.  Remember, yung mga acquired companies mostly hindi nagbibigay ng dividend income.

Third point, well less substantial due to macro outlook, downgraded ang US as an economy and as a government, so generally speaking, all companies operating under its jurisdiction should carry some risks.  Ito hindi kontrolado ng berkshire.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: bauer on May 20, 2013, 03:32 PM
The Non-Entrepreneur's Guide to Startup Funding
Brent Beshore
Contributor
  I don’t consider Warren Buffett’s greatest contribution to be his unbelievable investment track record or incredibly generous philanthropic contributions. His greatest gift to humanity is a well-documented life, proving that integrity, transparency, hard work, and continual learning lead to a life worth living.


Quite true.

all retail investors be forewarned:  Buffett's investment philosophy is applicable only in America, not in our country. 

Buffett's investment decisions is good for HIS COMPANY.  It is not necessarily good for small investors like us.  It is not wise to follow the herd.

I do not dislike Buffett.  In fact, it is about him that i decided to concentrate on stock investment.  But after several years, he is an apple and we are mangoes.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: lemreyes on May 20, 2013, 03:40 PM
all retail investors be forewarned:  Buffett's investment philosophy is applicable only in America, not in our country. 
Why do you say that it is not applicable in the Philippines?
What kind of investment philosophy would be more suited here?
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: L3 on May 20, 2013, 03:46 PM
you can do 5 year forecast of the company, you mean their potential earning? that's great!

yung PE, EPS at ROE would be very easy. Just go to PSE, bloomberg, COL etc. website and look for "no. of shares outstanding".

EPS (Earnings per share) = company's profit / no. of shares
PE (Price per earnings) = price (current) / EPS
ROE (Return on Equity) = earnings / shareholder's funds - in %

hindi naman po. what i mean is confident lng ako na magbubulish pa ang real estate at infras dahil sa mga projects na kailangang gawin ng government at marami rin ngayon ang emerging cities which is good for real estate developer. dun ko po nabase ang 5year forecast ko. o mali lng ang gamit ko ng word na forecast.

clarification po. ang company's profit po ba ang Net Income sa kanilang Annual Report? how about earnings po?

thanks
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: bauer on May 20, 2013, 03:55 PM
Why do you say that it is not applicable in the Philippines?

Buffett, during interviews, admitted gladly that his first LUCK was being born in America.  The freest economy in the world.  The main reason why he became very successful.  The Philippines has a strong environmental & regulatory contraints including concentration of wealth among the few to merit an investment philosophy being applied by buffett.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: rds on May 20, 2013, 03:58 PM
@L3

...profit or earnings or income are same

...and it should be NET earnings (less tax, depreciation, amortization, etc - anyway its straightforward in their Annual specified as NET)

...and it should also EXCLUDE "non-recurring items" (items like a one time activity and not likely to happen next year, i.e. sale of properties, etc.)
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: bauer on May 20, 2013, 04:04 PM
What kind of investment philosophy would be more suited here?

Some of my observations:

1. Reduce your future growth outlook. Instead of 20 or more years, make it 5 to 10 years max.

2. Be conservative in buying stocks. Our financial reports are vague and too general.  Make a lot of allowances against possible accounting errors.

3. Try to time the market even if it is very difficult.  Filipinos love herd mentality.  It is our culture.

4. Rules are guides only.  It is not implemented fair and square.  Adjust your trades accordingly.

5. Talk are cheap among filipino executives of public companies.  Focus on their actions and the results it produces.

6. Patience is not a virtue in local stocks.  Impose a time limit on your stock portfolio to produce good results.  If not met, dump it and move on.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: rds on May 20, 2013, 04:35 PM
3. Try to time the market even if it is very difficult.  Filipinos love herd mentality.  It is our culture.

--- i remember Bo, he always reminds his members don't time the market and always look for long term (say 20 years)...yet frequently (like every 2 months) you can receive e-mail from him saying "buy this stock because...." or "sell this stock because..." which I find funny.

--- Time the market. To some extent yes...

--- yet for the reason above that "Filipinos love herd mentality" I don't think it should be the main reason since IT'S NOT FILIPINO only, Americans have that mentality too.

Quote
4. Rules are guides only.  It is not implemented fair and square.

agree 100% - NO one-size-fits-all approach in stocks investing!

Quote
6. Patience is not a virtue in local stocks.  Impose a time limit on your stock portfolio to produce good results.  If not met, dump it and move on.

"Patience is not a virtue in local stocks" --- in some case YES in some cases NO.

As you have mentioned in your rule no. 4 --- so shall it be. "Patience will always be a virtue, subject to rule no. 4"
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 20, 2013, 05:36 PM
@Wills--- your #1. Acquiring Newspapers- I would have thought that this industry is going to bite the dust soon. At least, the physical newspaper. Almost everything is duplicated online already. Right? 
Ang pakaintindi ko lang Sir is pagdating sa newspaper hindi lang earnings ang habol ni Warren. Ang naalala ako may sinabi siya na kahit paliit ng paliit ang kita nila sa news business they would still hold on to it. Mga rason na alam ko is si Warren kung hindi daw siya naging Investor malamang journalist siya "Investigative Journalism" ang hilig niya kagaya ng natimbug nila yung Boy's Town siya ang key player dun. Although may issue pa nga noon na bakit daw involve ang owner ng newspaper eh diba hindi common thing yan sa news industry. And also maybe he likes what the News business doing for a community.

So it's like more on giving back to community and also backing up(financially) the news business/industry and making sure that the news business has a backer with solid reputation.

Naniniwala si Warren na napakalaki at napakaganda ng ginagawa at epekto ng isang news business sa isang bansa.

Maaring mali ang sagot ko at mali ang kwento ko so kung sino gusto magcorrect please do so. (make sure you are right)
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 20, 2013, 05:42 PM
not tip sir. i use my very own unreliable FA, five-year forecast on real estate (for meg) or infras project (for mpi), company itself, who the person behind (tan, manny). some are rumors, news, from other persons in the forum pero mostly sa mga to subject for analysis ko pa rin. tama ba tong gnagawa ko? i first heard megaworld when i am a college stud in iloilo. i also want a conglomerate so i select mpi kc un lng kaya ko sa ngayon. ang problema ko lng hindi ako marunog kumuha ng PE, EPS, ROE. ung bang mas mahal pa pala ang P5 price ng company kaysa P20 ng isang company. eto ang gusto ko sanang pag aralan nakalimutan ko lang pano ulit gagawin. hindi kc nakikinig sa seminar sa col  :D . i hope walang mali sa kind ng analysis na ginagawa ko. painput na lng po kung my kailangan talagang baguhin  :thankyou:
Very good question.
If you want to learn the basic of how to perform the quantitative analysis just buy this - Warren Buffett 3 favourite books

http://www.amazon.com/Warren-Buffetts-Favorite-Books-Intelligent/dp/0982967624/ref=sr_1_1?ie=UTF8&qid=1369042842&sr=8-1&keywords=preston+pysh


You cannot get all the answers here in PMT and it is not that easy. Buy that book, simple ang libro na yan walang pasikot sikot diretso lesson agad.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 20, 2013, 05:48 PM
kaya pala downtrend MEG. laki siguro nilabas mo sir?

kidding aside, I am enjoying this  very informative thread. keep on posting sirs..
hehehe! Sana nga
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 20, 2013, 05:55 PM
Quite true.

all retail investors be forewarned:  Buffett's investment philosophy is applicable only in America, not in our country. 

Buffett's investment decisions is good for HIS COMPANY.  It is not necessarily good for small investors like us.  It is not wise to follow the herd.

I do not dislike Buffett.  In fact, it is about him that i decided to concentrate on stock investment.  But after several years, he is an apple and we are mangoes.
@ Sir bauer

I have an impression that you know a lot in investing so I respect your wisdom on this.

I respect all your views regarding Buffett style not applicable here, I agree and disagree on some points you mentioned.
Since it is you who made this comment, I should review my stand.

And also want to know what is Sir TSO's take on this.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: bauer on May 21, 2013, 04:32 AM
--- i remember Bo, he always reminds his members don't time the market and always look for long term (say 20 years)...yet frequently (like every 2 months) you can receive e-mail from him saying "buy this stock because...." or "sell this stock because..." which I find funny.
 

Super LOL!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: L3 on May 21, 2013, 01:29 PM
Very good question.
If you want to learn the basic of how to perform the quantitative analysis just buy this - Warren Buffett 3 favourite books

http://www.amazon.com/Warren-Buffetts-Favorite-Books-Intelligent/dp/0982967624/ref=sr_1_1?ie=UTF8&qid=1369042842&sr=8-1&keywords=preston+pysh


You cannot get all the answers here in PMT and it is not that easy. Buy that book, simple ang libro na yan walang pasikot sikot diretso lesson agad.

salamat sa book sir Wills. hindi ko pa nakikita to baka mamaya pag uwi. salamat talaga sa pagsagot nyu sa mga tanong naming mga newbie  :thankyou:
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 22, 2013, 06:06 AM
Quite true.

all retail investors be forewarned:  Buffett's investment philosophy is applicable only in America, not in our country. 

Buffett's investment decisions is good for HIS COMPANY.  It is not necessarily good for small investors like us.  It is not wise to follow the herd.

I do not dislike Buffett.  In fact, it is about him that i decided to concentrate on stock investment.  But after several years, he is an apple and we are mangoes.
Sir Bauer

I disagree on this, for me it's still clear that buffett style(maybe not all) can be applied here in our market. For after all our National Law, capitalism and system in our country are copied from USA, yes of course not everything is copied from US we have our own system of doing things also.

That is why Index Fund(Copied from US) is also effective and has almost same results here in our country, so I think Buffett's strategy will give the same effect and result if we apply it here in our Stock market. We could argue that the result would have a huge difference with Buffett's results from US stock market, but the sure thing is if we will use his strategy here in our local stock market, you will have small chance of losing money(beating index is debatable).

ex.(figures may not be accurate)
SM and TEL.

If we will buy on March 2005 SM at 237 per share and TEL at 1495 per share.
Of course I will apply Buffett strategy I will not dance in and out up to year 2020 or I would hold it forever and will not average up(From Sir TSO's lesson) just one time buy(BIG) of both stocks, I think the result would be fine or good if not great. As of now SM is kinda overpriced and TEL a little over the fair price(if we will use Phil Fisher's method) because both stock is experiencing their new normal in earnings and I think it is sustainable.

Some of my observations:

1. Reduce your future growth outlook. Instead of 20 or more years, make it 5 to 10 years max.

2. Be conservative in buying stocks. Our financial reports are vague and too general.  Make a lot of allowances against possible accounting errors.

3. Try to time the market even if it is very difficult.  Filipinos love herd mentality.  It is our culture.

4. Rules are guides only.  It is not implemented fair and square.  Adjust your trades accordingly.

5. Talk are cheap among filipino executives of public companies.  Focus on their actions and the results it produces.

6. Patience is not a virtue in local stocks.  Impose a time limit on your stock portfolio to produce good results.  If not met, dump it and move on.
1. To me it depends on the business you bought.

2. Even in USA they do magic in their Financial Reports and it is still very rampant asked Bogle he will give us facts and evidences. My take is I would already assume that all company is lying so I agree with you Sir be very conservative.

3. I would never time the market it is dangerous, I respect the 100 years thesis of Bogle they proved that by timing the market will only give you failure results over the long term period. Plus it is high maintenance on your part, like Buffett said “But we will survive in the 100th while many others fail. And we will sleep well in all 100.” I believe he copied it from Phil Fisher but not sure. Buffett Style is more relaxed.

4. Agree

5. Super Agree

6. I disagree on this Sir as I mentioned above my stand.

To sum it all, if I would perform Warren's strategy in our stock market I would have a better chance of not losing(performance wise) to market timers and from losing money literally. Beating Index is another topic.

Sir Bauer I respect your wisdom on this so your reply/criticisms on my viewpoints are very much welcome and will surely give me lots of "deep thinking".hehe Thank You Sir.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: bauer on May 23, 2013, 07:26 PM
  Sir Bauer I respect your wisdom on this so your reply/criticisms on my viewpoints are very much welcome and will surely give me lots of "deep thinking".hehe Thank You Sir.

Noon nagsimula ako sa stock trading I also THOUGHT that Warren's investing style will be good to use in our local market just like your own view.  But after 12 years in investing, i need to change my mind set in order to keep a good profit margin.

In time, i think your views in local stock investing will be modified to fit your financial targets.  BTW, there's no argument that Warren's style is one of the best!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: sj.unite on May 23, 2013, 10:04 PM
Yes, I'm aware Buffett is speaking from the viewpoint of "permanent capital", where he'd have no qualms owning a company for decades on end. The fact of the matter is, the purchase price ALWAYS determines the value you're going to get from the stock. They understand that and is a reason why they harp on "fair" or "average" price, not excessive price.

The problem with high P/E's is that the market -- the investing community -- also expects high growth from the company. Whether high P/E is excessive or not depends on the growth prospects surrounding that company, or at least speculations surrounding its near future. Benjamin Graham recommends 16x P/E as the ceiling, but from my experience, fixation on an immobile number results in missed opportunities. What you want is growth at a reasonable price (GARP, which is another form of value investing), or growth for free or at a discount (which is 16 PE and lower at a 6.25% discount rate, 10 PE and below at 10%, or 8.33 and below at 12%).

Let's say you have two companies. One trading at 30 PE, and the other at 17.

Growth prospects, again, MATTER. ROE is directly tied to the growth rate of the business? How so? Because a company must sustain a growth rate equal to its current ROE to maintain it over the long-term. For example, if ROE is 50% (as is the case in a small business in the Philippines), then an equity investment of P100,000 will be P150,000 after year 1. In year 2, to maintain 50% ROE, it must grow at the same percentage, with retained earnings going up from P50,000 to P75,000.

So let's say the 30 PE company has a 25% ROE (to reflect the stronger economic moat and the higher valuation by the market) and the 17 PE one has a more pathetic 12%. Assume EPS at 15. Obviously, 30 PE co. is priced at 450. The other one, at 255.

Over a five year period, if EPS grows at 25% a year, you'd have EPS of roughly 45.78. If PE remains the same, then the price is at 1373 -- 305% return or 25% a year. For the other company, EPS would be 26.44. Price would be 449 -- 76% return or 12% a year.

Now, what if this growth does not materialize at all? A very mature company with few growth prospects other than making acquisitions would have a very hard time growing at 25% a year to maintain this 25% ROE over the long run. And most exec officers are horrible investors, overpaying for other businesses to the extent they increase total assets and end up deflating ROE. If earnings growth was 15% instead of 25%, then you'd have an EPS of 30.17  by year 5. IF PE miraculously remains the same (which is a VERY BIG "IF" given that earnings growth is declining and failing to meet past expectations), then the current price is 905. A 200% return or 15% a year. Not the expected 25%. If PE happens to drop from 30 to 20, which is likely to be the case, the price would be a little bit over 600 -- 34% return or 6% a year. Eew.

On the other hand, if the smaller company surprises the market and ends up with 15% returns (remember that the assumption was 12% based on ROE), at the 17 PE the market might price this one at 513 -- 201% or 15% a year. If the PE rises to 20 (because it was beating growth expectations), the price would be 603 -- 237% return or 19% a year.

All because you paid a lower price!

What if you were buying stock in the meantime? You'd no doubt be accumulating shares, and at the same time, increasing your average cost per share. This dilutes your overall ROI from THAT one company. If your average cost per share in the second company rises from 255 to 350 over that five year period, your returns fall from cumulative 237% to 172%. A massive drop of 30%, because of the price you paid. As you can CLEARLY see, it doesn't matter if PE went up or down!

Let's put it in a 20 year period then. Inflation in the Phil's roughly 5%. EPS of 10, 5% growth rate, 20 years = 26.53 EPS after 20 years. PE of 10 = P100 at the beginning and P265 at the end. If the company happens to grow twice as fast over this time frame, you'd have 67.27 EPS after 20 years, and an ending price of 673 if the market doesn't adjust the PE multiple upwards. The rates of return are extremely high, of course, and are even higher if the market reappraises the company. If you happen to buy enough to have an average cost of P270 by two decades' end, you would've earned nothing at the first scenario. At the other, you would've made a cumulative 150%. One hell of a drop from the massive 570% you would've made had you stuck to one giant buy near the very beginning. Even if PE dropped to 8 just because of the market (let's say it's a 1.0 beta stock), then the price would be P538. At P100, that's a 438% return. At 270, that's 200%. In both cases (where PE falls by 2 points or it is unaffected at all), the difference between cost averaging and making all your purchases early and then holding it for the long run except possibly on major dips, is enormous. (150 percent is 74% less than 570; 200 percent is 54% less than 438; 438 percent is 23% less than 570.)

My point is, the absolute price you pay for a company determines everything. The results of this 5-year study can be extended to extremely long-term records of 20 or 30 years. Changes in market sentiment (the PE ratio) is obviously a small matter, because what matters is the future growth of the company. The PE is factored in as a proxy for expected growth, which you can compare against what you think the company can achieve over the long run.

Sir I'm just curious on your take regarding the other use of cost-averaging. Some people use this strategy to buy enough shares while maintaining a low average price. Taking your point above, would you rather buy in lump sum then set a target price to sell then re-enter again? Or would you hold until your preferred maturity period is attained, only buying on dips? Naguguluhan po kasi talaga ako sa dalawang to.  :help:
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: sj.unite on May 23, 2013, 10:06 PM
After I realised lesson from this post I sold my position at MEG and MPI hehe. From now on I will never TIME the market and focus on One strategy only.

Sir TS sorry kung sobrang backtrack. May I know the reason why you sold your positions at MEG and MPI? Sa tingin niyo po ba hindi na ganun kaganda ang future growth ng dalawang companies na to? (I currently have shares of MPI and planning to hold it long-term)
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 24, 2013, 12:16 AM
Noon nagsimula ako sa stock trading I also THOUGHT that Warren's investing style will be good to use in our local market just like your own view.  But after 12 years in investing, i need to change my mind set in order to keep a good profit margin.

In time, i think your views in local stock investing will be modified to fit your financial targets.  BTW, there's no argument that Warren's style is one of the best!
Thank you Sir Bauer appreciate your post.

There's nothing to argue, maybe I should continue my plan to test the water for 5-7 years using this strategy then reevaluate my strategy.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 24, 2013, 12:34 AM
Sir TS sorry kung sobrang backtrack. May I know the reason why you sold your positions at MEG and MPI? Sa tingin niyo po ba hindi na ganun kaganda ang future growth ng dalawang companies na to? (I currently have shares of MPI and planning to hold it long-term)
After reading Sir TSO's post, naging maliwanag sakin kung saan ako tatayo sa stock market, buti nalang may malaman na post din si Sir Bauer at least it will keep me on my toes!

I like MEG and MPI, MEG is consistent and ang daming project in line kaya lang medyo mahal siya ng nabili ko so talo ako in the long run, ngunit kung magkaroon man ng correction at bumaba ang presyo sa 2pesos or 1.50pesos dun ako bibili ng MEG then hold for 10-15years WITHOUT worrying if the bear market is coming and if dumating ang bear market I would not sell it maybe average down pa ang gawin ko. MPI ang mahal! I'll buy it at 3-3.50pesos then hold FOREVER hehe!

Binenta ko sila dahil may nakita akong Stock na mura at malaki ang ROE at sa tingin ko ay kayang i-maintain ang current ROE for the next 10 years. Sa mga nabili kong Stock ngayon ang strategy ko ay wala ng market timing, kahit pa dumating ang bear market hindi ko ibebenta, ang pwede ko pang gawin sa mga hawak ko if magkabear market ay bibili ako ng masmarami. This way relax ako at may tulog gabi gabi hehe.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: sj.unite on May 24, 2013, 05:53 AM
After reading Sir TSO's post, naging maliwanag sakin kung saan ako tatayo sa stock market, buti nalang may malaman na post din si Sir Bauer at least it will keep me on my toes!

I like MEG and MPI, MEG is consistent and ang daming project in line kaya lang medyo mahal siya ng nabili ko so talo ako in the long run, ngunit kung magkaroon man ng correction at bumaba ang presyo sa 2pesos or 1.50pesos dun ako bibili ng MEG then hold for 10-15years WITHOUT worrying if the bear market is coming and if dumating ang bear market I would not sell it maybe average down pa ang gawin ko. MPI ang mahal! I'll buy it at 3-3.50pesos then hold FOREVER hehe!

Binenta ko sila dahil may nakita akong Stock na mura at malaki ang ROE at sa tingin ko ay kayang i-maintain ang current ROE for the next 10 years. Sa mga nabili kong Stock ngayon ang strategy ko ay wala ng market timing, kahit pa dumating ang bear market hindi ko ibebenta, ang pwede ko pang gawin sa mga hawak ko if magkabear market ay bibili ako ng masmarami. This way relax ako at may tulog gabi gabi hehe.

I never thought of considering MPI to be expensive because of their future project prospects and their subsidiaries are pero after reading your reply, I'm going to review it again. Haha. May nakita din akong stock na mura ngayon kaso ang baba ng trade volume.  :hihi: THank you sir Wills!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: mps on May 24, 2013, 06:37 AM
Wills position about MPI is based on its Earnings VS Current Price which is also based on "fact". But MPI's growth based on its future project prospects is purely speculation. Of course we can always speculate that the future projects will give MPI a future income, but that's in the future. And it is still unpredictable. 
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 24, 2013, 10:02 AM
Wills position about MPI is based on its Earnings VS Current Price which is also based on "fact". But MPI's growth based on its future project prospects is purely speculation. Of course we can always speculate that the future projects will give MPI a future income, but that's in the future. And it is still unpredictable. 
Wills position about MPI is based on its Earnings VS Current Price which is also based on "fact". But MPI's growth based on its future project prospects is purely speculation. Of course we can always speculate that the future projects will give MPI a future income, but that's in the future. And it is still unpredictable. 

Yes Pangilinan proved that he is a good manager but the fact remains that MPI is big and will have a hard time increasing their ROE, so a company with low to average ROE should be bought at a very low price that way you'll have a better chance of good returns. Kaya ganito ang gusto kong mangyari sapagkat ang dahilan ay pangLongterm holding at hindi na ako magbenta ng shares if bear market comes.

Sa mga Guru d2 pls correct me na lang
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 24, 2013, 10:40 AM
I never thought of considering MPI to be expensive because of their future project prospects and their subsidiaries are pero after reading your reply, I'm going to review it again. Haha. May nakita din akong stock na mura ngayon kaso ang baba ng trade volume.  :hihi: THank you sir Wills!
Sa akin lang yan Sir, malay mo mali ako at at malay natin meron d2 magaling maganalyze at magsabi sa atin na mura ang MPI,  basta ang payo ko sayo when you decide to pick you own stocks make sure na mataas ang confidence mo meaning pagmay nagsabi sayo na salungat sa analization mo dapat hindi ka natitinag otherwise magIndex Fund ka. IMO lang po yan Sir
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: sj.unite on May 24, 2013, 01:40 PM
Sa akin lang yan Sir, malay mo mali ako at at malay natin meron d2 magaling maganalyze at magsabi sa atin na mura ang MPI,  basta ang payo ko sayo when you decide to pick you own stocks make sure na mataas ang confidence mo meaning pagmay nagsabi sayo na salungat sa analization mo dapat hindi ka natitinag otherwise magIndex Fund ka. IMO lang po yan Sir

Bago pa lang po kasi ako sir so I'm taking every info that I can get to learn. Medyo di pa ganun kataas yung confidence level ko but I'm getting there kasi willing naman ako matuto. :) Anyway, thank you po for the info that you gave me! Nag-iba din kasi yung pananaw ko after reading sir TSO's post.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: L3 on May 24, 2013, 03:42 PM
salamat sir sj.unite sa pag tanong kay sir Wills kung bakit nya binitawan ang MEG at MPI. ngayon clear na sakin ang sinabi ni sir TSO and salamat din sir Wills for the folow-up answer. narealize ko na ang ibig sabihin ng PE/EPS vs ROE. i think kailangan ko na ulit mag review para makapagposisyon sa magandang stock then todo hold regardless ng mga chismis. :D

as sir bauer said "you must have your own analysis" and "Rules are guides only"
 :thankyou:
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 24, 2013, 08:23 PM
@Sir sj.unite, Sir L3

Newbie lang din po ako, Jan. 2013 ako nagstart sa Index Fund and Feb. 2013 ako nagstart magpick ng sariling stocks.

But before I took action I've been studying Warren Buffett's life/Stock approach/strategy and also Stock market for 5 years.

If you are going for the strategy that you learn from this thread I suggest you read a lot before you take action, with this kind of strategy you will learn more in reading than doing.

Books to buy for beginners like us:

1. The Snowball: Warren Buffett and the Business of Life by Alice Schroeder
2. Common Stocks and Uncommon Profits and Other Writings (Wiley Investment Classics) by Philip A. Fisher and Kenneth L. Fisher
3. Warren Buffett's 3 Favorite Books: A guide to The Intelligent Investor, Security Analysis, and The Wealth of Nations... by Preston George Pysh
4. Damn Right: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger by Janet Lowe

Watch all Warren Buffett and Charlie Munger's video in YouTube over and over again!

Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 24, 2013, 08:34 PM
salamat sir sj.unite sa pag tanong kay sir Wills kung bakit nya binitawan ang MEG at MPI. ngayon clear na sakin ang sinabi ni sir TSO and salamat din sir Wills for the folow-up answer. narealize ko na ang ibig sabihin ng PE/EPS vs ROE. i think kailangan ko na ulit mag review para makapagposisyon sa magandang stock then todo hold regardless ng mga chismis. :D

as sir bauer said "you must have your own analysis" and "Rules are guides only"
 :thankyou:
Ang galing mo nakuha mo hindi importante ang chismis sa stocks hehe pero kung importanteng impormasyon malamang hindi na chismis yan. Sir if you are really serious on this-->"todo hold regardless ng mga chismis" pagaralan mo kung ano ibig sabihin ni Warren Buffett sa temperament dahil importante iyon.

P/E EPS vs ROE kulang pa yun, mahaba habang discussion kasi pagpinagusapan pa lahat d2, masbetter buy ka ng book ni Preston Pysh, napakalaking tulong ng lesson ng book niya. Although napakalaking tulong rin ng post ni Sir TSO.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: TSO on May 25, 2013, 02:03 AM
Quote

Sir I'm just curious on your take regarding the other use of cost-averaging. Some people use this strategy to buy enough shares while maintaining a low average price. Taking your point above, would you rather buy in lump sum then set a target price to sell then re-enter again? Or would you hold until your preferred maturity period is attained, only buying on dips? Naguguluhan po kasi talaga ako sa dalawang to


My strategy is simple but extremely difficult to properly apply.

Basically, until the day comes that I can focus on business ownership and employ Buffett's strategy of intelligent negligence, my holding period as a outside passive minority investor is "forever until..."

A. The stock is overvalued by the market.
B. Change in fundamentals upset my margin of safety.
C. I find a better opportunity but I can only raise money from existing holdings.

A is the hardest here, because I like holding companies for years, and you just don't know if the market will keep jacking up the price or if a correction happens. But that's why I estimate the stock's intrinsic value. The instant that it becomes overvalued according to my valuation estimates, that's when I start looking for other opportunities. Might even sell a portion of my holdings, but I never completely liquidate positions unless B and C happen.

As far as cost averaging is concerned, ideally you would want to buy in a lump-sum, set a target, then forget about it until it starts going there again. However, because it is CONSISTENTLY IMPOSSIBLE to time the market in the long run, you stagger your purchases across several time periods. Cost averaging does this through regular purchases. Value averaging does this by opportunistically adding to one's position.

Quote
But MPI's growth based on its future project prospects is purely speculation. Of course we can always speculate that the future projects will give MPI a future income, but that's in the future. And it is still unpredictable. 

Watch Shark Tank. It's an American TV show about entrepreneurs trying to get funding from billionaire investors, who own or have owned businesses that they built from the ground up. If you notice, they always focus on what the company is worth IN THE HERE AND NOW, and they TRY TO AVOID PAYING FOR GROWTH.

If it helps, you yourself can easily get the amount of money you're forking over for future growth by multiplying the PE ratio by your preferred discount rate and subtracting the product by 1. Negative means a discount. Positive means a premium.

Again, guys. Sustainable growth = ROE times retention rate. The larger the company, the more unlikely it is to attain "sustainable growth" without resorting to drastic measures (such as international expansion or M&A)


Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 25, 2013, 01:04 PM
My strategy is simple but extremely difficult to properly apply.


A. The stock is overvalued by the market.


A is the hardest here, because I like holding companies for years, and you just don't know if the market will keep jacking up the price or if a correction happens. But that's why I estimate the stock's intrinsic value. The instant that it becomes overvalued according to my valuation estimates, that's when I start looking for other opportunities. Might even sell a portion of my holdings, but I never completely liquidate positions unless B and C happen.

This is the thing that bothers me,

When you are in these situation, does considering macroeconomics important? Or is it important to evaluate the "new normal" of the company based on macroeconomics? Does this give you a better decision to hold or sell?
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: TSO on May 25, 2013, 02:35 PM
Yes.

Macro and beta are important here. Beta = price volatility. It must be based on the broad market, AND it must be as close to 1 as possible. Anything significantly deviant from this means company or industry specific information impacts the price greatly, preventing you from exploiting macro worries (that don't really put the company's going-concern in jeopardy).

Negative macro catalysts on a stock with beta » 1.0 but satisfactory margins of safety given low to moderate risks (accounting for company & industry fundamenals) will result in: (a) me establishing a foothold in the business (40% of intended position); (b) me taking profits in other holdings or getting more capital contributions to prepare for deployment; and (c me attempting to hedge against the long position.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: TSO on May 25, 2013, 02:37 PM
In most cases,I just make sure I hold about 20% of the portfolio in cas. All the time. Kils me in bull markets, but when great corrections occur... :)
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 25, 2013, 09:19 PM
In most cases,I just make sure I hold about 20% of the portfolio in cas. All the time. Kils me in bull markets, but when great corrections occur... :)

I like this!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 25, 2013, 09:34 PM
Yes.

Macro and beta are important here. Beta = price volatility. It must be based on the broad market, AND it must be as close to 1 as possible. Anything significantly deviant from this means company or industry specific information impacts the price greatly, preventing you from exploiting macro worries (that don't really put the company's going-concern in jeopardy).

Negative macro catalysts on a stock with beta » 1.0 but satisfactory margins of safety given low to moderate risks (accounting for company & industry fundamenals) will result in: (a) me establishing a foothold in the business (40% of intended position); (b) me taking profits in other holdings or getting more capital contributions to prepare for deployment; and (c me attempting to hedge against the long position.

I'm learning a lot from you Sir!

Now I know why Warren Buffett like this book ----> The wealth of nations by Adam Smith
correct me if I'm wrong, this book is about macroeconomics.

I haven't read this book pero ngayon mukhang kailangan ko na hehehe

Thank you Sir TSO!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: sj.unite on May 26, 2013, 12:34 AM
http://www.investopedia.com/articles/fundamental-analysis/09/five-must-have-metrics-value-investors.asp

Hope this helps! :)
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: sj.unite on May 26, 2013, 12:54 AM

As far as cost averaging is concerned, ideally you would want to buy in a lump-sum, set a target, then forget about it until it starts going there again. However, because it is CONSISTENTLY IMPOSSIBLE to time the market in the long run, you stagger your purchases across several time periods. Cost averaging does this through regular purchases. Value averaging does this by opportunistically adding to one's position.


Now I know how to differentiate CA from VI. My prof never taught me these things. Lol. I tend to mix Tech analysis to Fundamentals because I want to learn how the market works. That's why I always find myself confused when deciding what to do with my portfolio. Thanks Sir TSO! :)


Now I know why Warren Buffett like this book ----> The wealth of nations by Adam Smith
correct me if I'm wrong, this book is about macroeconomics.


I read the wealth of nations in college and for me, its kinda dragging (maybe because of the old school writing style?). There are books available that adds contemporary examples to every chapter of that book. I'll try to search for the titles kasi nakalimutan ko na. :)
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on May 26, 2013, 05:03 AM

I read the wealth of nations in college and for me, its kinda dragging (maybe because of the old school writing style?). There are books available that adds contemporary examples to every chapter of that book. I'll try to search for the titles kasi nakalimutan ko na. :)
Tama ka Sir kanina ko lang inumpisahan mukhang matinding labanan ito hehe anyway if you could find the book with contemporary examples pls post it here. tnx!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: bauer on May 26, 2013, 05:39 PM
In most cases,I just make sure I hold about 20% of the portfolio in cas. All the time. Kils me in bull markets, but when great corrections occur... :)

you refer to your US holdings?

I'm all in on US stocks!  Bullish patterns are emerging quite strongly.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: personalfinanceapprentice on May 31, 2013, 11:16 AM
...slight break...

emerging? kala ko nag all-time highs na? start pa lang ba ng bull run nila?


...back to interpretations :D ...
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jun 15, 2013, 12:23 PM
Temperament and Circle of Competence

Temperament Makes Warren Buffett a Genius
Published on July 19, 2010 at 10:09 am
What makes Warren Buffett a genius?  Does he have unique mathematical abilities, business insights, or simply a temperament more suited for capital allocation than all other investors?  These questions have long intrigued observers trying to understand what key factors account for Mr. Buffett’s unique investment track record.

Ronald Chan makes the following comments:

"People like to ask Buffett how he values an investment, but a question like that is not too meaningful. He does not do it any differently than an average investor. In fact, his investment calculation model is probably the same as what we all learn from financial textbooks. The real distinction, then, is how Buffett equips himself with the right mental capacity to stick to his investment principles year after year, regardless of the prevailing environment.
This does not mean that he is stubborn or unconcerned about the ever- changing market dynamics. Instead, he maintains the same attitude toward investing while evolving along with the market. Temperament is what makes Buffett an investment genius. He understands well enough that evaluating a business is not difficult."


While anyone who has observed Mr. Buffett over the years knows that his temperament is a major asset, there is a risk of glossing over his superior business insights if we attribute the bulk of his success to this one factor.  Understanding a business is not inherently easy and requires a tremendous amount of accumulated knowledge.  The circle of competence of any investor depends on years of experience and effort.  Making the appropriate judgment regarding key factors involved in valuation is anything but easy.
Advanced mathematics is not required to succeed in the field of investing, nor is it important to know everything about all industries.  Indeed, no one including Mr. Buffett has the ability to evaluate all businesses.  The key factors for success involve working hard to define your circle of competence and to always try to expand it.  There really is no substitute for years of experience which is why Warren Buffett and Charlie Munger are only getting better at their jobs as they get older.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jun 15, 2013, 12:31 PM
In INVESTING, TEMPERAMENT trumps TALENT!
By Scott Phillips - March 15, 2011


For most of us who endured the 2008-9 bear market, it might have been an unwelcome reminder of that time – and may well have renewed questions of whether or not the stock market was a place for the individual investor, and whether we were smart enough to be successful.

Brains = Success?
It would be fair to assume that to be a successful investor; you have to be pretty smart.

In fact, given the legion of investment bankers, financial commentators and professional investors – not to mention the dozens and dozens of analyst reports produced every single workday – anyone without a stratospheric IQ should give up, right?

You’d be forgiven for thinking so, but here at The Motley Fool Australia we couldn’t disagree more. And happily for us, we’re in pretty good company.

Oracle of Omaha
You’ve probably heard of Warren Buffett. If you’re late to the party, don’t worry – there are plenty of Foolish resources (including here and here) to get yourself up to speed.

In short, many people think Warren Buffett is the world’s greatest investor. What we know is he’s the third richest person on the planet.

When Buffett speaks, Fools don’t always agree, but we certainly listen! Warren Buffett famously told BusinessWeek back in 1999:


"SUCCESS IN INVESTING DOESN'T CORRELATE WITH IQ, ONCE YOU'RE ABOVE THE LEVEL OF 125. ONCE YOU HAVE ORDINARY INTELLIGENCE, WHAT YOU NEED IS THE TEMPERAMENT TO CONTROL URGES THAT GET OTHER PEOPLE INTO TROUBLE OF INVESTING"


Now, I can’t speak for Warren Buffett, but I’m pretty sure he wasn’t suggesting that if you have ‘ordinary intelligence’, investing is a cinch. What I think he was saying is that successful investing requires more than just raw brain power.

Beating the Street
Another very, very successful investor is Peter Lynch. Lynch ran the Fidelity Magellan Fund in the US for 23 years, returning an average 29% per annum over that time. Lynch wrote in his book, Beating the Street:

“Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and stock mutual funds altogether”

As wildly successful experts in their chosen field, Messrs Buffett and Lynch could have dazzled us with jargon and tales of sophisticated algorithms that only they could understand.

They could have told us about how difficult this investing caper is, and made themselves seem all the more impressive to have overcome the odds through application of super-human intelligence.

Not only do they not claim genius status (though it may be fairly conferred on them), both men separately tell us that there is something far more important than a sky-high IQ – temperament; the ability to be rational and considered and to stay calm in the face of uncertainty.

By way of contrast, a company called Long Term Capital Management was probably the most spectacular US corporate collapse of the 1990s. Among their best and brightest were two Nobel Prize winners – and yet the business still lost many billions of dollars despite their combined experience and intellect.

Don’t Follow the Crowd
When in a crowd – at a rock concert, football game or during a disaster – humans have been conditioned by millions of years of evolution to take our cues from those around us. Our distant forebears ran when others around them were running, without waiting to see the lion with their own eyes. So it’s no surprise that modern humans are hard-wired to respond to the activity around us.

The challenge for Homo Investus is to recognise that crowds can – and frequently do –overreact. If you see others running from a lion, there’s no harm in running just in case… the downside risks make that option a slam dunk.

But as an investor, Warren Buffett reminds us that his success has come from an approach of being:

“…fearful when others are greedy, and…greedy when others are fearful.”

It can be incredibly hard to ignore the emotions and action around you. The financial and popular press on television, newspapers and the internet provide almost hourly updates of the gyrations of the markets. It’s easy to ascribe some sort of special meaning to the ups and downs, believing that each tenth of a percentage point actually means something.

Have the Courage of your Convictions
Unlike our ancestors who dealt with mortal threat on a regular basis, we have the luxury of time – to stop, think and choose whether to we need to act. We can choose to hold our ground when those around us are running. We can be wary, even while those around us celebrate, blind to the risks. As long as your analysis is sound, this unpopular act can give you the edge over the crowd – of amateurs and professionals alike.

THE CHALLENGE - AND IT IS A CHALLENGE - IS LEARNING TO IGNORE THE NOISE AND FOCUS ONLY ON WHAT MATTERS.

Business quality and a fair price will determine your success over the long term – having the temperament to take advantage of hopeless pessimism and ignore heady optimism will keep you out of trouble.

Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jun 15, 2013, 12:56 PM
"In money and focusing on it, I would consider calling a role models (I call them heroes actually).
I think if you can tell me who your heroes are, I can tell how you gonna turn out."

"You can absorb a lot by just watching"

"In tough times having the right heroes will take you right through it."

- Warren Buffett
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: bauer on Jun 17, 2013, 01:18 AM
...slight break...

emerging? kala ko nag all-time highs na? start pa lang ba ng bull run nila?


...back to interpretations :D ...

yes, sa tingin ko based on my own trading experience since 2010.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: TSO on Jun 17, 2013, 04:14 AM
Hedge! Hedge, hedge, hedge! I disagree with bauer going "all in" and I think it's always important to have cash on hand. Bull or bear, I don't care. When you're "fully invested", then it's time for you to make another deposit OR make partial sells as soon as you find an undervalued business.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jun 17, 2013, 06:12 AM
Hedge! Hedge, hedge, hedge! I disagree with bauer going "all in" and I think it's always important to have cash on hand. Bull or bear, I don't care. When you're "fully invested", then it's time for you to make another deposit OR make partial sells as soon as you find an undervalued business.
Sir TSO ganyan na ganyan nangyari sakin ngayon ayan tuloy nagoverbudget ko sa practice money ko, dagdag deposit ng wala sa oras!


Sir TSO, sa 20% cash on hold anong rules niyo dun? Use it only if you find super undervalued company?
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jun 17, 2013, 06:15 AM
...slight break...

emerging? kala ko nag all-time highs na? start pa lang ba ng bull run nila?


...back to interpretations :D ...

US is having a new "low" and experiencing new "normal".

Most US company hoards tons of money because of what they learned from bad experience(2008 recession).

Pls correct me if I'm wrong.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: TSO on Jun 17, 2013, 08:20 AM
Sir TSO, sa 20% cash on hold anong rules niyo dun? Use it only if you find super undervalued company?

20% cash as much as you can stick to it. Warby apparently goes for 40% iirc from Berk's financial statements. And yes, use it only for that. You don't have clients so you don't have to worry about redemptions.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jun 17, 2013, 10:39 PM
20% cash as much as you can stick to it. Warby apparently goes for 40% iirc from Berk's financial statements. And yes, use it only for that. You don't have clients so you don't have to worry about redemptions.

Ok Sir Thanks!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: bauer on Jun 18, 2013, 01:22 AM
Hedge! Hedge, hedge, hedge! I disagree with bauer going "all in" and I think it's always important to have cash on hand. Bull or bear, I don't care. When you're "fully invested", then it's time for you to make another deposit OR make partial sells as soon as you find an undervalued business.

You maybe right that I need to "re-align" my portfolio in case I found an undervalued business when i'm "All In". 

But for the record, I seldom do "ALL IN" unless I see some compelling opportunities.  In the PSE, I am 40% cash right now.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: bauer on Jun 18, 2013, 01:24 AM
mahirap for me mag stick sa 20% cash if my total portfolio is not that big. I need to maximize my capital's return rates.  Big fund managers can always stick to the rule of a comfortable cash position in their portfolio.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: sj.unite on Jun 18, 2013, 07:49 AM
mahirap for me mag stick sa 20% cash if my total portfolio is not that big. I need to maximize my capital's return rates.  Big fund managers can always stick to the rule of a comfortable cash position in their portfolio.

This is true. The cash percentage should be relative to the size of the portfolio. For example 50k lang yung portfolio mo. Kung ang 20% nun ay 10k lamang, sayang naman kung pinaupo mo pa diba? I think it's better if we talk about absolute value with regard to the cash positions.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jun 18, 2013, 08:50 AM
This is true. The cash percentage should be relative to the size of the portfolio. For example 50k lang yung portfolio mo. Kung ang 20% nun ay 10k lamang, sayang naman kung pinaupo mo pa diba? I think it's better if we talk about absolute value with regard to the cash positions.

Yes but let us not forget the reason why we hold 20% cash. That reason of holding 20% will answer this "sayang naman kung pinaupo mo pa diba?"
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: richpulubi on Jun 18, 2013, 03:18 PM
Question, has anyone actually bought berkshire hathaway stock?  Di  ba if you want Mr. Buffet's investment genius, eh di buy his stock?
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: TSO on Jun 18, 2013, 03:27 PM
I did.

I didn't do it because it was undervalued or anything though. I just bought it for the lulz, since all I'm after's the free yearly ticket to the circus..
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: richpulubi on Jun 18, 2013, 03:30 PM
I did.

I didn't do it because it was undervalued or anything though. I just bought it for the lulz, since all I'm after's the free yearly ticket to the circus..

Wow, that's about $100K per share ata?  Does it perform well?  Any regrets?  Maganda ba yung circus?
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: TSO on Jun 18, 2013, 03:34 PM
Uhhh, Berk has Class B shares that are worth $80 a pop and still enables you to make the pilgrimage.

Frankly, I don't know how it's performing. I bought it for a non-investment reason.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: TSO on Jun 18, 2013, 03:36 PM
No regrets about the circus though. Worth the 12 hour drive. Truly an unforgettable experience. Learned a lot too. I was distributing a Word doc to my friends chronicling my notes and observations a few weeks ago. I ought to put it up here too though =_=
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: richpulubi on Jun 18, 2013, 03:41 PM
Cool!

Yung BRK-A pala yung $170K!

Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jun 18, 2013, 04:47 PM
I was distributing a Word doc to my friends chronicling my notes and observations a few weeks ago. I ought to put it up here too though =_=

Sir TSO please do it now!!haha!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jun 26, 2013, 09:43 AM
Warren Buffett (1962) talks about a brief stock market drop (Rare Footage)


http://www.youtube.com/watch?v=REhg_bv7srM
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 04, 2013, 11:04 PM
2010 Berkshire annual meeting:

How do you get better at valuing companies?

WarrenBuffett: Very very good question. I started out not knowing anything about valuing companies. Ben Graham taught me a way to value certain type of business, but the selection of available companies dried up. Charlie taught me about durable competitive advantage. Not how big circle of competence is, but knowing where the edges are is most important. Think about businesses in your own home town. Ask questions about the businesses. Which do you want to buy into, which are hard to compete with, talk about businesses with people. What is working, what is not? You have to ask. You would be surprised at how many companies I know nothing about. The goal is to find companies that will be around for 20 years and offer a margin of safety. You have to recognize your limitations to be successful in this business. 6-7yrs ago I looked at Korean stocks, and I could see a number of businesses that met margin of safety. I bought 20 and diversified.

CharlieMunger: Obviously if you want to get good at something which is competitive, you have to think about it and practice a lot. You have to keep learning because world keeps   changing and competitors keep learning. You have to go to bed wiser than you got up. As you try to master what you are trying to do – people who do that almost never fail utterly. Very few have ever failed with that approach. You may rise slowly, but you are sure to rise.

WB: When did you start valuing businesses?

CM: I never took a business class, except accounting. When I was a boy, there was a man who came to the club every day at 10:30am. I asked my dad about him – he had such a good life! My Dad said, “He gathers up and renders dead horses.” I learned from that. Many businesses are sold under distress. Life is hard to get near top, and hard to hold position once attained. I think you could predict that Kiewits would win, they cared more. I would not have bet on anyone else. Half Dutch half German – and that is coming from me, I’m named Munger. I was automatically doing it – what was working and what wasn’t. If you have that temperament, you will gradually learn. If you don’t have that temperament, I can’t help you.

WB: Avoiding the dumb things is the most important. Learn more, know limitations, avoid the dumb things. Charlie often thought about his client’s business. He was incapable of thinking about a business without noticing the fundamental economics.

CM: I had a client who sold a Caterpillar dealership business for a crazy price to an oil business. The oil business had consultants and a concept and a strategy!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 05, 2013, 08:29 AM
1999 Berkshire Annual Meeting:

How do you place a value on intangible assets? What are the signs of great ““moats”” around a business and great managements? Do you place a dollar value on this? What discount rates do you use?

WarrenBuffett: We use a treasury rate for comparability across companies and time. As far as we’’re concerned, a dollar earned by The Lucky Horseshoe Company is the same as a dollar earned by an Internet company - even if the market is a lot more enthusiastic about the Internet company dollar.

Valuation is an art. Look at Wrigley: pick a figure for what the volumes will be, their prices, their competition, the likelihood of management being bright with cash. All of that figures into the moat and its size, and what that business will earn.

There aren’’t many businesses with a terrific moat. Coke has a terrific moat, right down to the container. How many other products can people identify correctly when they’’re blindfolded? Coke has not just market share, it has a great share of mind. People associate Coke with good things. Ten years from now, the moat formed by that share of mind will be even greater.

No formula in finance tells you that the moat is 28 feet wide and 16 feet deep. That’’s what drives the academics crazy. They can compute standard deviations and betas, but they can’’t understand moats. Maybe I’’m being too hard on the academics.

[CharlieMunger: You’’re not sufficiently critical of the academics. They remind me of Long Term Capital Management - why do smart people do dumb things against their own self-interest?]

Now we have whole finance departments full of destructive self-pity, which is one of the most dangerous forces in the world. And you are paying to send your children to those schools!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: richpulubi on Jul 05, 2013, 09:40 AM
Kindly share your thoughts about the article in Market Watch, that if you were to invest in Berkshire stocks, you would have underperformed. 

That Warren Buffet is more 'Myth than Legend'.  That, the only ones who would've done well investing in Berkshire, would be the very first investors.  If you invested in the past 15 years, your stock would've underperformed.

Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 05, 2013, 07:57 PM
Kindly share your thoughts about the article in Market Watch, that if you were to invest in Berkshire stocks, you would have underperformed. 

That Warren Buffet is more 'Myth than Legend'.  That, the only ones who would've done well investing in Berkshire, would be the very first investors.  If you invested in the past 15 years, your stock would've underperformed.


If I would share my thoughts about this, I'm quite sure it would not be satisfying.

I urge you to read the comments of the readers in that article.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 07, 2013, 07:26 AM
This is WOW! A must read!

1998: Lecture at the University of Florida Business School

Have you ever bought a company where the numbers told you not to? How much is quantitative and how much is qualitative?

Warren Buffett: The best buys have been when the numbers almost tell you not to. Because then you feel so strongly about the product. And not just the fact you are getting a used cigar butt cheap. Then it is compelling. I owned a windmill company at one time. Windmills are cigar butts, believe me. I bought it very cheap, I bought it at a third of working capital. And we made money out of it, but there is no repetitive money to be made on it. There is a one-time profit in something like that. And it is just not the thing to be doing. I went through that phase. I bought streetcar companies and all kinds of things. In terms of the qualitative, I probably understand the qualitative the moment I get the phone call. Almost every business we have bought has taken five or ten minutes in terms of analysis. We bought two businesses this year.

General Re is a $18 billion deal. I have never been to their home office. I hope it is there. (Laughter) “There could be a few guys there saying what numbers should we send Buffett this month?” I could see them going once a month and saying we have $20 billion in the bank instead of $18 billion.   I have never been there.

Before I bought Executive Jet, which is fractional ownership of jets, before I bought it, I had never been there. I bought my family a quarter interest in the program three years earlier. And I have seen the service and it seems to develop well. And I got the numbers. But if you don’t know enough to know about the business instantly, you won’t know enough in a month or in two months. You have to have sort of the background of understanding and knowing what you do or don’t understand. That is the key. It is defining your circle of competence.

Everybody has got a different circle of competence. The important thing is not how big the circle is, the important thing is the size of the circle; the important thing is staying inside the circle. And if that circle only has 30 companies in it out of 1000s on the big board, as long as you know which 30 they are, you will be OK. And you should know those businesses well enough so you don’t need to read lots of work. Now I did a lot of work in the earlier years just getting familiar with businesses and the way I would do that is use what Phil Fisher would call, the “Scuttlebutt Approach.” I would go out and talk to customers, suppliers, and maybe ex-employees in some cases. Everybody. Everytime I was interested in an industry, say it was coal, I would go around and see every coal company. I would ask every CEO, “If you could only buy stock in one coal company that was not your own, which one would it be and why? You piece those things together, you learn about the business after awhile.

Funny, you get very similar answers as long as you ask about competitors. If you had a silver bullet and you could put it through the head of one competitor, which competitor and why? You will find who the best guy is in the industry. So there are a lot of things you can learn about a business. I have done that in the past on the business I felt I could understand so I don’t have to do that anymore. The nice thing about investing is that you don’t have to learn anything new. You can do it if you want to, but if you learn Wrigley’s chewing gum forty years ago, you still understand Wrigley’s chewing gum. There are not a lot of great insights to get of the sort as you go along. So you do get a database in your head.

I had a guy, Frank Rooney, who ran Melville for many years; his father-in-law died and had owned H.H. Brown, a shoe company. And he put it up with Goldman Sachs. But he was playing golf with a friend of mine here in Florida and he mentioned it to this friend, so my friend said “Why don’t you call Warren?” He called me after the match and in five minutes I basically had a deal.

But I knew Frank, and I knew the business. I sort of knew the basic economics of the shoe business, so I could buy it. Quantitatively, I have to decide what the price is. But, you know, that is either yes or no. I don’t fool a lot around with negotiations. If they name a price that makes sense to me, I buy it. If they don’t, I was happy the day before, so I will be happy the day after without owning it.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: GIG on Jul 08, 2013, 10:11 AM
1. Sa haba haba ng sinabi ko mali rin pala haha!
2. Good thing I asked about this, and thank you for your answer Sir, all this time I thought it is about business debt, I was looking at it in a business perspective.
3. I stand corrected thank you
4. Thank you for your insight on this, your answer shows that in order for me to be a good VI I need to dig a lot from other sources too.


 
1. It means it's pointless to differentiate a "value" stock from a "growth" stock because "value" is the reason why people invest their money, regardless of time horizon or intentions.
2. Means a bull market makes everyone look like a winner and bears reveal who is lucky and who is operating on skill.
3. No, he's not talking about circle of competence. He's talking about the follies of pursuing precison or reducing everything to mathematics.
4. I know what he's discussing here and you've made the right interpretation. However, I disagree with it. Empirical research has shown that 50% of long-term returns come from the price you pay for a business, and 30% from the company's underlying performance over time. Ergo, a company that makes 6% a year or 20% a year for ten, twenty, thirty, or forty years will have value or not depending on the price you pay for it.

I don't think there is a right or wrong answer here, it just hit people in a different way depending on your level of "sophistication" if you may. Number 3 hits me as just to look at things that are obviously mispriced like a very low PE etc. . . . simple just like my sophistication hehehe!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 08, 2013, 10:55 AM
Kindly share your thoughts about the article in Market Watch, that if you were to invest in Berkshire stocks, you would have underperformed. 

That Warren Buffet is more 'Myth than Legend'.  That, the only ones who would've done well investing in Berkshire, would be the very first investors.  If you invested in the past 15 years, your stock would've underperformed.



Tsong this is the best info I could get, Warren Buffett himself answered your query.



If you were today 20-something years old would you primarily be searching for: a) Situations reminiscent of 1957 –– akin to Daehan Flour Mills, or b) Situations reminiscent of 1987 –– akin to Moody’’s Corporation?


[Warren Buffett] Either is fine. a) is better for small sums. b) is better for large sums


If I was running $1 million today, or $10 million for that matter, I'd be fully invested. Anyone who says that size does not hurt investment performance is selling. The highest rates of return I've ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It's a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: personalfinanceapprentice on Jul 08, 2013, 08:57 PM
^ He's talking about agility right?

The same opportunities are there, but he can't get 50% on 1 billion because there's not many places to put a large sum like that. And after he get's all those 1M/50% he's stuck with ok blue chips / big businesses that every one else has?

So I guess this is the advantage of retail investors? they can jump in and out of any situation, without affecting the stock price?
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: GIG on Jul 08, 2013, 10:05 PM
@Wills

Thanks for the good reads . . . keep it coming!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 08, 2013, 10:18 PM
^ He's talking about agility right?

The same opportunities are there, but he can't get 50% on 1 billion because there's not many places to put a large sum like that. And after he get's all those 1M/50% he's stuck with ok blue chips / big businesses that every one else has?

So I guess this is the advantage of retail investors? they can jump in and out of any situation, without affecting the stock price?

Agility?

What do you mean by jump in and out without affecting the price?
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 08, 2013, 10:20 PM
no prob GIG
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 08, 2013, 10:37 PM
Secret Millionaires Club yr. 2010

How do you know when you are going to lose money and when you aren't? Since the stock market changes every minute.

[Warren Buffett] That is a very good question. The answer is you don’t know when you are going to make money or lose money. You are right, the stock market changes every minute. Because of that, you should never buy a stock expecting to make money in the short term. When you buy a stock, you are actually buying a share of that company. If it is a good company then you will make money over time as its value goes up. When you buy a stock, you need to imagine that the stock market will be closed for 20 years and you will not be able to look at its price. That way, you wont be distracted by the short term ups and downs. A company will be successful if it offers good products and services at a fair price while being run by honest, capable managers. Over the long run, such companies tend to appreciate and go up in value.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: dayap on Jul 08, 2013, 11:05 PM
Secret Millionaires Club yr. 2010

How do you know when you are going to lose money and when you aren't? Since the stock market changes every minute.

[Warren Buffett] That is a very good question. The answer is you don’t know when you are going to make money or lose money. You are right, the stock market changes every minute. Because of that, you should never buy a stock expecting to make money in the short term. When you buy a stock, you are actually buying a share of that company. If it is a good company then you will make money over time as its value goes up. When you buy a stock, you need to imagine that the stock market will be closed for 20 years and you will not be able to look at its price. That way, you wont be distracted by the short term ups and downs. A company will be successful if it offers good products and services at a fair price while being run by honest, capable managers. Over the long run, such companies tend to appreciate and go up in value.


For me, I became a fan of warren buffet since I've read the buffetology book last 2008. This gave me the reason to enter the market..I have no idea what stocks should I buy back then..because of his concept I bought URC and JFC. Napansin ko nun dumadami ang mga ministops..halos kada kanto nun na nakikta ko me ministop..I like jack and jill pretzels and chippy..jollibee hindi natitinag maski andyan c mcdo...seek for companies with durable competitive advantage..un ang mostly na nababanggit sa book..but the problem is..I didnt pay attention much with the concept of accumulating volume..since I was a newbie back then, I listened to my colleague na wag muna mag accumulate.. :hihi: then I stopped buying them and hold until last year..sold them all to buy a new batch..sayng but yeah... I tasted blood as sir tony somehow said it.lol... I learned a lot from you guys.thanks for sharing. :)
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 08, 2013, 11:19 PM

For me, I became a fan of warren buffet since I've read the buffetology book last 2008. This gave me the reason to enter the market..I have no idea what stocks should I buy back then..because of his concept I bought URC and JFC. Napansin ko nun dumadami ang mga ministops..halos kada kanto nun na nakikta ko me ministop..I like jack and jill pretzels and chippy..jollibee hindi natitinag maski andyan c mcdo...seek for companies with durable competitive advantage..un ang mostly na nababanggit sa book..but the problem is..I didnt pay attention much with the concept of accumulating volume..since I was a newbie back then, I listened to my colleague na wag muna mag accumulate.. :hihi: then I stopped buying them and hold until last year..sold them all to buy a new batch..sayng but yeah... I tasted blood as sir tony somehow said it.lol... I learned a lot from you guys.thanks for sharing. :)

Do you still follow Buffett?
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: dayap on Jul 09, 2013, 12:24 AM
Hi Wills,
Sometimes yes and no...since ive been reading a lot lately with pmt, im now torn between holding it with a certain period na lang and not five years..like sir tony I would also like to earn more before I reach 75 (hoping I would stll live at that age..lol) and enjoy life with the invested money. But I think I would still hold one or two blue chips pa rin and think of this as a time deposit..I think kakain pa rin ako ng pretzel and chippy and chicken joy  ten years from now. :)
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 09, 2013, 12:27 AM
Hi Wills,
Sometimes yes and no...since ive been reading a lot lately with pmt, im now torn between holding it with a certain period na lang and not five years..like sir tony I would also like to earn more before I reach 75 (hoping I would stll live at that age..lol) and enjoy life with the invested money. But I think I would still hold one or two blue chips pa rin and think of this as a time deposit..I think kakain pa rin ako ng pretzel and chippy and chicken joy  ten years from now. :)

Hahaha I like your answer!

Dayap if you don't mind may I know your age?
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: dayap on Jul 09, 2013, 07:55 AM
Age.hmm...yes I do mind at times nung wala na ako sa kalendaryo...nah..hehe..im 33 :)
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 09, 2013, 09:07 AM
Age.hmm...yes I do mind at times nung wala na ako sa kalendaryo...nah..hehe..im 33 :)

oww sorry dude, I thought you're 60+ kala ko age is part of the equation on why you change mind. anyway thanks!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: dayap on Jul 09, 2013, 10:13 AM
@wills:  yup! still learning! :)  (by the way, i'm female)   
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 09, 2013, 10:19 AM
@wills:  yup! still learning! :)  (by the way, i'm female)   

Sorry dayap, nice to know na dumadami ang female sa mundo ng investing!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: dayap on Jul 09, 2013, 05:39 PM
@Wills: okay lang. no worries :)
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 09, 2013, 06:27 PM
Lecture at the University of Florida Business School yr. 1998

How do you distinguish the Cokes of the world from the Procter & Gambles of this world?

Warren Buffett:  Well, P&G is a very, very good business with strong distribution capability and lots of brand names, but if you ask me and I am going to go away for twenty years and put all my family’s net worth into one business, would I rather have P&G or Coke? Actually P&G is more diversified among product line, but I would feel more sure of Coke than P&G. I wouldn’t be unhappy if someone told me I had to own P&G during the twenty-year period. I mean that would be in my top 5 percent. Because they are not going to get killed, but I would feel better about the unit growth and pricing power of a Coke over twenty or thirty years.

Right now the pricing power might be tough, but you think a billion servings a day for a penny each or $10 million per day. We own 8% of that, so that is $800,000 per day for Berkshire Hathaway. You could get another penny out of the stuff. It doesn’t seem impossible. I think it is worth a penny more. Right now it would be a mistake to try and get it in most markets. But over time, Coke will make more per serving than it does now. Twenty years from now I guarantee they will make more per serving, and they will be selling a whole lot more servings. I don't know how many or how much more, but I know that.

P&G's main products--I don't think they have the kind of dominance, and they don't have the kind of unit growth, but they are good businesses. I would not be unhappy if you told me that I had to put my family's net worth into P&G and that was the only stock I would own. I might prefer some other name, but there are not 100 other names I would prefer.

Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 10, 2013, 08:56 AM
Berkshire Hathaway Annual Meeting yr. 1999


Coke and Gillette are off something like 30% from their highs. Do you still consider them exciting businesses?

Warren Buffett: We don’’t want to dart in and out of businesses we love. It’’s too hard to get the timing right, and then there’’s the problem of taxes.

Coke and Gillette have both had their disappointments. It happens. It’’s not in the nature of everything to go right all the time in a straight line. The same thing goes for Disney.

I see nothing to upset the trendline of the blade and razor business or the Coke business.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 12, 2013, 10:08 AM
Student Visit yr. 2005


According to a business week report published in 1999, you were quoted as saying “it's a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.” First, would you say the same thing today? Second, since that statement infers that you would invest in smaller companies, other than investing in small-caps, what else would you do differently?

Warren Buffett: Yes, I would still say the same thing today. In fact, we are still(currently 2005) earning those types of returns on some of our smaller investments. The best decade was the 1950s; I was earning 50% plus returns with small amounts of capital. I could do the same thing today with smaller amounts. It would perhaps even be easier to make that much money in today's environment because information is easier to access.

You have to turn over a lot of rocks to find those little anomalies. You have to find the companies that are off the map - way off the map. You may find local companies that have nothing wrong with them at all. A company that I found, Western Insurance Securities, was trading for $3/share when it was earning $20/share!! I tried to buy up as much of it as possible. No one will tell you about these businesses. You have to find them.

Other examples: Genesee Valley Gas, public utility trading at a P/E of 2, GEICO, Union Street Railway of New Bedford selling at $30 when $100/share is sitting in cash, high yield position in 2002. No one will tell you about these ideas, you have to find them.

The answer is still yes today that you can still earn extraordinary returns on smaller amounts of capital. For example, I wouldn't have had to buy issue after issue of different high yield bonds. Having a lot of money to invest forced Berkshire to buy those that were less attractive. With less capital, I could have put all my money into the most attractive issues and really creamed it.

I know more about business and investing today, but my returns have continued to decline since the 50's. Money gets to be an anchor on performance. At Berkshire's size, there would be no more than 200 common stocks in the world that we could invest in if we were running a mutual fund or some other kind of investment business.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 12, 2013, 10:42 AM
This is a MUST READ!

Bershire Annual Meeting yr. 2009

Q - If you were starting a $26 million fund, what would you do differently with a smaller asset base? How many positions would you hold, and what kind of turnover would you have? What would you do if some investments lost 50% and some gained?

Warren Buffett: We would hold the half-dozen stocks we liked best. We would do the same thing if they lost 50%. Cost has nothing to do with it. We look at price and think about what something is worth. Keep it in the few you know.

Charlie Munger: He [Buffett] has tactfully suggested you adopt a different way of thinking. [laughter]

[Comment: As Buffett stated, cost basis has nothing to do with investment judgment (apart from tax considerations). Nevertheless, many investors (like the questioner) pay way too much attention to what they’ve paid, rather than its value.]
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 14, 2013, 04:19 PM
Berkshire Meeting yr. 1999


Do you have any investing tips?

Buffet: Start with the A's and examine all of them
Charlie Munger: Dancing in and out of your favorite companies is not a good idea.
B: Have to make two decisions right, when to buy and when to sell. Also have to pay taxes along the way.
B: Investing is about valuing businesses. Encourage us to look at inefficiently priced businesses.
B: Built snowball on top of a very long hill, start very young and live a long time. Keep expenses low.
B: Find out what you know and don't know. Think for yourself
CM: First struggle is to get to $100,000. Underspend income grossly to get there quicker.
B: Valuation is an art
B: Get a strong enough moat so management less of a factor
B: Standard Deviation doesn't tell you anything
B: Better investor if look back at decisions you make and determine if you make the right decision
B: Pick out five to ten companies in which you understand their products, get annual reports, get every news piece on it. Ask what do I not know that I need to know. Talk to competitors and employees. Essentially be a reporter, ask questions like: If you had a silver bullet and could put it into a competitor who would it be and why. In the end you want to write the story, XYZ is worth this much because…
Cm: The question WHY is the most important of all.

Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 15, 2013, 07:31 PM
Berkshire Annual Meeting yr. 2003



What's your opinion of cigar butts vs quality businesses?

[CM: If See's Candy had asked $100,000 more [in the purchase price; Buffett chimed in, "$10,000 more"], Warren and I would have walked -- that's how dumb we were.]

[Ira Marshall said you guys are crazy -- there are some things you should pay up for, like quality businesses and people. You are underestimating quality. We listened to the criticism and changed our mind. This is a good lesson for anyone: the ability to take criticism constructively and learn from it. If you take the indirect lessons we learned from See's, you could say Berkshire was built on constructive criticism. Now we don't want any more today. [Laughter]]

The qualitative [evaluating management, competitive advantage, etc.] is harder to teach and understand, so why not just focus on the quantitative [e.g., cigar butt investing]? Charlie emphasized quality [of a business] much more than I did initially. He had a different background.

It makes more sense to buy a wonderful business at a fair price. We've changed over the years in this direction. It's not hard to watch businesses over 50 years and learn where the big money can be made.

Even when you get a new important idea, the old ideas are still there. There wasn't a strong line of demarcation when we moved from cigar butts to wonderful businesses. But over time, we moved.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 19, 2013, 09:06 AM
Berkshire Annual Meeting yr.2008

I have four children. Can you give them advice about keeping up with the Joneses?

WB: Just keep up with the Buffetts. [laughter] We’ve always been fans of living within your means and income. You’ll have a lot more income later on. They will follow the example of their parents. You shouldn’t increase your cost of living without improving your standard of living. If you go too tough on children, they go crazy later on. There are plenty of people I don’t advise to save. If you already have money in a 401(k) and Social Security and have a little left over, who is to say you should give up taking your children to Disney World and the associated happiness now for a 30-foot boat later vs. a 20-foot boat later. There are benefits to spending now. It is not always better to save 10% than 5%, but definitely better than spending 105%. You need to live a life that is true to yourself. We don’t encourage extreme frugality. You are not a better or worse person if you live differently from your neighbor.

CM: The best method is to train your child.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: bauer on Jul 20, 2013, 09:05 AM
Berkshire Annual Meeting yr.2008
 There are benefits to spending now. It is not always better to save 10% than 5%, but definitely better than spending 105%. You need to live a life that is true to yourself. We don’t encourage extreme frugality. You are not a better or worse person if you live differently from your neighbor.
 

It's the first time I read WB gave such a heart warming advise on how a person should handle money.  Buti naman hindi siya tulad ni Mr. Scrooge.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: freefront on Jul 20, 2013, 09:48 AM
^That's a fantastic POV.  I thoroughly dislike cheap people. Madalas kasi, they discount themselves and watch cents habang they don't notice being bled dry by people around them. It's OK if it just happens na wala talaga silang hilig sa bagay-bagay at kaligayahan na nilang magpamigay sa iba. Buffet is not fond of pomp and pageantry. I mean no mansions, no bodyguards, no showy cars, etc. I'm thinking he probably have 6 sets of suits lol. He knows human nature in that he acknowledges there is no hard and fast rule on saving---except that you live within your means.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 20, 2013, 12:49 PM
It's the first time I read WB gave such a heart warming advise on how a person should handle money.  Buti naman hindi siya tulad ni Mr. Scrooge.

Mr. Scrooge!Lol

^That's a fantastic POV.  I thoroughly dislike cheap people. Madalas kasi, they discount themselves and watch cents habang they don't notice being bled dry by people around them. It's OK if it just happens na wala talaga silang hilig sa bagay-bagay at kaligayahan na nilang magpamigay sa iba. Buffet is not fond of pomp and pageantry. I mean no mansions, no bodyguards, no showy cars, etc. I'm thinking he probably have 6 sets of suits lol. He knows human nature in that he acknowledges there is no hard and fast rule on saving---except that you live within your means.

Right!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 20, 2013, 12:53 PM
Q&A with 6 Business Schools

What advice would you give the average person in the U.S.?

Warren Buffett: It’s hard to give advice to someone who might lose their job. My Dad went to work on August 13, 1931 to find out the bank where he worked and held all our money had closed. He had no job and no money and two kids. You want to be as prepared as you can and you just don’t want to have debt. Medical problems cause a lot of the grief and lots of credit card debt. Credit cards are poison. If you make a dollar, only spend 95 cents, not $1.05. You should be ahead of the game all the time rather than behind as it is harder to work your way out of a hole. You want to play the game from strength, and you have to think ahead. People don’t always want to hear advice when things are going well. People risked everything they had and needed for something they didn’t have or need. Charlie once said, “The problem isn’t getting rich, it’s staying sane.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: freefront on Jul 20, 2013, 09:20 PM
I haven't read anything about Munger yet. Has he ever said anything about his plans of disposing his wealth? If I remember right, Buffet said his children won't inherit from him.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 20, 2013, 10:16 PM
I haven't read anything about Munger yet. Has he ever said anything about his plans of disposing his wealth? If I remember right, Buffet said his children won't inherit from him.

Mahilig si Munger magFund ng mga educational works like si Robert Cialdini - he believes Cialdini's work will benefit the society. At maraming universities siyang binibigyan. He is a fan of education, Buffett calls him the encyclopedia book with two legs.

Si Charlie walang pangarap na yumaman ng husto, ang gusto niya lang is financial freedom so that he could do anything he want.

I believe he maintains $1.1 billion. Lahat ng sobra dinodonate niya.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 20, 2013, 10:23 PM
Charlie Munger's "Lollapalooza Effect"

Tendencies or mental models acting at the same time in the same direction. With the Lollapalooza effect, itself a mental model, the result is often extreme, due to the confluence of the mental models, biases or tendencies acting together. During a talk at Harvard in 1995, Munger mentions Tupperware parties and open outcry auctions, which turn the human brain into "mush". In the Tupperware party, you have reciprocation and social proof. (The hostess gave the party and the tendency is to reciprocate; other people are buying, which is the social proof.) In the open outcry auction, there is social proof of others bidding, commitment to buying the item, and deprivation super-reaction syndrome, i.e. sense of loss. The latter is an individual's sense of loss of what he believe should be or is his. These biases often occur at either conscious or subconscious level, and in both microeconomic and macroeconomic scale.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 21, 2013, 08:13 AM
Buffett & Gates at Columbia Business School yr. 2009

What general advice would you give to students?

Warren Buffett: First of all, I'd say marry the right person. And I'm serious about that.It will make more difference in your life. It will change your aspiration, all kind of things. It's enormously important who you marry. Beyond that, I would say that do what you would do if you were in my position, where the money means nothing to you. At 79, ... I work every day. And it's what I want to do more than anything else in the world. The closer you can come to that early on in your life, you know the more fun you're going to have in life and really the better you're going to do. So don't be driven where you think the last dollar is presently or anything of that sort. And then also go to work, if possible, for an organization or an individual that you admire. I mean I offered to go to work for Ben Graham because there was nobody I admired more in the business than him. I didn't care what he paid me. When he finally did hire me in 1954, I moved from Omaha to New York and I didn't know what I was getting paid until I got my first paycheck. But I knew I wanted to work for Ben Graham. And I knew I would jump out of bed every morning and be excited about what I would do and I would go home at night smarter than I was in the morning. Go to work at a job that turns you on and a person that turns you on and institution.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: freefront on Jul 21, 2013, 09:51 AM
As early as high school---people should start drumming into the heads of those students: There are 2 things in life that would determine whether you'll be RICH or POOR.

1. Your choice of partner( and I'm being politically correct here as to cover the rainbow coalition of sexual preferences and the various state singlehood).

2.Kids. How soon? How many? How far apart in between? (In the case of Buffett- there is a second marriage and there are step-children to consider)

*nuggets of wisdom from resident benevolent sexists here in PMT(huwag ng naimik at kayo ay mabubuko  :hihi:)

Hindi kasalanan ang ipanganak na mahirap. Kasalanan ang manatiling mahirap. Mas malaking kasalanan ang hindi maghanap ng biyenan na mayaman.

Different class of stocks= Different class of girls ----> apply FA,TA, short term, long term, tsupit, invest----> you get the idea! (#substitute guys for girls---it works just the same)

Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: edgop on Jul 21, 2013, 07:30 PM
As early as high school---people should start drumming into the heads of those students: There are 2 things in life that would determine whether you'll be RICH or POOR.

1. Your choice of partner( and I'm being politically correct here as to cover the rainbow coalition of sexual preferences and the various state singlehood).

2.Kids. How soon? How many? How far apart in between? (In the case of Buffett- there is a second marriage and there are step-children to consider)

*nuggets of wisdom from resident benevolent sexists here in PMT(huwag ng naimik at kayo ay mabubuko  :hihi:)

Hindi kasalanan ang ipanganak na mahirap. Kasalanan ang manatiling mahirap. Mas malaking kasalanan ang hindi maghanap ng biyenan na mayaman.

Different class of stocks= Different class of girls ----> apply FA,TA, short term, long term, tsupit, invest----> you get the idea! (#substitute guys for girls---it works just the same)


Hahah! Natawa naman ako dito! The person I'm marrying next year still sends 20k pesos monthly back home to support her jobless parents and studying sister and brother. The amount she sends is also the amount I could save and that's why I'm here @ pmt to increase my assets for her, because even if she's not rich, I love her. FA on her is she's responsible, pretty and has the potential to succeed when our salaries increase by rank promotions.

Though it's really tempting, but shameful for me to find a mayamang biyenan! hahah! WB hits the nail on finding the right one to marry! Pero how will we know if she's the right one? No charts can explain that siguro, pero kung puros TA, then SALN muna bago kasal? Hahah!!!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 22, 2013, 12:10 AM
@ freefront

hahah ok ka rin ha

@edgop

ok ang FA mo sa gf mo haha!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 22, 2013, 07:30 AM
Berkshire Annual Meeting 2010 yr. 2010


Is there a way to create synergies between BRK companies to promote solar solutions?

CM: Solar solutions are coming because they are so obviously needed. I never pass on an opportunity to not put them in, because they will get cheaper.

WB: That’s long term thinking!

CM: I have to think of long term. And I am going to miss you terribly when you’re gone. It reminds me of the old quote, Husband: “Will you still love me if I lost all my money?” Wife: “I will always love you but I will miss you terribly.” What would modern civilization do if we had no alternative to fossil fuels? Cities are choking on themselves. More renewable energy is the answer. It is a stunningly stupid idea to grow corn with fossil water and fossil fuel. I am enormously optimistic about the new energy grid, and we will be way better for it. It is not all that important if solar power costs twice as much as we are used to – it is a blip in the economic future. Immediate business decisions, frequently the right answer is counterintuitive. Wait, they will get cheaper.

WB: I have nothing to add. [laughter]
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 23, 2013, 07:18 AM

Student Visit yr. 2005

Are investors more or less knowledgeable today compared to ten years ago?

Warren Buffett: There is no doubt that there are far more “investment professionals” and way more IQ in the field, as it didn't use to look that promising. Investment data are available more conveniently and faster today. But the behavior of investors will not be more intelligent than in the past, despite all this. How people react will not change – their psychological makeup stays constant. You need to divorce your mind from the crowd. The herd mentality causes all these IQ's to become paralyzed. I don't think investors are now acting more intelligently, despite the intelligence. Smart doesn't always equal rational. To be a successful investor you must divorce yourself from the fears and greed of the people around you, although it is almost impossible.

Do you think Ponzi was crazy? The tech and telecom madness that existed just 6 years ago is right up there with the craziest mania's that have ever happened. Huge training in capital management didn't help.

Take Long Term Capital Management. They had 100's of millions of their own money, and had all of that experience. The list included Nobel Prize winners. They probably had the highest IQ of any 100 people working together in the country, yet the place still blew up. It went to zero in a matter of days. How can people who are rich and no longer need more money do such foolish things?
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 24, 2013, 11:05 AM
Q&A with 6 Business Schools yr. 2009

Do you feel that the might of America has changed?

You can bet against the dollar, but I would never bet against America. The system in the U.S. has allowed the country to unleash more for the world than any other country. Since 1776, the U.S. had a different system than the rest of the world and that system unleashed the human potential. We were not the smartest nor did we have the best resources. This is the same system we have in place today with people of similar intelligence. I have and would bet against the U.S. currency, stocks, etc. but the United States prevails over time. There are all kinds of rocky roads but we have rule of law, equality of opportunity, and a meritocracy. We have a market system and people apply energies and imagination to come up with things someone would want. Everyone in this room is working far below his/her potential.


--------------------------------------------------

Berkshiren Annual Meeting yr. 2005

WB: Overall, I’m an enormous bull on the United States. In 1790, we had a population of 3.9 million people vs. 290 million in China and 190 million in Europe. We’ve all had roughly the same conditions since then, yet 215 years later, we have 30% of the world’s GDP. This is one of the great all-time success stories.

[CM: I believe that we are at or near the apex of a great civilization.]

WB: I don’t feel that way. You’ll know who’s right in 20 or 30 years.

What we do is no secret. The relative importance of America will diminish. The rest of the world is catching on and adopting our best practices. But our castle will grow. It’s good for us if the rest of the world does well, and they’re growing from a lower base. I don’t think their success comes out of our hide.

[CM: In 50-100 years, if we’re a poor third to some countries in Asia, I wouldn’t be surprised. If I had to bet, the part of the world that will do best will be Asia.]

Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: sj.unite on Jul 24, 2013, 02:06 PM
I'm liking this thread. :) I honestly don't read all of Buffett's books kaya its nice reading these little nuggets of wisdom.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 24, 2013, 08:40 PM
Glad to know SJ.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 26, 2013, 07:50 AM
Berkshire Annual Meeting yr.1999


Where is a good place for new investors to invest right now?

WarrenBuffett: That’’s very difficult - we don’’t have one-line advice on that. Maybe for a small investor, continuous investment in index funds might work - but not for us. I like the businesses we’’re in, so I wouldn’’t be giving up any of my businesses.

Investors have to remember: corporate profits are going up, but stocks are going up faster. How can that CONTINUE INDEFINITELY? Investors can only earn what companies themselves can earn; the government or the markets themselves don’’t kick anything in. How can you get anything more out of a farm than what it grows?

There’’s nothing magical added by the stock market to corporate returns. It just doesn’’t create more earnings to pay out to investors. If you trace out the mathematics of the market’’s logic, you begin to see the limits to the logic.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 26, 2013, 08:05 AM
Charlie and I have made money in a lot of different ways, some of which we didn’t anticipate 30-40 years ago. You can’t have a defined roadmap, but you can have a reservoir of thinking, looking at markets in different places, different securities, etc. The key is that we knew what we didn’t know. We just kept looking. We knew during the Long Term Capital Management crisis that there would be a lot of opportunities, so we just had to read and think eight to ten hours a day. We needed a reservoir of experience. We won’t spot every one, though – we’ve missed all kinds of things.

- Warren Buffett
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 26, 2013, 10:07 AM
Berkshire Annual Meeting yr. 1998

Do you have advice for the individual investor to help them narrow the stock universe?

WarrenBuffett: They ought to think about what he or she understands. Let's just say they were going to put their whole family's net worth in a single business. Would that be a business they would consider? Or would they say, "Gee, I don't know enough about that business to go into it?" If so, they should go on to something else. It's buying a piece of a business. If they were going to buy into a local service station or convenience store, what would they think about? They would think about the competition, the competitive position both of the industry and the specific location, the person they have running it and all that. There are all kinds of businesses that Charlie and I don't understand, but that doesn't cause us to stay up at night. It just means we go on to the next one, and that's what the individual investor should do.

(Follow up question) So if they're walking through the mall and they see a store they like, or if they happen to like Nike shoes for example, these would be great places to start? Instead of doing a computer screen and narrowing it down?

WarrenBuffett: A computer screen doesn't tell you anything. It might tell you about P/Es or something like that, but in the end you have to understand the business. If there are certain businesses in that mall they think they understand and they're public companies, and they can learn more and more about them.... We used to talk to competitors. To understand Coca-Cola, I have to understand Pepsi, RC, Dr. Pepper.

[CharlieMunger: And Cott. Cott is the one you have to understand more than anything else. [Note: Cott is a Canadian company specializing on low-priced, private-label soft drinks.]]
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 29, 2013, 10:42 AM
[CharlieMunger: In 50-100 years, if we’re a poor third to some countries in Asia, I wouldn’t be surprised. If I had to bet, the part of the world that will do best will be Asia.]



WHY INVESTORS SHOULDN'T LEAVE EMERGING MARKETS JUST YET

By Gary Regenstreif, Reuters
Posted at 07/27/2013 9:11 AM | Updated as of 07/27/2013 9:11 AM
NEW YORK - Fickle investors have spurned emerging markets in recent weeks, but this route has obscured a more alluring vista out on the horizon.

Developing economies now account for 50 percent of global output and 80 percent of economic expansion and are projected to continue growing far faster than developed nations. They are expected to possess an even larger share of global growth, wealth and investment opportunities in years to come. So much so that the labels investors use to classify some of these nations will change as the developing develop and the emerging emerge into more potent economic powers.

But this long-term view has been lost on many of those who look to emerging market assets for a higher yield in the short term. Their ardor cooled when the Federal Reserve signaled it may soon ease the stimulus that has kept credit cheap, signaling higher interest rates ahead. That was coupled with signs of slower growth in key emerging markets like China and Brazil.

Still, the developing world's gross domestic product growth of 5.0 percent this year and 5.4 percent next, as projected by the International Monetary Fund, will far outpace the advanced economies' 1.2 percent and 2.1 percent. Developing countries are now also better armed to keep panic at bay, with more foreign exchange reserves than before and less aggregate debt than developed nations. Many have put their economies on firmer foundations.

Fear of a mass exodus of investors, however, has still sent emerging market shares down about 10 percent in the past two months, as measured by the MSCI Emerging Markets Index, compared with a marginal rise in the Standard & Poor's index of U.S. shares.

Consider some other data that the World Bank has crunched, suggesting developing nations will attract increased capital flows because their growth implies big investment opportunities, improved creditworthiness and the ability to better diversify portfolios and manage risk.

According to one bank report, by 2030 developing countries will represent two-thirds of all global investment, up from about half today and from one-fifth in 2000. At that time, half the global stock of capital is expected to reside in the developing world, compared to less than one-third today. That means a shift in the distribution of wealth and in the creation of opportunity.

This shift in investment activity coincides with the catch-up growth that began during the 1990s, as developing nations integrated into global markets, transformed their economies and improved their institutions, Hans Timmer, director of the World Bank team that produced the report, said.

"Productivity catch-up, increasing integration into global markets, sound macroeconomic policies and improved education and health are helping speed growth and create massive investment opportunities, which, in turn are spurring a shift in global economic weight to developing countries," the report said. And to be clear, this is investment in buildings and machinery, not the more flighty financial flows.

The BRIC nations are expected to loom large. China will make up 30 percent of all investment activity, while Brazil, India and Russia together will account for more than 13 percent of global investment in 2030, edging the 11 percent projected in the United States.

But their growing importance as sources and destinations of capital flows will not be a BRICs story alone, the report says. It calls out Sub-Saharan Africa, for example, which can be expected to not only receive a growing volume of capital flows but also to attract an increasing share of the total capital flows to developing countries.

The bank's researchers forecast that developing countries will likely have the resources needed to finance massive future investments for infrastructure and services. That's predicated on strong saving rates, expected to top out at 34 percent of national income in 2014 and averaging 32 percent annually until 2030. Meanwhile, the saving rate for high-income countries will fall from 20 percent to 16 percent.

In aggregate terms, the developing world will account for 62-64 percent of global saving of $25-27 trillion by 2030, up from 45 percent in 2010.

This points to greater wealth in the developing world as a percentage of the global total: the average per capital income of the developing world is expected to rise from about 8.0 percent of that in high-income countries in 2010, to about 16 percent by 2030. The average citizen of what is now a developing country, according to one bank scenario, will earn 19 percent of the income of an average high-income country citizen by 2030.

Indeed, one McKinsey study projects more than half the world's population will have joined the consuming classes by 2025, boosting consumption in emerging markets to $30 trillion a year. It will, the report says, be nothing short of the "defining growth opportunity of our times."

Seizing on this theme, Bhaskar Chakravorti and Gita Rao, writing in Foreign Affairs recently, pointed to the hand-wringing over the decline of American power and urged U.S. businesses to compete in emerging markets to help themselves grow, hire again and create wealth.

Another fan with a long lens is Mark Mobius, chairman of the Templeton Emerging Markets Group, who wrote last month that commodities, exports and infrastructure development could continue to be leading growth drivers in many emerging economies, but overall growth is likely to arise increasingly from healthier domestic demand.

"Expanding consumer wealth is creating an increasingly large and discriminating body of middle-class consumers across emerging markets, and their demand is, in turn, creating increasingly significant domestic economic activity," Mobius said. ". With a relatively high proportion of the population in emerging markets moving into the workforce and a relatively low proportion of dependents, demographics are acting to reinforce consumer demand."

These forecasts are not unconditional. Some risks will reduce over time. Others will increase.

The countries must continue to drive increases in productivity and attract investors to finance the investments, the bank's report says.

There is also an assumption that some of markets will have addressed some of the hurdles to invest now which variously include poor governance, lax enforcement of contracts and property rights, corruption, lack of adequate infrastructure and distribution networks and uneven pipeline of talent.

In addition, as emerging economies develop, their financial markets integrate more into global ones, and they ease restrictions on capital that flows across their borders, then it becomes more difficult to shield them from international shocks, the World Bank's Timmer said. They can mitigate those shocks as alternatives to the dollar rise and they build reserves in other currencies like the euro and the yuan.

There are other challenges that concern Neil Shearing, chief emerging markets economist at Capital Economics in London. The first, already well-known in China, is the need to reposition economies to be more consumer driven and less dependent on exports. The second is avoiding the kind of investment bubble created in the eastern European property market - which burst a few years ago.

"If the investment is in glitzy shopping malls," Shearing told me, "it can create bubbles and be dangerous. Whereas investment in China is excessive but in roads, railways and ports that you do want to look for." Growth may slow, and challenges will abound, but the prospects loom large. And therein lies opportunity.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Jul 30, 2013, 11:04 AM
MBA Student Meeting yr. 2005

What sources of investment ideas are available today?

WarrenBuffett: First, you need two piles. You have to segregate businesses you can understand and reasonably predict from those you don't understand and can't reasonably predict. An example is chewing gum versus software. You also have to recognize what you can and cannot know. Put everything you can't understand or that is difficult to predict in one pile. That is the too-hard pile. Once you know the other pile, then it's important to read a lot, learn about the industries, get background information, etc. on the companies in those piles. Read a lot of 10Ks and Qs, etc. Read about the competitors. I don't want to know the price of the stock prior to my analysis. I want to do the work and estimate a value for the stock and then compare that to the current offering price. If I know the price in advance it may influence my analysis. We're getting ready to make a $5 billion investment and this was the process I used.

Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Aug 02, 2013, 08:09 AM
"We would not like to have the job of designing a better system. It's simply to say that managers and investors alike must understand that accounting numbers are the beginning, not the end, of business evaluation" - W. Buffett
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Aug 02, 2013, 01:46 PM
Lecture at the University of Florida Business School yr. 1998


What tells you when an investment has reached its full potential?

I don’t buy Coke with the idea it will be out of gas in 10 years or 50 years. There could be something that happens by I think the chances are almost nil. So what we really want to do is buy businesses that we would be happy to own forever. It is the same way I fell about people who buy Berkshire. I want people who buy Berkshire to plan to hold it forever. They may not for one reason or the other but I want them at the time they buy it to think they are buying a business they are going to want to own forever.

And I don’t say that is the only way to buy things. It is just the group to join me because I don’t want to have a changing group all the time.   I measure Berkshire by how little activity there is in it. If I had a church and I was the preacher and half the congregation left every Sunday. I wouldn’t say, “It is marvelous to have all this liquidity among my members.”

Terrific turnover... I would rather go to church where all the seats are filled every Sunday by the same people. Well that is the way we look at the businesses we buy. We want to buy something virtually forever. And we can’t find a lot of those. And back when I started, I had way more ideas than money so I was just constantly having to sell what was the least attractive stock in order to buy something I just discovered that looked even cheaper. But that is not our problem really now. So we hope we are buying businesses that we are just as happy holding five years from now as now. And if we ever found a huge acquisition, then maybe we would have to sell something. Maybe to make that acquisition but that would be a very pleasant problem to have.

We never buy something with a price target in mind. We never buy something at 30 saying if it goes to 40 we’ll sell it or 50 or 60 or 100. We just don’t do it that way. Anymore than when we buy a private business like See’s Candy for $25 million. We don’t ever say if we ever get an offer of $50 million for this business we will sell it. That is not the way to look at a business.

The way to look at a business is this going to keep producing more and more money over time? And if the answer to that is yes, you don’t need to ask any more questions.

Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Aug 03, 2013, 04:14 PM
"The market, like the Lord, help those who help themselves. But unlike the Lord, the market does not forgive those who know not what they do" - Warren Buffett
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Aug 04, 2013, 10:43 AM
Student Visit yr. 2005

Since Ben Graham isn't around anymore, what money managers do you respect today? Is there a Ben Graham today?

WarrenBuffett: You don't need another Ben Graham. You don't need another Moses. There were only Ten Commandments; we're still waiting for the eleventh. His investing philosophy is still alive and well. There are disciples of him around, but all we are doing is parroting. I did read Phil Fisher later on, which showed the more qualitative aspects of businesses. Common stocks are part of a business. Markets are there to serve you, not to instruct you. You can often find a couple of companies that are out of line. Find one; get rich. Most people think that what the stock does from day to day contains information, but it doesn't. It isn't just something that wiggles around. The stock market is the best game in the world. You can take advantage of people who have no morals. High prices inside of a year will typically be 100% of the low price. Businesses don't change in value that much. That is simply crazy. There are extreme degrees of fluctuation, and Mr. Market will call out the prices. Wait until he is nutty in one direction or the other. Put in a margin of safety. Don't find a bridge that says no more than 10,000 pounds when you have a 9800 pound vehicle. It isn't a function of IQ, but receptivity of the mind.

When investing you don't have to invest in all 10,000 companies available, you just have to find the one that is out of line. Mr. Market is your servant. Mr. Market is your partner and wants to sell the business to you everyday. Some days he is very optimistic and wants a high price, others he is pessimistic and will sell at a low price. You have to use this to your advantage. The market is the greatest game in the world. There is nothing else that can, at times, get this far out of line with reality. For example, land usually only fluctuates within a 15% band. Negotiated transactions are less volatile. Some get this; others don't. Just keep your wits about you and you can make a lot of money in the market.
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Aug 04, 2013, 10:50 AM
One of the best Q&A!


If you were to teach an investment course, besides works by Ben Graham and Phil Fisher and your book on the instalment basis, what would be on the syllabus?

[Q - how would you teach the next generation of investors?]

Buffett: I had 49 university groups, in clumps of six, [visit me] last year. [An education in] investing requires only two courses: How to Value a Business, and How to Think About Markets. You don’t have to know how to value all businesses. Start with a small circle of competence, things you can understand. [Look for] things that are selling for less than they’re worth. Forget about things you can’t understand. You need to understand accounting, which has enormous limitations. [You need to] understand when a competitive advantage is durable or fleeting. Learn that the market is there to serve you, not instruct you. In the investing business, if you have an IQ of 150, sell 30 points to someone else. You do not need to be a genius. You need to have emotional stability, inner peace and be able to think for yourself, [since] you’re subjected to all sorts of stimuli. It’s not a complicated game; you don’t need to understand math. It’s simple, but not easy.

Munger: Exactly half of future investors are going to be in the bottom 50%. There is so much that’s false and nutty in business schools. Reducing the nonsense would be a good goal.

Buffett: Emotional makeup is more important than technical skill.

Munger: Absolutely. If you think your IQ is 160 and it’s really 150, you’re a disaster.

Buffett: A student in one of the groups asked me, “What are we learning that’s wrong?”

Munger: How do you answer in only one hour? [laughter]

Buffett: [My experience] has given me a jaundiced view of academia generally. Efficient market theory—that everything is priced appropriately—is bunk. There’s a certain degree to which ideas that are nutty take hold and propagate. Max Planck [remarked about] the resistance of the human mind to new ideas: “Science advances one funeral at a time.”
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Aug 04, 2013, 10:52 AM
If you focus on the price, you're assuming that the market knows more than you do. That may be the truth, but in that case you shouldn't own it. The stock market is there to serve you, not to instruct you. - Warren Buffett
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Aug 06, 2013, 12:37 PM
A very awesome Q&A!

Berkshire Annual Meeting yr. 1997


Mr. Market is valuing Dow Jones at about 7000, and the S&P at about than 800. What is a fair valuation? (1997)

WarrenBuffett: If you believe that American businesses in aggregate can earn the kind of returns they have been earning in the past couple of years, and you postulate no change in interest rates, you can justify 7000 on the Dow and 800 on the S&P. Now, if interest rates go higher, the valuation goes down automatically. And, more importantly, if the returns on equity of American industry, which are at historic highs, and which classical economics tells you would be hard to maintain--if those returns go down, that also would pull it down.

I'll give you a little quiz: What two years has the Dow had the greatest overall gain? The two years in the 1900s are 1933, which most of you don't think of as a banner year, and 1954, and in both of those years the Dow was up over 50%, counting dividends. In March of 1955, because of the fact that the Dow had gone up, they decided to have Congressional hearings about it (laughter), and my boss Ben Graham was called down to testify, and Ben's opening comments about the market at that time were, "The market looks high, it is high, but it's not as high as it looks." Which brings about the current situation--the market certainly looks high, but there have been huge changes in earnings and return on equity and you've had this big move in interest rates. Now those are underlying fundamentals that have powered a huge bull market. After a while, people get captivated simply by the notion of rising prices without going back to the underlying rationale and that's when you get very dangerous conditions in terms of possible developments. I have no idea where the markets will go, but you have the kind of conditions that could cause real excesses, just like you had excesses in 1973-74 in the other direction, when you could buy businesses for 20 cents on the dollar. People behave in extreme ways in markets and over time that's very good for people who keep their heads.


---------------------------

"The market looks high, it is high, but it's not as high as it looks." - Benjamin Graham

"Which brings about the current situation--the market certainly looks high, but there have been huge changes in earnings and return on equity and you've had this big move in interest rates." - Warren Buffett

^ I strongly believe that this is our current state!
Title: Re: Interpretation of Warren Buffett and Charlie Munger's "saying"
Post by: Wills on Aug 07, 2013, 09:05 AM
"You don't make money when you buy stocks and you don't make money when you sell stocks, you make money by waiting" - Charlie Munger

Relayed by Mohnish Pabrai

---------------------------------------------------------------------------------

"People behave in extreme ways in markets and OVER TIME that's very good for people who keep their heads." - Warren Buffett


^^^ This says it all by Warren!
Title: Re: The Universe of Stock Investing
Post by: Wills on Aug 11, 2013, 08:32 AM
Student Visit January 2007


Do you believe that we'll have significant mispricings again? And if you were 26 today how would you generate the 50% returns that you said you might do with smaller amounts of capital?

Warren Buffett: Attractive opportunities come from observing human behavior. In 1998, people behaved like frightened cavemen (referring to the Long Term Capital Management meltdown). People make their own opportunities. They will be frozen by fear, excited by greed and it doesn’t matter what their IQ, degrees etc is. Growth of 50% per year is with small capitalization, not large cap. The point is I got rich looking for stock with strong earnings.

The last 50 years weren’t unique. It’s just capitalizing on human behavior. It’s people that make opportunities when others are frozen by fear or excited by greed. Human behavior allows for success if you are able to detach yourself emotionally.

In 1951, I got out of school at 20 years old. At the time there were two publishers of stock information, Moody’s and Standards and Poor’s. I used Moody’s and went through every manual. I recently bought a copy of the 1951 Moody off of Amazon. On page 1433, there’s a stock you could have made some money on. The EPS was $29 and the Price Range was from $3-$21/share. On another page, there is a company that had an EPS of $29.5 and the price range was $27-28, 1x earnings. You can get rich finding things like this, things that aren’t written about.

A couple of years ago I got this investment guide on Korean stocks. I began looking through it. It felt like 1974 all over again. Look here at this company...Dae Han, I don't know how you pronounce it, it’s a flour company. It earned 12,879 won previously. It currently had a book value of 200,000 won and was earning 18,000 won. It had traded as high as 43,000 and as low as 35,000 won. At the time, the current price was 40,000 or 2 times earnings. In 4 hours I had found 20 companies like this.

The point is nobody is going to tell you about these companies. There are no broker reports on Dae Han Flour Company. When you invest like this, you will make money. Sure 1 or 2 companies may turn out to be poor choices, but the others will more than make up for any losses. Not all of them will be good, but some will and those will make you rich. And this didn’t happen in 1932, this was in 2004! These opportunities will be there in the next 30 years. You’ll have streaks where you’ll find some bad companies and a few times where you’ll make money with everything that you do.

The Wall Street analysts are brilliant people; they are better at math, but we know more about human nature.

In your investing life you will have several opportunities and one or two that can’t go wrong. For example, in 1998 the NY fed offered a 30-year treasury bonds yielding less then the 29-½ year treasury bonds by 30 basis points. What happened was LTCM put a trade on at 10 basis points and it was a crowded trade, they were 100% certain to make money but they could not afford any hiccups. I know more about human nature; these were MIT grads, really smart guys, and they almost toppled the system with their highly leveraged trading.

This was definitely a good time to act. (Remember this was January of 2007)
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: ferrariEverest on Aug 11, 2013, 09:51 AM
maliit lang ang 50%, kung tutuusin.

when you have a very volatile environment, gaya nung 2008, kayang kaya ang 50%++ in a matter of months (or weeks pag sinwerte ka), not years.

The issue is: you should be prepared; that is, you are trading at the right place (instrument/stock) at the right time.

Dito kasi pumapasok yung "luck" component - right timing + volatility. These periods happen very very rarely pero they will comprise your "best trades" list. You increase your luck whenever you:
a. continue trading/investing for many years/decades and more importantly,
b. continue honing your trading skills

dun sa issue ng talino, advantage yung talino pero yung sobrang talino hindi na ok. ibig sabihin kasi nun, hindi hasa ang ibang parts ng brain ng taong yun (weak interpersonal skills, etc.; nabanggit na sa article yung 'human nature').
mas maganda book smart at street smart.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 11, 2013, 10:54 AM
maliit lang ang 50%, kung tutuusin.

when you have a very volatile environment, gaya nung 2008, kayang kaya ang 50%++ in a matter of months (or weeks pag sinwerte ka), not years.

The issue is: you should be prepared; that is, you are trading at the right place (instrument/stock) at the right time.

Dito kasi pumapasok yung "luck" component - right timing + volatility. These periods happen very very rarely pero they will comprise your "best trades" list. You increase your luck whenever you:
a. continue trading/investing for many years/decades and more importantly,
b. continue honing your trading skills

dun sa issue ng talino, advantage yung talino pero yung sobrang talino hindi na ok. ibig sabihin kasi nun, hindi hasa ang ibang parts ng brain ng taong yun (weak interpersonal skills, etc.; nabanggit na sa article yung 'human nature').
mas maganda book smart at street smart.

@FE

This is not an article made by an author, this is a note based on Q&A.

Regarding "Human Nature" - Buffett is talking about qualitative analysis of a business, it's about how human interacts with products and also how human reacts in macroeconomic stuff, he based his decision to buy a business(stock) more on qualitative analysis because he understands how human nature works and that is more powerful compare to numbers, and compared/bashed Wallstreet analysts who is more on quantitative stuff for which they based their decision mostly from numbers(key ratios).

Also Buffett knows Human Nature in a context of movement of stock market's price, that is why he emphasise Temperament as a very important factor for investor.

FE may I ask what do you mean when you mentioned "interpersonal skills"? Thank you
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 11, 2013, 11:12 AM
"If there wasn’t a Warren Buffett, there wouldn’t be a Pabrai Funds… It is hard for me to overstate the influence Warren Buffett and Charlie Munger have had on my thinking… I can never repay my debt to them for selflessly sharing priceless wisdom over the decades." - Mohnish Pabrai
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: freefront on Aug 11, 2013, 11:43 AM
 Mohnish Pabrai=Pabrai Funds---> what did it do? Change the world  :watchuthink:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: ferrariEverest on Aug 11, 2013, 01:40 PM
@FE

This is not an article made by an author, this is a note based on Q&A.

Regarding "Human Nature" - Buffett is talking about qualitative analysis of a business, it's about how human interacts with products and also how human reacts in macroeconomic stuff, he based his decision to buy a business(stock) more on qualitative analysis because he understands how human nature works and that is more powerful compare to numbers, and compared/bashed Wallstreet analysts who is more on quantitative stuff for which they based their decision mostly from numbers(key ratios).

Also Buffett knows Human Nature in a context of movement of stock market's price, that is why he emphasise Temperament as a very important factor for investor.

FE may I ask what do you mean when you mentioned "interpersonal skills"? Thank you
ah yun, wala naman, i meant nothing special about it:
interpersonal skills = social skills, people skills: skills involving communication and interaction with other people

it's a matter of balance sa left at right brain:
IQ is indirectly proportional sa EQ :D

napeke mo ko, eto pala yung thread tungkol kina Buffett. kala ko kasi bagong thread :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 11, 2013, 03:42 PM
Oww, yup I changed the threads name and its purpose so that we could also enjoy wisdom of other successful investors.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: GIG on Aug 11, 2013, 10:14 PM
@Willis

. . . nice read as usual . . . keep it coming!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 11, 2013, 10:23 PM
Mohnish Pabrai=Pabrai Funds---> what did it do? Change the world  :watchuthink:

Mohnish Pabrai is mentioned and introduced in this thread because he is a living example that you could follow W. Buffett's strategy and beat the index consistently even if you just buy small shares of a company and not the whole company.

In USA people are bashing the followers of Buffett saying that if you follow Buffett's strategy you will not be successful because Warren Buffett is buying the whole company not just shares, so Pabrai proved them wrong.

And for us small investors we can learn a lot from Pabrai.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 11, 2013, 10:24 PM
@Willis

. . . nice read as usual . . . keep it coming!

Thanks
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 11, 2013, 10:47 PM
"Most of the big profits I've had was the stocks that I held for 6 years" - Peter Lynch
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 13, 2013, 08:07 AM
"An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative." - Benjamin Graham
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 13, 2013, 08:14 AM
"It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent. There must be some wisdom in the folk saying: 'It's the strong swimmers who drown.'" – Charlie Munger
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 13, 2013, 08:32 AM
"Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world." - Charlie Munger

Munger means in stock market most people are always looking for some big news and believed that it will make an impact on stocks price. Many investors do this and keeps on jumping from one stock to another.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: ferrariEverest on Aug 13, 2013, 10:55 AM
"Most of the big profits I've had was the stocks that I held for 6 years" - Peter Lynch
buhay pa ba si Peter L? still managing a fund?

nasubaybayan mo ba kung ilang % yung "big profits" na tinutukoy nya ?
Maraming salamat bro
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 13, 2013, 03:27 PM
buhay pa ba si Peter L? still managing a fund?

nasubaybayan mo ba kung ilang % yung "big profits" na tinutukoy nya ?
Maraming salamat bro

I believe he is still alive but not managing a public fund.

I remember he mentioned some of his 8 and 12 bagger stocks.(800% - 1200%) but Bro i have to read again some of his books so I could give you a detailed answer.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 13, 2013, 03:54 PM
For those who have succeeded and failed today

"You know what Rudyard Kipling said? Treat those two imposters just the same success and failure. Of course, there’s going to be some failure in making the correct decisions. Nobody bets a thousand. I think it’s important to review your past stupidities so you are less likely to repeat them, but I’m not gnashing my teeth over it or suffering or enduring it. I regard it as perfectly normal to fail and make bad decisions. I think the tragedy in life is to be so timid that you don’t play hard enough so you have some reverses." - Charlie Munger
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 13, 2013, 04:12 PM
Berkshire Annual Meeting yr. 2007

How do you learn who to trust and who not to trust?

Warren Buffett: I get letters all the time from people who have been taken advantage of in financial transactions. It’s sad. A lot isn’t fraud – just the frictional costs and the baloney. Charlie and I have had very good luck buying businesses and putting our trust in people – it’s been overwhelmingly good, but we filter out a lot of people. People give themselves away and maybe it’s an advantage being around awhile and seeing how people give themselves away by what they talk about and what’s important and not important to them. We’ve had a batting average I wouldn’t have thought we’d have. We haven’t batted 100%, but it’s above 90%.

Munger: We’re deeply suspicious if the proposition sounds too good to be true. I recall a deal that was pitched to us by someone who said the company only wrote fire insurance on concrete bridges covered by water. It’s like taking candy from a baby. [Laughter] We stay away from businesses like that.

Buffett: When they make certain kinds of comments, what they laugh about, if they say “it’s so easy.” It’s not so easy. We rule out people 90% of the time. Maybe we’re wrong sometimes, but what’s important is the ones we let in. In the 1970s when I referred my clients to three people [as he closed down the Buffett Partnership], when I thought who they should turn over 100% of their money to, there were hundreds of people with great records. I recommended Charlie, Sandy Gottesman and Bill Ruane. I couldn’t have told you which of the three would be the best, but the one thing I was sure of was that they were going to be sensational stewards of money and do what was right for clients rather then try to make 2x in commissions in a given year. Anytime someone who takes what I think is an unfair fee structure because they can get it, I rule them out.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: ferrariEverest on Aug 13, 2013, 08:41 PM
I believe he is still alive but not managing a public fund.

I remember he mentioned some of his 8 and 12 bagger stocks.(800% - 1200%) but Bro i have to read again some of his books so I could give you a detailed answer.
meron ka ba nabasa na mas mataas pa jan? (better performance by anyone)

ayos na yan figures mo. d mo na kailangan i-review yung mga libro tungkol kay Lynch. ;)
Maraming salamat
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 14, 2013, 04:06 PM
This is it! The best Q&A of Warren Buffett in my opinion!
Anybody here who wants to learn how Warren Buffett value a company must read and chew the lesson properly!


Q&A with 6 Business Schools yr. 2009

How do you think about value?

The formula for value was handed down from 600 BC by a guy named Aesop. A bird in the hand is worth two in the bush. Investing is about laying out a bird now to get two or more out of the bush. The keys are to only look at the bushes you like and identify how long it will take to get them out. When interest rates are 20%, you need to get it out right now. When rates are 1%, you have 10 years. Think about what the asset will produce. Look at the asset, not the beta. I don’t really care about volatility. Stock price is not that important to me, it just gives you the opportunity to buy at a great price. I don’t care if they close the NYSE for 5 years. I care more about the business THAN I DO ABOUT EVENTS. I care about if there’s price flexibility and whether the company can gain more market share. I care about people drinking more Coke.
 


I bought a farm from the FDIC 20 years ago for $600 per acre. Now I don’t know anything about farming but my son does. I asked him, how much it cost to buy corn, plow the field, harvest, how much an acre will yield, what price to expect. I haven’t gotten a quote on that farm in 20 years.



If I were running a business school I would only have 2 courses. The first would obviously be an investing class about how to value a business. The second would be how to think about the stock market and how to deal with the volatility. The stock market is funny. You have no compulsion to act and a bunch of silly people setting prices all the time, it is great odds. I want the market to be like a manic depressive drunk. Graham’s Ch. 8, in the book Intelligent Investor, on Mr. Market is the most important thing I have ever read. Now think about the NYSE. You have thousands of companies to choose from. For me, that universe has shrunk because I need to put large dollar amounts to work. Attitude is much more important than IQ. You can really get into trouble with a high IQ, i.e. Long-Term Capital. You need to have the right philosophical temperament.



To know more about Long-Term Capital Management here is the link:

http://www.youtube.com/watch?v=tsZRndV5lIc

Watch it and you will be educated.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: ferrariEverest on Aug 14, 2013, 04:31 PM
"Attitude is much more important than IQ. You can really get into trouble with a high IQ, i.e. Long-Term Capital. You need to have the right philosophical temperament.
"

ah, yan pala yun. kaya ka pala na-curious dun sa sinabi ko nung isang araw.

pareho pala kami ni big B. LOL :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 14, 2013, 04:33 PM
Bro sinong big B?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: ferrariEverest on Aug 14, 2013, 04:37 PM
ay sorry. may Ben at Buffett nga pala. :D

kung sino man nagsabi nung "Attitude is much more important than IQ. You can really get into trouble with a high IQ, i.e. Long-Term Capital. You need to have the right philosophical temperament.
" :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 14, 2013, 04:39 PM
ay sorry. may Ben at Buffett nga pala. :D

kung sino man nagsabi nung "Attitude is much more important than IQ. You can really get into trouble with a high IQ, i.e. Long-Term Capital. You need to have the right philosophical temperament.
" :D

It's Warren.

Bro what he meant is a settled way of thinking and feeling towards Mr. Market's mood swing and stock market as a whole.

If you have the right attitude - half of your problem is solved! <-- in the context of investing.

LTCM are composed of a very wise and intelligent people and yet they failed. It's a beautiful story actually.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 14, 2013, 04:42 PM
I just need to repost this! Damn good Q&A!

------------------------------------------------------------
This is it! The best Q&A of Warren Buffett in my opinion!
Anybody here who wants to learn how Warren Buffett value a company must read and chew the lesson properly!


Q&A with 6 Business Schools yr. 2009

How do you think about value?

The formula for value was handed down from 600 BC by a guy named Aesop. A bird in the hand is worth two in the bush. Investing is about laying out a bird now to get two or more out of the bush. The keys are to only look at the bushes you like and identify how long it will take to get them out. When interest rates are 20%, you need to get it out right now. When rates are 1%, you have 10 years. Think about what the asset will produce. Look at the asset, not the beta. I don’t really care about volatility. Stock price is not that important to me, it just gives you the opportunity to buy at a great price. I don’t care if they close the NYSE for 5 years. I care more about the business THAN I DO ABOUT EVENTS. I care about if there’s price flexibility and whether the company can gain more market share. I care about people drinking more Coke.
 


I bought a farm from the FDIC 20 years ago for $600 per acre. Now I don’t know anything about farming but my son does. I asked him, how much it cost to buy corn, plow the field, harvest, how much an acre will yield, what price to expect. I haven’t gotten a quote on that farm in 20 years.



If I were running a business school I would only have 2 courses. The first would obviously be an investing class about how to value a business. The second would be how to think about the stock market and how to deal with the volatility. The stock market is funny. You have no compulsion to act and a bunch of silly people setting prices all the time, it is great odds. I want the market to be like a manic depressive drunk. Graham’s Ch. 8, in the book Intelligent Investor, on Mr. Market is the most important thing I have ever read. Now think about the NYSE. You have thousands of companies to choose from. For me, that universe has shrunk because I need to put large dollar amounts to work. Attitude is much more important than IQ. You can really get into trouble with a high IQ, i.e. Long-Term Capital. You need to have the right philosophical temperament.



To know more about Long-Term Capital Management here is the link:

http://www.youtube.com/watch?v=tsZRndV5lIc

Watch it and you will be educated.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 16, 2013, 06:02 PM
FE,

Here is another example, Washington Post:
From 1973 to 1991 Washington Post stock gained 4000%.

Warren's $10million investment from 1974 had grown to $205 million in 1985, for an annual return of 32 percent.


Warren Buffett's 1984 speech using his Washington Post experience:

[On Beta] "I have never been able to figure out why it's riskier to buy $400 million worth of properties for $40 million than $80 million. And as a matter of fact, if you buy a group of such securities and you know anything at all about business valuation, there is essentially no risk in buying $400 million for $80 million, particularly if you do it by buying ten $40 million piles of $8 million each."

[On margin of safety] "You don't try and buy businesses worth $83 million for $80 million. You leave yourself an enormous margin. When you build a bridge, you insist it can carry 30,000 pounds, but you only drive 10,000 pound trucks across it. And that same principle works in investing."

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 17, 2013, 10:04 PM
"I bought a stock at $10 per share that went to $6 that are now $40, it's what happens to fundamentals that really counts over the long term." - Peter Lynch



-------------------------------------

Just imagine having a paper loss of 40%? Can you still keep your wits? Do you have enough confidence on your analysis?

That's the point of company's fundamentals! Either good or bad, you have to know that if you are an investor.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 18, 2013, 05:39 PM
Interview with Peter Lynch



Q: You originated the expression "four bagger", "five bagger" et cetera. What's that mean exactly?


P Lynch: I've always been a great lover of baseball. I mean if you grew up in Boston, you know that the last time we won the World Series, Babe Ruth pitched for us. It was 1918. So it's been a long drought here. So I've always loved baseball and the ten bagger is two home-runs and a double. It's you run around a lot, so it's very exciting.

You made ten times your money. Is a ten bagger.


Interviewers comment: That's pretty good.


P Lynch: Excellent. You don't need a lot in your lifetime. You only need a few good stocks in your lifetime. I mean how many times do you need a stock to go up ten-fold to make a lot of money? Not a lot.


Q: Was that your secret?


P Lynch: Well, I think the secret is if you have a lot of stocks, some will do mediocre, some will do okay, and if one of two of 'em go up big time, you produce a fabulous result. And I think that's the promise to some people. Some stocks go up 20-30 percent and they get rid of it and they hold onto the dogs. And it's sort of like watering the weeds and cutting out the flowers. You want to let the winners run. When the fun ones get better, add to 'em, and that one winner, you basically see a few stocks in your lifetime, that's all you need. I mean stocks are out there. When I ran Magellan, I wrote a book. I think I listed over a hundred stocks that went up over ten-fold when I ran Magellan and I owned thousands of stocks. I owned none of these stocks. I missed every one of these stocks that went up over ten-fold. I didn't own a share of them. And I still managed to do well with Magellan. So there's lots of stocks out there and all you need is a few of 'em. So that's been my philosophy. You have to let the big ones make up for your mistakes.

In this business if you're good, you're right six times out of ten. You're never going to be right nine times out of ten. This is not like pure science where you go, "Aha" and you've got the answer. By the time you've got "Aha," Chrysler's already quadrupled or Boeing's quadrupled. You have to take a little bit of risk.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 19, 2013, 09:58 AM
"Stock market demands conviction and surely it victimises the unconvinced" - Peter Lynch
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 19, 2013, 10:04 AM
"The way you lose money in the stock market is to start off with an economic picture. I also spend fifteen minutes a year on where the stock market is going. All these great, heady, thinking deals kill you." - Peter Lynch
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 19, 2013, 10:13 AM
"I don't care where the Dow(index) go, I made money in a lousy market and lost money in a great market."

"I spend about fifteen minutes a year on economic analysis. "

"We don’t make economic judgements."


Peter Lynch

---------------

Interesting!!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 19, 2013, 11:28 AM
Damn good Wisdom! Damn GoOD!



"The GNP six months out is just malarkey. How is the sneaker industry doing? That’s real economics." - Peter Lynch
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: panitanfc on Aug 20, 2013, 02:24 AM
W
My question Sir is can we lean/depend on that 5 year research? Because from what I understand, Buffett buys stock in a very long term view like say 20 to a hundred years.

So it's like maybe if we will look at it that way the results of the research would be different and will prove Munger's case "Buying great businesses in an average price"

As an example Heinz.
Heinz with high P/E but also high ROE.

Am I making sense here? I'm sorry if my question is obvious
WB buys company with great franchise...buys company that takes time to change or doesn't change at all. No R& D. Heinz...in the next 20 more years, people will eat ketchup just like today.  This brand is international. He pointed out the management as well.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: dayap on Aug 20, 2013, 08:52 AM
I believe he is still alive but not managing a public fund.

I remember he mentioned some of his 8 and 12 bagger stocks.(800% - 1200%) but Bro i have to read again some of his books so I could give you a detailed answer.


Hi Wills,  :hello:

just want to comment about Peter Lynch because I became a fan of him also. :)

way back 3 or 4 years ago when I was reading about stocks I learned the term "bagger" from him  and after reading Buffettology I want to learn more.. then nakilala ko si sir Peter Lynch.. I've read about One Up on Wall Street! also one of my favorite book. Maybe this was one of the reasons why I didn't want to accumulate back then with my stock  kasi nakikita ko ung stock ko na to e nagiging 800% gain!   It felt good on me every time I see it ..gusto ko nakikita ko ung gantong klaseng bagger...totoo pala! ayaw ko mabawasan ung gain percentage..lol..

tas narealize ko.. I was too late to accumulate na rin with this stock..800%  gain nga pero konti naman ung volume ko!  :hihi: kaya i sold it all last year..   we are on a bull run right now.. it's quite difficult to maintain and find some good stocks sa ngaun pero I am still studying some few stocks paunti unti...maybe I will wait for the big drop then we'll start over again.. I am still learning. :) 

TIME WAITS FOR NO ONE..I  never increased my volume..lessons learned..  but it was  a great experience for me to have an eight-bagger for once in my life. :)  hopefully..magkaroon uli!!  :applause:

 :thankyou: sir Peter Lynch!   :)

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 20, 2013, 08:58 AM
W WB buys company with great franchise...buys company that takes time to change or doesn't change at all. No R& D. Heinz...in the next 20 more years, people will eat ketchup just like today.  This brand is international. He pointed out the management as well.

Panitanfc thank you for your input.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 20, 2013, 08:59 AM
Hi Wills,  :hello:

just want to comment about Peter Lynch because I became a fan of him also. :)

way back 3 or 4 years ago when I was reading about stocks I learned the term "bagger" from him  and after reading Buffettology I want to learn more.. then nakilala ko si sir Peter Lynch.. I've read about One Up on Wall Street! also one of my favorite book. Maybe this was one of the reasons why I didn't want to accumulate back then with my stock  kasi nakikita ko ung stock ko na to e nagiging 800% gain!   It felt good on me every time I see it ..gusto ko nakikita ko ung gantong klaseng bagger...totoo pala! ayaw ko mabawasan ung gain percentage..lol..

tas narealize ko.. I was too late to accumulate na rin with this stock..800%  gain nga pero konti naman ung volume ko!  :hihi: kaya i sold it all last year..   we are on a bull run right now.. it's quite difficult to maintain and find some good stocks sa ngaun pero I am still studying some few stocks paunti unti...maybe I will wait for the big drop then we'll start over again.. I am still learning. :) 

TIME WAITS FOR NO ONE..I  never increased my volume..lessons learned..  but it was  a great experience for me to have an eight-bagger for once in my life. :)  hopefully..magkaroon uli!!  :applause:

 :thankyou: sir Peter Lynch!   :)



Hi dayap good morning!

What do you mean dayap? 800% gain tapos gusto mo dagdagan ang share mo?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: lemreyes on Aug 20, 2013, 09:24 AM
"I bought a stock at $10 per share that went to $6 that are now $40, it's what happens to fundamentals that really counts over the long term." - Peter Lynch



-------------------------------------

Just imagine having a paper loss of 40%? Can you still keep your wits? Do you have enough confidence on your analysis?

That's the point of company's fundamentals! Either good or bad, you have to know that if you are an investor.

Lynch has hundreds of stocks in his portfolio.  This will be difficult to do for someone who has a very concentrated portfolio.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: dayap on Aug 20, 2013, 09:37 AM
Hi dayap good morning!

What do you mean dayap? 800% gain tapos gusto mo dagdagan ang share mo?

good morning too ! :)


Bale hindi ko sya dinagdagan until mag -800% gain  na siya.. hindi na ako nagaccumulate nun.. eng-eng lang..lol... binenta ko na lang siya lahat last year.. sayang nga sana d ko na lang binitawan nagdagdag na lang ako..hayyy!! ganun talaga.. *SIGH*  LOL!


Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 20, 2013, 10:03 AM
Lynch has hundreds of stocks in his portfolio.  This will be difficult to do for someone who has a very concentrated portfolio.

Actually he has thousands of stocks in his Magellan's Portfolio.


Lynch does not look at the index chart, his style has similarity with Buffett and Munger, they look at the business economic of the company that their eyeing for.

He heavily relies on the fundamentals of the company (quantitative and qualitative) and thats about it,

he also mentioned that if the price of the stock he owns fall but the story(fundamentals) did not change, he would still keep the stock and if the stocks price went significantly high but story(fundamentals) did not change, he would sell that stock and look for another undervalued stock.

Plus we all know that events make an impact in stock prices but that impact is short term that is why this makes sense when he said this:

"The GNP six months out is just malarkey. How is the sneaker industry doing? That’s real economics." - Peter Lynch

He said it's "malarkey" because those kind of events will only matter in a short time but if the business you bought will dominate its competitors 5 - 10 years from now Mr. Market will surely notice and that sure matters, the bottom line is Who doesn't want a profitable business?




40 - 50% decline of Stocks price but the fundamentals hadn't change is supported by this quote:

 “In the short run, the market is a voting machine but in the long run it is a weighing machine.” - Benjamin Graham

Now if you only have 2 stocks in your portfolio and both went down to 40% percent - still it won't matter as long as fundamentals is intact.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 20, 2013, 10:27 AM
good morning too ! :)


Bale hindi ko sya dinagdagan until mag -800% gain  na siya.. hindi na ako nagaccumulate nun.. eng-eng lang..lol... binenta ko na lang siya lahat last year.. sayang nga sana d ko na lang binitawan nagdagdag na lang ako..hayyy!! ganun talaga.. *SIGH*  LOL!




Hi dayap!

Actually what will Lynch do if he is in your position, he will compare the current price of that 800% gain to its current ratios and future growth, if the price is to much or overtakes the fundamentals he will not add but instead dump the stock and look for another undervalued stock.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: dayap on Aug 20, 2013, 10:30 PM
Thanks Will! :)

Undervalued stocks..challenging for me now kaya I seek guidance here s pmt :)
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 20, 2013, 10:37 PM
Welcome Dayap.

If you really want to learn, I would suggest you look for a mentor or call it a hero, Your "mentor" or "hero" will give you great help in times of turmoil.

Don't get me wrong I'm not an expert, I'm just trying my best to learn and share what I learned.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 20, 2013, 10:51 PM
Ms Dayap read articles of mr. Valentino Sy you will learn a lot from him.

I don't know his past records but I like the way he view economics.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: dayap on Aug 20, 2013, 11:52 PM
Thanks! I Will! :)
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: kulatir on Aug 21, 2013, 03:11 AM
Ms Dayap read articles of mr. Valentino Sy you will learn a lot from him.

I don't know his past records but I like the way he view economics.

link pls.,tia
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 21, 2013, 10:44 AM
http://www.philequity.net/philequiCorner.php

I have an impression that this guy got real balls!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: adam on Aug 21, 2013, 12:37 PM
After I realised lesson from this post I sold my position at MEG and MPI hehe. From now on I will never TIME the market and focus on One strategy only.

@Wills, I have the same position, I got MEG and MPI in my port but why the rush to sell it? I'm quite lost. Maybe you can enlighten me.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 21, 2013, 01:13 PM
Hi adam,

Because I realized that a smart move for a long term investor is not to look at charts,volume, and short term events(like the Feds QE) but rather focus on fundamentals of the company and consider the interest rate and inflation rate of our country.

After I fully understand what I realised, that made my decision decision to have CPG than MEG and AGI over MPI.


MEG is good actually, fundamental wise but I bet on CPG because it has lower PE and I strongly believe that the current EPS is sustainable and will grow in the next 3 - 4 years. Currently there are a lot of brouhaha on CPG, for me it's an opportunity. Also I bought AGI so no reason for me to hold MEG anymore.


AGI vs MPI? no brainer!

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 22, 2013, 05:57 AM
WOW! This is my first time to encounter a stock with 70+ to 80+ ROE!

That's IBM!

Warren Buffett's average cost for IBM is $169.875.

What amazed me is that there are some people skeptical with Buffett's move on IBM given his reputation. <---That is more WOW!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 22, 2013, 10:21 PM
"The trick is to discipline yourself to ignore your gut feelings, standby your stocks as long as the fundamentals story of the company hasn't change, if you can't your only hope for increasing your net worth maybe to adapt J Paul Getty's sure fire formula of financial success Rise early, work hard, strike oil! - Peter Lynch
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: FFreedom3 on Aug 22, 2013, 10:56 PM
"Wide diversification is only required when investors do not understand what they are doing." - Warren Buffett

In the beginning, diversification is relevant. Once you've gotten your feet wet and have confidence in your investments, you can adjust your portfolio accordingly and make bigger bets.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 22, 2013, 10:58 PM
FFreedom,


Nice 1 there! LIKE!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: jmces on Aug 23, 2013, 09:28 AM
true
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 24, 2013, 04:21 AM
"I think it would be very, very foolish to have your money in long-term fixed-dollar investments or short-term fixed-dollar investments if you had the ability to own equities and hold them for a considerable period of time," Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 24, 2013, 08:33 PM
One of the best!


With the popularity of "Fortune's Formula" and the Kelly Criterion, there seems to be a lot of debate in the value community regarding diversification vs. concentration. I know where you side in that discussion, but was curious if you could tell us more about your process for position sizing or averaging down.

Warren Buffett: I have 2 views on diversification. If you are a professional and have confidence, then I would advocate lots of concentration. For everyone else, if it’s not your game, participate in total diversification. The economy will do fine over time. Make sure you don’t buy at the wrong price or the wrong time. That’s what most people should do, buy a cheap index fund and slowly dollar cost average into it. If you try to be just a little bit smart, spending an hour a week investing, you’re liable to be really dumb.

If it’s your game, diversification doesn’t make sense. It’s crazy to put money into your 20th choice rather than your 1st choice. “Lebron James” analogy. If you have Lebron James on your team, don’t take him out of the game just to make room for someone else. If you have a harem of 40 women, you never really get to know any of them well.

Charlie and I operated mostly with 5 positions. If I were running 50, 100, 200 million, I would have 80% in 5 positions, with 25% for the largest. In 1964 I found a position I was willing to go heavier into, up to 40%. I told investors they could pull their money out. None did. The position was American Express after the Salad Oil Scandal. In 1951 I put the bulk of my net worth into GEICO. Later in 1998, LTCM was in trouble. With the spread between the on-the-run versus off-the-run 30 year Treasury bonds, I would have been willing to put 75% of my portfolio into it. There were various times I would have gone up to 75%, even in the past few years. If it’s your game and you really know your business, you can load up.

Over the past 50-60 years, Charlie and I have never permanently lost more than 2% of our personal worth on a position. We’ve suffered quotational loss, 50% movements. That’s why you should never borrow money. We don’t want to get into situations where anyone can pull the rug out from under our feet.

In stocks, it’s the only place where when things go on sale, people get unhappy. If I like a business, then it makes sense to buy more at 20 than at 30. If McDonalds reduces the price of hamburgers, I think it’s great.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: FFreedom3 on Aug 24, 2013, 08:50 PM
One of the best!

In stocks, it’s the only place where when things go on sale, people get unhappy. If I like a business, then it makes sense to buy more at 20 than at 30. If McDonalds reduces the price of hamburgers, I think it’s great.

Good one Wills!

Thanks for sharing.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 24, 2013, 09:08 PM
No prob bro. More to come!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 24, 2013, 10:56 PM
"Over the past 50-60 years, Charlie and I have never permanently lost more than 2% of our personal worth on a position. We’ve suffered quotational loss, 50% movements. That’s why you should never borrow money. We don’t want to get into situations where anyone can pull the rug out from under our feet." - Warren Buffett


MiSMONG MiSMO ito!!

"QUOTATIONAL LOSS"<------------YUN MISMO! What the HECK! Why is it hard to understand? haha!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: yagami_kira on Aug 25, 2013, 08:41 AM
http://www.philequity.net/philequiCorner.php

I have an impression that this guy got real balls!

I've been following Valentino Sy's posts for several months now and they have a great know-how on where the market and economy is going IMO.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 26, 2013, 09:10 AM
You're right yagami
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 26, 2013, 09:33 AM
“Investors should be skeptical of history-based models. Constructed by a nerdy-sounding priesthood using esoteric terms such as beta, gamma, sigma and the like, these models tend to look impressive. Too often, though, investors forget to examine the assumptions behind the models. Beware of geeks bearing formulas. ”
― Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: kulatir on Aug 27, 2013, 06:49 AM
http://www.philequity.net/philequiCorner.php

I have an impression that this guy got real balls!

thanks sa link sir wills...
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 27, 2013, 04:33 PM
This is a must READ!


Why do you think that despite making your methods publicly available, that relatively few people have been able to emulate your success?



Warren Buffett: I asked Graham the same question. Everyone took his class at Columbia Business School. He used current examples, and by the end of the semester you would have a portfolio that would’ve made you money. Graham lived a life of sharing. He may have had more money hoarding, but lived happier because of it. The money’s just a figure in the paper, perhaps he would’ve died with 86 million instead of 42 million, but it doesn’t really matter. 90% of the people that took his class ended up doing something else.

At age 11 I started investing, purchasing three shares of Cities Service Preferred. I had read every book on investing in the Omaha library. I was really into charting and technical analysis. I loved it, but didn’t make any money from it. At 19 I read Graham’s “The Intelligent Investor” and it changed my world. Did Ben lose because I read his book? Maybe we competed and he made less money, but it didn’t matter to Graham.

The philosophy either takes immediately or it doesn’t at all. The reason gets down to temperament. People want to make money fast, but it doesn’t happen that way. Graham’s philosophy doesn’t promise enough for many people. You don’t know when it will happen, but you just wait for the fat pitches within your circle of competence. It’s not as exciting as guessing whether the stock price will go up the next day. Most investors in internet companies didn’t know the market cap. They were buying because they thought the stock would move, but if you asked them to write “I would buy XYZ company for $6 billion because”, they wouldn’t get halfway through the sentence. IT's THE CLASSIC TORTOISE VERSUS HARE, bound to work over time. Charlie and I have educated competitors. Most don’t compete with us, though. It’s fine, we have more than enough money.


--------------------------------------------

The philosophy either takes immediately or it doesn’t at all. The reason gets down to temperament. People want to make money fast, but it doesn’t happen that way.<-------highlighted part is the PIVOTAL POINT for people who wants to learn.


The reason gets down to temperament<--------What he meant by temperament is a settled way of thinking and feeling towards any subject.

People want to make money fast<------That kind of thinking why lessons of Buffett and Graham is always automatically blocked in our head!

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: jmces on Aug 28, 2013, 08:57 AM
 :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 29, 2013, 04:08 PM
A very good question, all of us had questions like this in our mind!


Is the individual investor even capable of assessing the riskiness of securities given the large number of institutions/hedge funds in the market?


Warren Buffett: I don’t think there is much being overlooked now, but I’m forced to look at big things. That’s the advantage you have over me. A few years ago a friend of mine mentioned that I should look at Korea. We bought Posco for 3-4 times post-tax earnings. I found 20 other companies selling at 2-3 times earnings and strong balance sheets. I diversified because I didn’t know the Korean market as well. We are looking for the very unusual. Occasionally things will happen in a securities market that are extraordinary. I like shooting fish in a barrel, but I like to make sure the water’s drained out.

We had that situation a few years ago with the 30 year versus 29 ½ year Treasury bonds. Because of less liquidity, the off-the-run bonds were selling for 30 basis points less, which translates into 3% of principal value. LTCM entered the trade at 10 basis points originally, but they overleveraged and were forced to unwind the position. If you went long/short you could make money really quickly.

Markets are efficient most of the time about most things. But for these opportunities, nobody will tell you about them. They won’t be on CNBC and they won’t be in brokerage reports. You have to go find them yourself. In 1951, after I graduated from school, I used Moody’s and S&P manuals as my sources of information. I went through them page by page. I was like a basketball coach looking for 7-footers. I still have to find out if he’s coordinated, and can stay in school. But if someone comes up to me that’s 5’6” and says, “Wait ‘til you see me handle the ball”, I say “No thanks”. On page 1443 of Moody’s, I found Western Insurance Securities. It had earned $21.66 per share 2 years ago, and earned $29.09 last year. Over the past year the stock was selling for between $3 and $13 per share. I still had to do the work to make sure the earnings were valid. The markets will get it right eventually. But they are there. You don’t have to find too many. Finding 10 of these opportunities in your lifetime will make you so rich. But you can’t be wrong. You can’t have any zeroes. A list of big numbers multiplied by zero will equal zero.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 29, 2013, 10:42 PM
In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.
Warren Buffett


He clearly talks about US economy that survives from a lot of BIG EVENTS.

-------------------------------

Also I remember from an interview he said a lot of people lose money in stock market while the DOW rose from 66 to 11,497.

DJIA today serves the same purpose for which it was created – to provide a clear, straightforward view of the stock market and, by extension, the U.S. economy.

Buffett is talking about the US economy, he is basically saying:

How can a guy lose money when he participates in a GROWING ECONOMY?

He said "DOW" because DJIA represents the US ECONOMY.

In a span of 100 years DOW went from 66 to 11,497<-------- It's a HUGE GROWTH and yet many people lose money.

For me it's simple----> Because People are trying to earn from Stock Market and not from the Business.


It is supported by this:

"I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years." -  Warren Buffett


^This is pretty clear that he is trying to make a profit from the business because fundamental of a company change a lot in a span of 5 years and also he gave 5 year time horizon because Mr. Market always ---> follow the value when it is already obvious and NOT chase the value when it is not yet obvious.

Take note that fundamentals might change DOWNWARD or UPWARD, bottom line is be sure that your analysis is RIGHT.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: jmces on Aug 30, 2013, 10:18 AM
 :thankyou:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: bauer on Aug 30, 2013, 05:16 PM

For me it's simple----> Because People are trying to earn from Stock Market and not from the Business.
 

Good view @wills.

just curious, where are you getting all your materials quoted from WB and CM?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 31, 2013, 09:45 AM
Good view @wills.

just curious, where are you getting all your materials quoted from WB and CM?

Bro I just search student visits Q&A, Buffett host schools every year and those lucky students are given a privilege of asking questions.

Just found out that Students have a smarter questions than investors in Berkshire meeting, that's just my opinion hehe.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 31, 2013, 11:44 AM
So if they’re walking through the mall and they see a store they like, or if they happen to like Nike shoes for example, these would be great places to start? Instead of doing a computer screen and narrowing it down?

Warren Buffett: A computer screen doesn’t tell you anything. It might tell you about P/Es or something like that, but in the end you have to understand the business. If there are certain businesses in that mall they think they understand and they’re public companies, and they can learn more and more about them…. We used to talk to competitors. To understand Coca-Cola, I have to understand Pepsi, RC, Dr. Pepper.

The place to look when you’re young is the INEFFICIENT MARKETS.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Aug 31, 2013, 07:19 PM
"I don't believe in predicting markets, I believe in buying great companies especially undervalued or underappreciated companies, doesn't matter where the dow jones industrial average is" - Peter Lynch
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 02, 2013, 05:02 AM
Berkshire Annual Meeting yr.2004


Importance of maths? Why does math reflect reality?

It’s just the way it is. If you want to understand science, you have to understand math. In business, if you’re enumerate, you’re going to be a klutz. The good thing about business is that you don’t have to know any higher math.

It may be an advantage not to know it.

[CM: Yes, it is. If you know it, you feel the need to use it.]
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: jmces on Sep 02, 2013, 09:10 AM
i wish i could meet him someday :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 02, 2013, 10:34 AM
Berkshire Annual Meeting yr.2008



I teach at a community college in Florida, teaching students to invest in themselves. Financial independence and freedom. Slow and steady wins the race. Law of reciprocity. Etc, etc, etc. What else should I be doing?

WB: [Laughing] I’m ready to hire your entire class right now. The most important investment is in themselves. Potential horsepower is rarely achieved. Just imagine you are 16 and your parents are going to give you the car of your choice. But the catch is that it is the only car you would get for the rest of your life. How would you choose to proceed? Of course, you will read the manual 5 times. How would you treat it? You’ll keep it garaged, change the oil twice as frequently as you’re supposed to, and keep rust to a minimum because you know it needs to last a lifetime. I tell students that you get only one body and one mind. You’d better treat them the same way. It’s hard to change habits at age 50 or 60. Anything students do to invest in body and mind is good, particularly in the mind. We didn’t work too hard on bodies around here. It pays off in an extraordinary way. The best asset is your own self. You can become, to an enormous degree, the person you want to be. When I talk to university classes, I ask them to buy one classmate to own [his or her earnings] for the rest of their life. They would pick the person not with the highest IQ, but the ones who are the most effective; the ones you want to be around. These people are easy to work with, generous, on time, don’t claim credit, help others. Those are good habits to develop. Leaders are effective because people want to be around them.

CM: I have a specific suggestion that I would add to your extensive repertoire. I would teach them to avoid being manipulated by vendors and lenders by using their own tricks against them. Cialdini has a new book—it is called Yes! It is not as good as Influence, but I recommend it and recommend adding both of those books to your repertoire.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 02, 2013, 06:51 PM
Buffett & Gates at Columbia Business School yr. 2009




What's the one thing that your MBA didn't prepare you for when you got out into the real world?



Well, I was -- it prepared me very well, not the whole degree, but specific professors prepared me very well for what I wanted to go into. I knew I was interested in investing, like I say, from the time I was six or seven years of age. So I was lucky that I found what turned me on early on. And I had these two marvellous professors here at Columbia that just being around -- I had read all the stuff they had written. So it wasn't I was acquiring lots of incremental knowledge but I was getting inspired. They were terrific for me. They treated me like a son. They would take me out to dinner. Ben Graham did the same thing for me. So it gave me confidence in myself. It just propelled me into a field I already love with a terrific tailwind from these professors that believed in me. But let me add one point because -- to the MBA situation. Right now, I would pay $100,000 for 10% of the future earnings of any of you. So anybody that wants to see me after this is over -- If that's true, you are a million-dollar asset right now, right, if 10% of you is worth 100,000? You could improve -- many of you, and I certainly could have when I got out, just in terms of learning communication skills. You know, it's not something that is taught. I actually went to a Dale Carnegie course later on in terms of public speaking. But if you improve your value 50% by having better communication skills, that's another $500,000 in terms of capital value. See me after the class and I'll pay you 150-thousand.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 02, 2013, 10:54 PM
Buffett & Gates at Columbia Business School yr. 2009


Do you think the current rally is for real?


Warren Buffett: What's going to happen tomorrow, huh? Let me give you an illustration. I bought my first stock in 1942. I was 11. I had been dillydallying up until then. I got serious. What do you think the best year for the market has been since 1942? Best calendar year from 1942 to the present time. Well, there's no reason for you to know the answer. The answer is 1954. In 1954, the Dow … dividends was up 50%. Now if you look at 1954, we were in a recession a good bit of that time. The recession started in July of '53. Unemployment peaked in September of '54. So until November of '54 you hadn't seen an uptick in the employment figure. And the unemployment figure more than doubled during that period. It was the best year there was for the market. So it's a terrible mistake to look at what's going on in the economy today and then decide whether to buy or sell stocks based on it. You should decide whether to buy or sell stocks based on how much you're getting for your money, long-term value you're getting for your money at any given time. And next week doesn't make any difference because next week, next week is going to be a week further away. And the important thing is to have the right long-term outlook, evaluate the businesses you are buying. And then a terrible market or a terrible economy is your friend. I don't care, in making a purchase of the Burlington Northern, I don't care whether next week, or next month or even next year there is a big revival in car loadings or any of that sort of thing. A period like this gives me a chance to do things. It's silly to wait. I wrote an article. If you wait until you see the robin, spring will be over.

-----------------------------------

If you don't get this.... sorry! BOOM!

So it's a terrible mistake to look at what's going on in the economy today and then decide whether to buy or sell stocks based on it. You should decide whether to buy or sell stocks based on how much you're getting for your money, long-term value you're getting for your money at any given time. And next week doesn't make any difference because next week, next week is going to be a week further away. And the important thing is to have the right long-term outlook, evaluate the businesses you are buying. And then a TERRIBLE MARKET or a TERRIBLE ECONOMY is YOUR FRIEND.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: FFreedom3 on Sep 03, 2013, 01:21 AM
“Swim your own races.” ++ Jim Rogers ++

Rogers said that early in his career as an investor, he assumed others knew more than he did, and he would try to mimic them. Over time, he found that when he disagreed with them, he ended up being right. So he began listening to himself over others.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 03, 2013, 05:00 AM
^Yun oh! WoW! Thanks FFreedom3 ganda!


What Warren Buffett, George Soros and Jim Rogers Share in Common?

ALL of them, neither Buffett, nor Soros nor Rogers care about what other people think. That’s one of their real strengths. Nor do they care what the markets will or won’t do.
 
The bottom line is that Soros, Buffett and Rogers have demonstrated time and again that they’ll only make a move when they’re darned good and ready - when they’ve done all they can to scope out the situation at hand, and done everything possible to make sure that the percentages are in their favor.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: jmces on Sep 03, 2013, 08:51 AM
 :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 04, 2013, 05:15 PM
BRK Annual Meeting yr. 2004


[In response to a shareholder expressing the many reasons why he is concerned about the future outlook for the economy and the market, Buffett replied:]



I would say that at any given point in history, including when stocks were the cheapest, you could have found an equally impressive list of negatives. In ‘74, you could have written down all kinds of things that would show the future would be terrible.

We don’t pay any attention to this kind of thing. Our underlying premise is that this country will do very well and that businesses will do very well. We used nuclear bombs, endured the cold war, etc., but over time the opportunities have won out over the problems. I expect this will continue, barring use [against us of] weapons of mass destruction – it would be hard for businesses to win out over this.

Going back to ‘59, I can’t think of any discussions Charlie and I have had in which we’ve passed on something because of a view on macro conditions. It won’t be the economy that will do in investors; it will be investors themselves. IF YOU'D JUST OWNED STOCKS OVER TIME, YOU'D DO FINE. We’re unaffected by the variables that you mentioned. Show us a good business tomorrow and we’ll jump.

[CM: We wouldn’t be surprised if professionally managed money in the US will have unimpressive returns relative to the high returns we had until three years ago.

Our expectations were more modest than most three years ago [see Buffett’s Fortune article, Mr. Buffett on the Stock Market, 11/99]. We didn’t project the end of the world, but said anyone who thought they could sit at home and day trade to double digit returns was living in a fool’s paradise. It’s hard to understand how people could believe such things. To some extent, they’re sold these beliefs.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: jmces on Sep 05, 2013, 09:08 AM
 :thankyou:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 05, 2013, 09:40 AM
^No Prob.

"Individuals who cannot master their emotions are ill-suited to profit from the investment process" - Benjamin Graham

"Investment is most intelligent when it is most businesslike" - Benjamin Graham
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 05, 2013, 05:53 PM
Warren Buffett – 'Investing Is More Intelligent When It Is Most Businesslike'



"Investment is most intelligent when it is most businesslike". This means that rather than thinking the stock market as an end in itself, investors should consider the economics of ownership of those businesses that the common stocks represent.

Warren considers, as Graham has taught him, that instead of asking in what security to invest and at what price, it is better to ask in what enterprise and on what terms the commitment is proposed.

This is a more businesslike perspective.

Warren’s strategy is to buy good businesses at a price that makes business sense and business sense means that the investment made will offer the investor the highest predictable annual compounding rate of return possible with the least amount of risk.

Warren is able to make this reasoning because he thinks in the long-term unlike other investors, particularly, Wall Street investment professionals who adopt the short-term style.

Warren thinks of himself as the owner of that portion or company. He asks himself how much money the business can earn and what the asking price is. Once he’s got both answers, he can do some comparison.

Unlike Buffett, Wall Street professionals take a short-term look at businesses. They want the return on the spot. Warren is more like a businessman who prefers to keep his business. He believes that a greater value is achieved on the long term rather than on the short term.

To understand his view in a simplest way, below there appears some of his opinions on a corporation’s earnings:

• He considers them his, in proportion to his ownership in the company.

• Warren believes that the company can pay profits through dividends or retain those earnings, reinvest them on behalf of the investor and thus, increase the underlying value of the company. The stock market will, over a period of time, acknowledge this increase in the company's underlying value and cause the stock's price to increase.

On the other hand, Wall Street professionals prefer to see their earnings paid through dividends.

In the early '80s the stock of Warren's holding company, Berkshire Hathaway (BRK.A)(BRK.B), traded at $500 a share. Today it trades at around $113,000 a share, and it still has never paid a dividend. The increase in the market price was related to the increase in the company’s underlying value that rose thanks to retaining earnings.

• For Buffett, it is better that the company retains earnings if it can employ them to generate profits. In addition, if dividends are paid, they are subject to personal income tax, thus reducing profits for the investor.

Wall Street has never seen companies retaining earnings in a positive way. This prejudice dates back to the early part of this century when most people bought bonds instead of stock. Bonds were considered safer because upon the company’s bankrupt bondholders could claim on assets.

Bonds paid interest to investors on a quarterly basis.

Common stocks at that time were considered dangerous, because of a lack of accounting regulations; majority owners and managements had enormous leeway to manage the books.

Non payment of dividends is seen as a sign of weakness, according to Wall Street and its minions.

To this day it is not uncommon for some security analysts to assign a higher value to companies that pay a dividend than to those that don't. This is the case even the company retaining earnings is better than the one paying them out.

Warren thinks of common stocks as ownership in the business. The investor is a sort of owner. His comments can be voiced and are considered when instructing management whether to pay dividends or retain earnings.

This arrangement places a great deal of emphasis on the integrity of the company's management to do what is best for the shareholders of the company.

• Warren considers that the quality of a company's management is paramount when making investment decisions. One way to determine the quality of management is to see what it does with its earnings.

• Warren believes that the test to which management should hold itself in determining whether or not to pay out a dividend is, would the investors/owners be better off removing the capital from the business and investing it in other enterprises?

With Berkshire Hathaway, Warren has managed to employ retained earnings at approximately a 23% compounding annual after-corporate-income-tax rate of return. If dividends are paid, the return would be reduced to approximately 15.9%.

For the Berkshire investor/owner, the question becomes: does he want to take his share of the company's earnings as a dividend, or does he want Berkshire to retain the earnings and reinvest them for him?

For Warren, common stocks are like bonds with the payable interest being the net earnings of the business. He divides the company annual net EPS by the price he pays for the stock and thus, he calculates his ROE.

Warren does this type of analysis whether he is buying an entire company or one share of a company. The price he pays determines his rate of return.



http://www.gurufocus.com/news/155806/warren-buffett--investing-is-more-intelligent-when-it-is-most-businesslike
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: kulatir on Sep 06, 2013, 02:38 AM
If Berkshire was not giving divs,pano kumikita ang ibang stockholder? unless kung ibenta nila yung shares nila,what if they want to grow with the company for 20 years. Surely its market price will appreciate,pero wala naman sila natitikman sa investment nila. Dba mas maganda pa rin yung kahit once a year may cash div,IMO lang...
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 06, 2013, 08:59 AM
"No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant." - Warren Buffett

HAHA!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 06, 2013, 09:05 AM
they want to grow with the company for 20 years. Surely its market price will appreciate

Thats the answer^

He reinvest the money instead of giving it away.

He is better than all of us when it comes to investing.... so why do the job? let him.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: freefront on Sep 06, 2013, 09:40 AM
"No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant." - Warren Buffett

HAHA!

How does octomom figure into this metaphor  :watchuthink:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 06, 2013, 09:49 AM
^That's how most market participants view stock market, and act on that perception.

They figure out that it is impossible to do when it's too late.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 06, 2013, 07:27 PM
“The natural juices of capitalism will push us out of the recession. And when we come out, it will be because the system founded in 1776 is still working. The system has enabled us to improve our lives. It has enabled us to live in a world that couldn’t have been dreamt about by the people who wrote the constitution.”

“We will still have plenty of hiccups, and maybe something more than a hiccup in Europe, but it will get better.” - Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 08, 2013, 09:35 AM
"If you understood a business perfectly and the future of the business, you would need very little in the way of a margin of safety."


- Warren Buffett

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 08, 2013, 10:04 AM
Warren Buffett: Why STOCKS beat GOLD and BONDS
February 9, 2012: 5:00 AM ET
FORTUNE

Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire Hathaway (BRKA) we take a more demanding approach, defining investing as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power -- after taxes have been paid on nominal gains -- in the future. More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date.

From our definition there flows an important corollary: The riskiness of an investment is not measured by beta (a Wall Street term encompassing volatility and often used in measuring risk) but rather by the probability -- the reasoned probability -- of that investment causing its owner a loss of purchasing power over his contemplated holding period. Assets can fluctuate greatly in price and not be risky as long as they are reasonably certain to deliver increased purchasing power over their holding period. And as we will see, a nonfluctuating asset can be laden with risk.

Investment possibilities are both many and varied. There are three major categories, however, and it's important to understand the characteristics of each. So let's survey the field.
Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as "safe." In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge.
Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as these holders continued to receive timely payments of interest and principal. This ugly result, moreover, will forever recur. Governments determine the ultimate value of money, and systemic forces will sometimes cause them to gravitate to policies that produce inflation. From time to time such policies spin out of control.

Even in the U.S., where the wish for a stable currency is strong, the dollar has fallen a staggering 86% in value since 1965, when I took over management of Berkshire. It takes no less than $7 today to buy what $1 did at that time. Consequently, a tax-free institution would have needed 4.3% interest annually from bond investments over that period to simply maintain its purchasing power. Its managers would have been kidding themselves if they thought of any portion of that interest as "income."

For taxpaying investors like you and me, the picture has been far worse. During the same 47-year period, continuous rolling of U.S. Treasury bills produced 5.7% annually. That sounds satisfactory. But if an individual investor paid personal income taxes at a rate averaging 25%, this 5.7% return would have yielded nothing in the way of real income. This investor's visible income tax would have stripped him of 1.4 points of the stated yield, and the invisible inflation tax would have devoured the remaining 4.3 points. It's noteworthy that the implicit inflation "tax" was more than triple the explicit income tax that our investor probably thought of as his main burden. "In God We Trust" may be imprinted on our currency, but the hand that activates our government's printing press has been all too human.

High interest rates, of course, can compensate purchasers for the inflation risk they face with currency-based investments -- and indeed, rates in the early 1980s did that job nicely. Current rates, however, do not come close to offsetting the purchasing-power risk that investors assume. Right now bonds should come with a warning label.

Under today's conditions, therefore, I do not like currency-based investments. Even so, Berkshire holds significant amounts of them, primarily of the short-term variety. At Berkshire the need for ample liquidity occupies center stage and will never be slighted, however inadequate rates may be. Accommodating this need, we primarily hold U.S. Treasury bills, the only investment that can be counted on for liquidity under the most chaotic of economic conditions. Our working level for liquidity is $20 billion; $10 billion is our absolute minimum.

Beyond the requirements that liquidity and regulators impose on us, we will purchase currency-related securities only if they offer the possibility of unusual gain -- either because a particular credit is mispriced, as can occur in periodic junk-bond debacles, or because rates rise to a level that offers the possibility of realizing substantial capital gains on high-grade bonds when rates fall. Though we've exploited both opportunities in the past -- and may do so again -- we are now 180 degrees removed from such prospects. Today, a wry comment that Wall Streeter Shelby Cullom Davis made long ago seems apt: "Bonds promoted as offering risk-free returns are now priced to deliver return-free risk."

The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer's hope that someone else -- who also knows that the assets will be forever unproductive -- will pay more for them in the future. Tulips, of all things, briefly became a favorite of such buyers in the 17th century.

This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce -- it will remain lifeless forever -- but rather by the belief that others will desire it even more avidly in the future.

The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.

What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As "bandwagon" investors join any party, they create their own truth -- for a while.

Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the "proof " delivered by the market, and the pool of buyers -- for a time -- expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: "What the wise man does in the beginning, the fool does in the end."

Today the world's gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce -- gold's price as I write this -- its value would be about $9.6 trillion. Call this cube pile A.

Let's now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world's most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
Beyond the staggering valuation given the existing stock of gold, current prices make today's annual production of gold command about $160 billion. Buyers -- whether jewelry and industrial users, frightened individuals, or speculators -- must continually absorb this additional supply to merely maintain an equilibrium at present prices.

A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops -- and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil (XOM) will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.

Admittedly, when people a century from now are fearful, it's likely many will still rush to gold. I'm confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B.
Our first two categories enjoy maximum popularity at peaks of fear: Terror over economic collapse drives individuals to currency-based assets, most particularly U.S. obligations, and fear of currency collapse fosters movement to sterile assets such as gold. We heard "cash is king" in late 2008, just when cash should have been deployed rather than held. Similarly, we heard "cash is trash" in the early 1980s just when fixed-dollar investments were at their most attractive level in memory. On those occasions, investors who required a supportive crowd paid dearly for that comfort.

My own preference -- and you knew this was coming -- is our third category: investment in productive assets, whether businesses, farms, or real estate. Ideally, these assets should have the ability in inflationary times to deliver output that will retain its purchasing-power value while requiring a minimum of new capital investment. Farms, real estate, and many businesses such as Coca-Cola (KO), IBM (IBM), and our own See's Candy meet that double-barreled test. Certain other companies -- think of our regulated utilities, for example -- fail it because inflation places heavy capital requirements on them. To earn more, their owners must invest more. Even so, these investments will remain superior to nonproductive or currency-based assets.

Whether the currency a century from now is based on gold, seashells, shark teeth, or a piece of paper (as today), people will be willing to exchange a couple of minutes of their daily labor for a Coca-Cola or some See's peanut brittle. In the future the U.S. population will move more goods, consume more food, and require more living space than it does now. People will forever exchange what they produce for what others produce.

Our country's businesses will continue to efficiently deliver goods and services wanted by our citizens. Metaphorically, these commercial "cows" will live for centuries and give ever greater quantities of "milk" to boot. Their value will be determined not by the medium of exchange but rather by their capacity to deliver milk. Proceeds from the sale of the milk will compound for the owners of the cows, just as they did during the 20th century when the Dow increased from 66 to 11,497 (and paid loads of dividends as well).

Berkshire's goal will be to increase its ownership of first-class businesses. Our first choice will be to own them in their entirety -- but we will also be owners by way of holding sizable amounts of marketable stocks. I believe that over any extended period of time this category of investing will prove to be the runaway winner among the three we've examined. More important, it will be by far the safest.

-----------------------------------------

http://finance.fortune.cnn.com/2012/02/09/warren-buffett-berkshire-shareholder-letter/
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: jmces on Sep 09, 2013, 09:11 AM
breakfast  :rakenrol:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 09, 2013, 09:14 AM
^haha good one
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 09, 2013, 11:02 AM
Warren Buffett Tries to Explain 'Colorful Charlie' Munger


BECKY QUICK: Warren, thank you for joining us today.

WARREN BUFFETT: My pleasure.

BECKY: You know, at one point you turned to Charlie Munger today and said, 'Who haven't we insulted yet?' (Buffett laughs) And I know you're not Charlie's keeper, but would you indulge me for just a minute? Let's go through some of the things he said today.

BUFFETT: Uh-oh.

BECKY: I'd like to get your take on them. First of all, on short sellers, he said, 'We don't like trading agony for money.'

BUFFETT: The reason he said that is because a stock, when you short it, can theoretically go to infinity. When you buy a stock at 10, you can only lose 10 points. When you short a stock at 10, it can go to 100 or 200. And occasionally you'll get into a situation on a short where you may know eventually it's going to turn out to be worth nothing, or very close to it, or it's a fraud, but what it can do in between can be very, very unpleasant. We like to sleep well, and you can't sleep well if you're short a lot of stocks.

BECKY: When he was asked about Greece, Charlie said, let's see, letting Greece into the EU was sort of like serving up rat poison for whipping cream.

BUFFETT: I don't think. (Laughs) I would not have chosen that. The — I think what he was getting at was that putting 17 countries into a monetary union where you synchronize the currency but you didn't synchronize any other aspects of their economies, I mean the fiscal policies, the culture, costs of production, was doomed to failure. And he could have used other illustrations of countries. (Laughs).

BECKY: All right, let's talk a little bit about bankers. He, on Friday, compared them to heroin addicts.

BUFFETT: Yeah, well, that's colorful Charlie, but I would say this, that leverage has enticed people to do crazy things for time immemorial. Bankers have an ability to attract money because they offer government-guaranteed deposits. You've got a government-guaranteed security. So, unless there are limits on them, there will be great temptations to over-leverage. They did some of that, and they can do it through other instruments, off balance sheet things or derivatives or that sort of thing, so you really need limitations on people. And he would say that, probably say that that heroin, basically, is leverage and the ability to just borrow more and more money through deposits or whatever, and that that should be controlled.

BECKY: Would you go to regulation as strictly as he has laid out some of his ideas?

BUFFETT: Well, we're in general agreement. There should be limitations on how much leverage you get in the system. And he and I are both suspicious of the degree to which derivatives can create a whole lot more leverage than people understand.

BECKY: He also said Friday that when it comes to high-frequency traders, he thinks it's basically legalized front running.

BUFFETT: That's what it is. Yeah, that's what it is. I mean, that's the whole game. Why a — let's say that high-frequency trading produces gross income of X. That X comes out of somebody. It doesn't make Berkshire Hathaway more productive. It doesn't do anything of the sort. It comes, one way or another, it comes out of the pocket of investors. And the social purpose of it is rather hard to discern. (Laughs)

BECKY: Another thing Charlie had to say when he was asked about the Fed and their policies when it comes to interest rates, he said, look, the Fed looked around and they hurt the savers because they were convenient.

BUFFETT: Yeah, well, it had to hurt somebody. Bernanke had tough choices to make, but he decided to step on the gas pedal, in terms of monetary policy, and he brought down rates to virtually unheard of levels, and kept them there. And he's still got his foot on the pedal and that really does hurt savers. I mean, it has made it extremely difficult for all kinds of people who live on fixed-income investments. But, unfortunately, that was a by-product. And probably Bernanke, maybe correctly, and I would say probably correctly, decided that the dangers to the economy were greater if he didn't do it.

BECKY: When it comes to Twitter, Charlie says he stays away from it like the plague. I know you have a Twitter account. You've only tweeted twice. Do you expect to tweet again anytime soon?

BUFFETT: It's not been at the top of my mind. I am — Charlie is the only guy less with it than I am. (Laughs)

BECKY: And you know, you had a really interesting comment today. You talked about the ten smartest words in economic history. Can you repeat those for us?

BUFFETT: Well, it was when George Bush came out in front of the White House (during the 2008 credit crisis) and said, 'If money doesn't loosen up, this sucker could go down.' And that summed it up. And incidentally, a number of members of his party disagreed with his actions during that time. George Bush was right on the money. He needed (Treasury Secretary) Paulson and he needed Bernanke and he needed them to put their foot to the floor in terms of loosening up things. And it worked, and he hadn't done it I think the consequences would have been terrible.

BECKY: When you were explaining why you've been buying newspapers, Charlie at one point said, basically you're saying it's an exception and you like doing it.

BUFFETT: He has a way of saying things, doesn't he? (Laughs) He's right. We're not doing anything dumb in the sense that we won't get a return on them, but in terms of moving the needle at Berkshire, it will never do it.

BECKY: Warren, thank you very much for you time.

BUFFETT: Thank you, Becky.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: GIG on Sep 09, 2013, 12:14 PM
Warren Buffett: Why STOCKS beat GOLD and BONDS
February 9, 2012: 5:00 AM ET
FORTUNE

Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire Hathaway (BRKA) we take a more demanding approach, defining investing as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power -- after taxes have been paid on nominal gains -- in the future. More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date.

From our definition there flows an important corollary: The riskiness of an investment is not measured by beta (a Wall Street term encompassing volatility and often used in measuring risk) but rather by the probability -- the reasoned probability -- of that investment causing its owner a loss of purchasing power over his contemplated holding period. Assets can fluctuate greatly in price and not be risky as long as they are reasonably certain to deliver increased purchasing power over their holding period. And as we will see, a nonfluctuating asset can be laden with risk.

Investment possibilities are both many and varied. There are three major categories, however, and it's important to understand the characteristics of each. So let's survey the field.
Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as "safe." In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge.
Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as these holders continued to receive timely payments of interest and principal. This ugly result, moreover, will forever recur. Governments determine the ultimate value of money, and systemic forces will sometimes cause them to gravitate to policies that produce inflation. From time to time such policies spin out of control.

Even in the U.S., where the wish for a stable currency is strong, the dollar has fallen a staggering 86% in value since 1965, when I took over management of Berkshire. It takes no less than $7 today to buy what $1 did at that time. Consequently, a tax-free institution would have needed 4.3% interest annually from bond investments over that period to simply maintain its purchasing power. Its managers would have been kidding themselves if they thought of any portion of that interest as "income."

For taxpaying investors like you and me, the picture has been far worse. During the same 47-year period, continuous rolling of U.S. Treasury bills produced 5.7% annually. That sounds satisfactory. But if an individual investor paid personal income taxes at a rate averaging 25%, this 5.7% return would have yielded nothing in the way of real income. This investor's visible income tax would have stripped him of 1.4 points of the stated yield, and the invisible inflation tax would have devoured the remaining 4.3 points. It's noteworthy that the implicit inflation "tax" was more than triple the explicit income tax that our investor probably thought of as his main burden. "In God We Trust" may be imprinted on our currency, but the hand that activates our government's printing press has been all too human.

High interest rates, of course, can compensate purchasers for the inflation risk they face with currency-based investments -- and indeed, rates in the early 1980s did that job nicely. Current rates, however, do not come close to offsetting the purchasing-power risk that investors assume. Right now bonds should come with a warning label.

Under today's conditions, therefore, I do not like currency-based investments. Even so, Berkshire holds significant amounts of them, primarily of the short-term variety. At Berkshire the need for ample liquidity occupies center stage and will never be slighted, however inadequate rates may be. Accommodating this need, we primarily hold U.S. Treasury bills, the only investment that can be counted on for liquidity under the most chaotic of economic conditions. Our working level for liquidity is $20 billion; $10 billion is our absolute minimum.

Beyond the requirements that liquidity and regulators impose on us, we will purchase currency-related securities only if they offer the possibility of unusual gain -- either because a particular credit is mispriced, as can occur in periodic junk-bond debacles, or because rates rise to a level that offers the possibility of realizing substantial capital gains on high-grade bonds when rates fall. Though we've exploited both opportunities in the past -- and may do so again -- we are now 180 degrees removed from such prospects. Today, a wry comment that Wall Streeter Shelby Cullom Davis made long ago seems apt: "Bonds promoted as offering risk-free returns are now priced to deliver return-free risk."

The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer's hope that someone else -- who also knows that the assets will be forever unproductive -- will pay more for them in the future. Tulips, of all things, briefly became a favorite of such buyers in the 17th century.

This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce -- it will remain lifeless forever -- but rather by the belief that others will desire it even more avidly in the future.

The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.

What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As "bandwagon" investors join any party, they create their own truth -- for a while.

Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the "proof " delivered by the market, and the pool of buyers -- for a time -- expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: "What the wise man does in the beginning, the fool does in the end."

Today the world's gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce -- gold's price as I write this -- its value would be about $9.6 trillion. Call this cube pile A.

Let's now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world's most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
Beyond the staggering valuation given the existing stock of gold, current prices make today's annual production of gold command about $160 billion. Buyers -- whether jewelry and industrial users, frightened individuals, or speculators -- must continually absorb this additional supply to merely maintain an equilibrium at present prices.

A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops -- and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil (XOM) will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.

Admittedly, when people a century from now are fearful, it's likely many will still rush to gold. I'm confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B.
Our first two categories enjoy maximum popularity at peaks of fear: Terror over economic collapse drives individuals to currency-based assets, most particularly U.S. obligations, and fear of currency collapse fosters movement to sterile assets such as gold. We heard "cash is king" in late 2008, just when cash should have been deployed rather than held. Similarly, we heard "cash is trash" in the early 1980s just when fixed-dollar investments were at their most attractive level in memory. On those occasions, investors who required a supportive crowd paid dearly for that comfort.

My own preference -- and you knew this was coming -- is our third category: investment in productive assets, whether businesses, farms, or real estate. Ideally, these assets should have the ability in inflationary times to deliver output that will retain its purchasing-power value while requiring a minimum of new capital investment. Farms, real estate, and many businesses such as Coca-Cola (KO), IBM (IBM), and our own See's Candy meet that double-barreled test. Certain other companies -- think of our regulated utilities, for example -- fail it because inflation places heavy capital requirements on them. To earn more, their owners must invest more. Even so, these investments will remain superior to nonproductive or currency-based assets.

Whether the currency a century from now is based on gold, seashells, shark teeth, or a piece of paper (as today), people will be willing to exchange a couple of minutes of their daily labor for a Coca-Cola or some See's peanut brittle. In the future the U.S. population will move more goods, consume more food, and require more living space than it does now. People will forever exchange what they produce for what others produce.

Our country's businesses will continue to efficiently deliver goods and services wanted by our citizens. Metaphorically, these commercial "cows" will live for centuries and give ever greater quantities of "milk" to boot. Their value will be determined not by the medium of exchange but rather by their capacity to deliver milk. Proceeds from the sale of the milk will compound for the owners of the cows, just as they did during the 20th century when the Dow increased from 66 to 11,497 (and paid loads of dividends as well).

Berkshire's goal will be to increase its ownership of first-class businesses. Our first choice will be to own them in their entirety -- but we will also be owners by way of holding sizable amounts of marketable stocks. I believe that over any extended period of time this category of investing will prove to be the runaway winner among the three we've examined. More important, it will be by far the safest.

-----------------------------------------

http://finance.fortune.cnn.com/2012/02/09/warren-buffett-berkshire-shareholder-letter/


WB always makes the complex things simple to understand.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 09, 2013, 05:39 PM
CNBC interview

Don't make this terrible mistake

The idea that the European news of slow down on this and that or anything like that. That will not cost you if you own a good farm and had it run by a good tenant, you wouldn't sell it because somebody said here's a news item or said this are happening in greece or something of the sort.

If you own an apartment house and you got to raise your rent a little, it is well located and you have a good manager you wouldn't dream of selling it.

If you have a good business personally like the local Mcdonalds franchise, you wouldn't be thinking of buying and selling it everyday.

Now when you own stocks, you own pieces of businesses and their wonderful business, you could pick the best businesses in the WORLD. And to BUY or SELL on CURRENT NEWS is just CRAZY, you're in a wonderful business, you got people running it for you, you know you are going to do well over 5 or 10 years and to think news events should cause you to try dance in and out and think its a wonderful game is a terrible mistake, so get into a bunch of wonderful businesses and STAY with them.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: jmces on Sep 10, 2013, 09:06 AM
 :cool2: men always make simple things complicated
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 10, 2013, 10:53 AM
"We've long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie [Munger] and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children."

Buffett and Munger
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 10, 2013, 04:57 PM
Source: The Snowball

The really big money tends to be made by investors who are right in QUALITATIVE DECISIONS.


Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: GIG on Sep 11, 2013, 04:50 PM
@Wills

My favorite thread in all of PMT!!

keep it coming baby!!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 11, 2013, 09:59 PM
^ thanks GIG.

More to come!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 11, 2013, 11:09 PM
“Paying up for an extraordinary company is not a mistake.” - Warren Buffett

"Buffett had success in value investing because competition was less intense. It’s ridiculous to think the way he did things in the past he should have stayed in."  - Charlie Munger
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 12, 2013, 10:10 AM
What are your capital spending plans? And do you owe your success to timing?

Warren: I was born in the U.S. so I had a huge advantage, and I was born male so I had a big advantage. I’m not sure in the business world if I was born in 1930 the time could have been better. I was conceived in November 1929 when my parents had nobody to call on and no TV, so here I am, luck the crash of 29 came along. It caused a lot of people to be turned off on stocks like the last crash. Business was a terrible environment. Every baby born in the U.S., on a probably basis, will do better in all kinds of ways than I do. In the investment field, it is not as good as it was in 1950. But a person with a passion for investing coming of age likely will do better and live better.

Charlie: Competition was weak in the early days. Competition is not as weak now. There is surely an advantage from exiting between not mean more to do ahead.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 12, 2013, 03:07 PM
"Visiting stores and testing products is one of the critical elements of the analyst’s job."

"As I look back on it now, it’s obvious that studying history and philosophy was much better preparation for the stock market than, say, studying statistics."


Peter Lynch
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: GIG on Sep 13, 2013, 08:55 AM
"Visiting stores and testing products is one of the critical elements of the analyst’s job."

"As I look back on it now, it’s obvious that studying history and philosophy was much better preparation for the stock market than, say, studying statistics."


Peter Lynch

While helping my daughter with her oh so "oppressive" math assignment yesterday, I just thought that the schools are teaching us a lot of unnecessary things to clutter our lives! Think extracting the square root manually. I mean this should be reserved to aspiring mathematicians haaay!!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 13, 2013, 09:14 AM
While helping my daughter with her oh so "oppressive" math assignment yesterday, I just thought that the schools are teaching us a lot of unnecessary things to clutter our lives! Think extracting the square root manually. I mean this should be reserved to aspiring mathematicians haaay!!

Agree with you
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 13, 2013, 12:31 PM
“Life is like a snowball. The important thing is finding wet snow and a really long hill. ”


― Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 13, 2013, 12:36 PM
From Graham's class, Warren took away three main principles that required nothing more than the stern discipline of mental independence:

a stock is the right to own a little piece of a business. A stock is worth a certain fraction of what you would be willing to pay for the whole business.

use a margin of safety. Investing is built on estimates and uncertainty. A wide margin of safety ensures that the effects of good decisions are not wiped out by errors.

Mr. Market is your servant, not your master. Graham postulated a moody character called Mr. Market, who offers to buy and sell stocks every day, often at prices that don't make sense. Mr market's moods should not influence your view of price. However, from time to time he does offer the chance to buy low and sell high.


- The Snowball
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 13, 2013, 12:54 PM
"I learned that it pays to hang around with people better than you are, because you will float upward a little bit. And if you hang around people that behave worse than you, pretty soon you'll start sliding down the pole."  - Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 13, 2013, 01:01 PM
"Part of Brandt's job for Buffett was finding scuttlebutt, a term used by investment writer Phil Fisher, the apostle of growth, who said that many qualitative factors like the ability to maintain sales growth, good management, and research and development characterised a good investment. These were the qualities that Munger was searching for when he spoke of the great businesses. Fisher's proof that these factors could be used to assess a stock's long-term potential was beginning to creep into Buffett's thinking and would eventually influence his way of doing business."

- Snowball


"I'm 15 percent Fisher and 85 percent Benjamin Graham." - Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: jmces on Sep 13, 2013, 01:17 PM
wow ang dami busog lunch  :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 14, 2013, 02:08 PM
"1. We will not go into businesses where technology which is way over my head is crucial to the investment decision. I know about as much about semiconductors or integrated circuits as I do of the mating habits of the chrzaszcs. 2. We will not seek out activity in investment operations, even if offering splendid profit expectations, where major human problems appear to have a substantial chance of developing." - Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: Wills on Sep 14, 2013, 03:51 PM
8 Charlie Munger Quotes To Help You Improve as an Investor


1. Denial will lead you straight to failure

"If you turn on the television you find the mothers of the most obvious criminals that man could ever diagnose and they all think their sons are innocent. The reality is too painful to bear so you just distort it until it’s bearable. We all do it to some extent. It’s a common psychological misjudgment that causes terrible problems."


2. Do not decide on something just because you like it

"The tendency to especially like oneself, one’s own kind and one’s own idea structures, and the tendency to be especially susceptible to being misled by someone liked."


3. Argument from authority bias

"They don’t do this in airplanes, but they’ve done it in simulators. They have the pilot do something where an idiot co-pilot would know the plane was going to crash, but the pilot’s doing it, and the co-pilot is sitting there, and the pilot is the authority figure. Twenty-five percent of the time, the plane crashes. I mean this is a very powerful psychological tendency."


4. Envy and jealousy kills rationality

"I’ve heard Warren say a half a dozen times, ‘It’s not greed that drives the world, but envy.’ And you go through the psychology survey courses, and you go to the index: envy, jealousy, in a 1,000-page book — it’s blank! There’s some blind spots in academia, but it’s an enormously powerful thing."


5. Active learning and application

"We all know people who’ve flunked, and they try and memorize and they try and spout back. It just doesn’t work. The brain doesn’t work that way. You’ve got to array facts on the theory structures answering the question ‘Why?’ If you don’t do that, you just cannot handle the world."


6. The psychology of the near miss

"Then if you take the slot machines, you get bar, bar, walnut. And it happens again and again and again. You get all these near misses. Well that’s deprival super-reaction syndrome, and boy do the people who create the machines understand human psychology. And for the high IQ-crowd they’ve got poker machines where you make choices. So you can play blackjack, so to speak, with the machine. It’s wonderful what we’ve done with our computers to ruin the civilization."


7. Get rid of defensive attitudes

"Here I think we should discuss John Gutfreund. This is a very interesting human example, which will be taught in every decent professional school for at least a full generation. Gutfreund has a trusted employee and it comes to light not through confession but by accident that the trusted employee has lied like hell to the government and manipulated the accounting system, and it was really equivalent to forgery. And the man immediately says, “I’ve never done it before, I’ll never do it again. It was an isolated example.”


8. Stress can induce mental changes

"Here, my favorite example is the great Pavlov. He had all these dogs in cages, which had all been conditioned into changed behaviors, and the great Leningrad flood came and it just went right up and the dog’s in a cage. And the dog had as much stress as you can imagine a dog ever having. And the water receded in time to save some of the dogs, and Pavlov noted that they’d had a total reversal of their conditioned personality. And being the great scientist he was, he spent the rest of his life giving nervous breakdowns to dogs, and he learned a helluva lot that I regard as very interesting."


Author's note:

Charlie Munger quotes are equally as timeless as Buffett. Difference is that Munger doesn’t talk about stocks that often. Instead, Munger likes to impart wisdom and lessons from other disciplines.

Munger obviously gets far less attention than Buffett, but by reading his words, you can dig into the brains of one of the great thinkers. Not everything is going to be applicable to investing, but most of it is. Investing requires a multi-disciplinary approach and at first, the things you read may not make sense or you may not be able to understand how it is related, but take a step back and you’ll see that mostly everything can be applied to investing.

Investing is more than just looking at numbers, buying and selling.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 16, 2013, 11:56 AM
Crash of 1987 Stock Market


Talk about the change in '86-87.


Peter Lynch: Well, I remember in my career you'd say to somebody you worked in the investment business. They'd say, "That's interesting. Do you sail? What do you think of the Celtics?" I mean it would just go right to the next subject. If you told them you were a prison guard, they would have been interested. They would have had some interest in that subject, but if you said you were in the investment business, they said, "Oh, terrific. Do your children go to school?" It just went right to the next subject. You could have been a leper, you know, and been much more interesting. So that was sort of the attitude in the '60s and '70s.

As the market started to heat up, you'd say you were an investor, "Oh, that's interesting. Are there any stocks you're buying?" And then people would listen not avidly. They'd think about it. But then as the '80s piled on, they started writing things down. So I remember people would really take an interest if you were in the investment business, saying "What do you like?" And then it turned and I remember the final page of the chapter would be you'd be at a party and everybody would be talking about stocks. And then people would recommend stocks to me. And then I remember not only that, but the stocks would go up. I'd look in the paper and I'd notice they'd go up in the next three months. And then you've done the full cycle of the speculative cycle that people hate stocks, they despised, they don't want to hear anything about 'em, now they're buying everything and cab drivers are recommending stocks. So that was sort of the cycle I remember going through from the '60s and early '70s all the way to '87.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 16, 2013, 12:46 PM
Crash of 1987 Stock Market



Where were you when the Crash of '87 came?


Peter Lynch: Well, I was very well prepared for the Crash of 1987. -- my wife and I took our first vacation in eight years and we left on Thursday in October and I think that day the market went down 55 points and we went to Ireland, the first trip we'd ever been there. And then on Friday, because of the time difference, we'd almost completed the day and I called and the market was down 115. I said to Carolyn, "If the market goes down on Monday, we'd better go home." And "We're already here for the weekend. So we'll spend the weekend." So it went down 508 on Monday, so I went home. So in two business days I had lost a third of my fund. So I figured at that rate, the week would have been a rough week. So I went home. Like I could do something about it. I mean it's like, you know, if there was something I could do. I mean there I was -- but I think if people called up and they said, "What's Lynch doing," and they said, "Well, he's on the eighth hole and he's every par so far, but he's in a trap, this could be a triple bogey," I mean I think that's not what they wanted to hear. I think they wanted to hear I'd be there lookin' over -- I mean there's not a lot you can do when the market's in a cascade but I got home quick as I could.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 16, 2013, 12:50 PM
Crash of 1987 Stock Market


Why did the Crash of '87 happen?


Peter Lynch: Well, I think people had not analyzed '87 very well. I think you really have to put it in perspective. 1982, the market's 777. It's all the way to '86. You have the move to 1700. In four years -- the market moves from 777 to 1700 in four years. Then in nine months it puts on a thousand points. So it puts on a thousand points in four years, then puts on another thousand points in the next nine months. So in August of 1987 it's 2700. It's gone up a thousand points in nine months. Then it falls a thousand points in two months, 500 points the last day. So if the market got sideways at 1700, no one would have worried, but it went up a thousand in nine-ten months and then a thousand in two months, and half of it in one day, you would have said.... "The world's over." It was the same price. So it was really a question of the market just kept going up and up and it just went to such an incredible high price by historic, price earnings multiple load, dividend yields, all the other statistics, but people forget that basically it was unchanged in 12 months. If you looked at September, 1986 to October '87, the market was unchanged. It had a thousand point up and a thousand points down and they only remember the down. They thought, "Oh, my goodness, this is the crash. It's all over. It's going to go to 200 and I'm going to selling apples and pencils," you know. But it wasn't. It was a very UNIQUE PHENOMENON because COMPANIES WERE DOING FINE. Just, you know, you'd call up a company and say, "We can't figure it out. We're doin' well. Our orders are good. Our balance sheet's good." "We just announced we're gonna buy some of our stock. We can't figure out why it's good down so much."

---------------------------------

Fund managers comment: "Oh, my goodness, this is the crash. It's all over. It's going to go to 200 and I'm going to selling apples and pencils,"

Company/Business managers comment: "We can't figure it out. We're doin' well. Our orders are good. Our balance sheet's good." "We just announced we're gonna buy some of our stock. We can't figure out why it's good down so much."
Title: Re: 1987 Market Crash
Post by: Wills on Sep 16, 2013, 04:08 PM
Crash of 1987 Stock Market


Was that the most scared you ever were in your career?


Peter Lynch: '87 wasn't that scary because I concentrate on fundamentals. I call up companies. I look at their balance sheet. I look at their business. I look at the environment. The decline was kinda scary and you'd tell yourself, "Will this infect the basic consumer? Will this drop make people stop buying cars, stop buying houses, stop buying appliances, stop going to restaurants?" And you worried about that.

The reality, the '87 decline was nothing like 1990. Ninety, in my 30 years of watching stock very carefully, was by far the scariest period.
Title: Re: 1987 Market Crash
Post by: Wills on Sep 16, 2013, 07:46 PM
Crash of 1987 Stock Market



What was so scary about 1990?


Peter Lynch: Well, 1990 was a situation where I think it's almost exactly six years ago approximately now. In the summer of 1990, the market's around 3000. Economy's doing okay. And Saddam Hussein decides to walk in and invade Kuwait. So we have invasion of Kuwait and President Bush sends 500,000 troops to Saudi to protect Saudi Arabia. There's a very big concern about, you know, "Are we going to have another Vietnam War?" A lot of serious military people said, "This is going to be a terrible war." Iraq has the fourth largest army in the world. They really fought very well against Iran.

These people are tough. This is going to be a long, awful thing. So people were very concerned about that, but, in addition, we had a very major banking crisis. All the major New York City banks, Bank of America, the real cornerstone of this country were really in trouble. And this is a lot different than if W.T. Grant went under or Penn Central went under. Banking is really tight. And you had to hope that the banking system would hold together and that the Federal Reserve understood that Citicorp, Chase, Chemical, Manufacturers Hanover, Bank of America were very important to this country and that they would survive. And then we had a recession. Unlike '87 you called companies, in 1990 you called companies and say, "Gee, our business is startin' to slip. Inventories are startin' to pile up. We're not doing that well." So you really at that point in time had to belief the whole thing would hold together, that we wouldn't have a major war. You really had to have faith in the future of this country in 1990. In '87, the fundamentals were terrific and it was -- it was like one of those three for two sales at the K-Mart. Things were marked down. It was the same story.
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 17, 2013, 08:44 AM
Q&A: Peter Lynch on Investing in Volatile Markets


What would you tell investors who have watched the value of their portfolios slide with the downturn in the markets?


Peter Lynch: I'd say the same things I said 10 months ago, the same things I said 10 years ago. The stock market is a volatile animal. There have been some traumatic declines in the stock market in the last year. Historically we have a decline of 10% or more about once every two years.

That's the nature of the market, even in good markets we have declines, and trying to predict its direction over the near term is an exercise in futility. Behind all the smoke and noise on the market's surface, it's important to remember that companies – small, medium and large – make up the market's backbone. And CORPORATE EARNINGS DRIVE STOCK PRICES. If you look at the 500 companies in the S&P 500®, despite 10 recessions since WW II, earnings have grown 7% annually. That's a pretty good track record.
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: jmces on Sep 17, 2013, 08:59 AM
 :cool2:
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: GoodSteward on Sep 17, 2013, 09:57 AM
Can I post this counter-view of John Mangun regarding Buffets famous saying : Buy companies, not stock even though your thread title has changed? TIA!

Something to ponder on lang but i dont completely agree with him... Im AC-DC mode again, Fundamentals or trends....LOL

Invest in stocks, not in companies
“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”—Warren Buffett

THOSE words from Buffett could cost you a fortune in losses and in missed opportunities if you apply them literally. Buffet does not buy stock; he buys companies. You, on the other hand, invest in stocks, unless you are buying enough of a company’s shares to earn a seat on its board of directors, like Buffett does. If you are on the board, then you really do not care if the stock market is open or not.

Another reason why the abovementioned quote has little relationship to the local stock market is that US companies pay dividends and Filipino companies do not.

There are two financial reasons for a person to own a company. The first is that, as the value of the company increases, it becomes a storehouse and a growth engine of personal wealth. Henry Sy and Bill Gates may not have billions of dollars in cash, but they hold ownership of the billions of dollars that their companies have. Even families that own private companies have their great wealth stored in their businesses.

But companies, public or not, also generate profits, which are given out to the owners in the form of dividends.

If you own a thriving and profitable family business that you also operate, you are probably not concerned about taking dividends out of the company for your income. You earn a salary just like everyone else, and your company is always growing your personal wealth.

But if you are not an employee and want your personal income to come from the company’s profits, then you want dividend payments. In the US the majority of the ownership of public companies is owned by the public, not by a small number of people who belong to the same family. Gates is not the majority owner of Microsoft any more than the Ford family owns Ford Motor Co. To attract public ownership, US public companies pay out a large amount of their profits in dividends.

In the Philippines, where most public companies are overwhelmingly owned by a small group of people who probably come from the families that started these firms, little or no dividends are paid. Therefore, the only way that public-company owners can make money is through stock-price appreciation and not profit participation through dividends.

Buffett can profitably own the stock of a company that pays a 6-percent or 7-percent cash dividend and does not need to worry about the stock market being open or not. You, on the other hand, do not receive those dividends here. Megaworld Corp. and Ayala Corp. are two excellent companies. Yet, both pay a cash dividend of about 1 percent, based on current prices. You must have the stock market open to make any money from your ownership of these two companies. And by the way, based on his investment requirements, Buffett would not buy shares of either Megaworld or Ayala.

Buffett makes money through the company; you make money through the stock.

A company buyer must focus attention on the company: its financials, its management and its ability to pay out dividends. A stock buyer must focus attention on the stock: its price trend, trading volume and investor sentiment about the stock.

Company factors may certainly affect stock price. However, is the company value of San Miguel Corp. truly 45 percent lower than it was five months ago? Maybe or maybe not, but that is how much the stock price went down.

While you are waiting for the price to recover that 45 percent, San Miguel is paying you a 1-percent income on your investment.

Buy the stock, not the company.
http://businessmirror.com.ph/index.php/en/news/opinion/19495-invest-in-stocks-not-in-companies
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 17, 2013, 10:49 AM
Hi GS,

I don't mind, in fact I like what you posted, can I share my thoughts about this?
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: GoodSteward on Sep 17, 2013, 11:32 AM
Sure man, what do you think?

I remember bauer mentioning he doesnot "buy" Manguns words anymore... Interestingly they have same view that local market and foreign markets are very different..hehe
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 17, 2013, 12:12 PM

Invest in stocks, not in companies

I completely disagree. I would say Invest in a profitable companies and stay with them.




“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”—Warren Buffett


Before someone attack this quote from Buffett he should study first how value investing works(Buffett style). Why did buffett said that? Here’s my take:

You’ve gotta be a VI before you apply what Buffett said, you don’t just buy company because it has a PE of 2 or it is BIG or because of past earnings. You have to validate all of this and ask yourself WHY did the company had a good past performance, WHY do they have loyal customers, WHY does the customers prefer their product instead of others, HOW sticky are their brand and product to customers, WHAT is the products psychological effect in customers(effects in human nature) and most important of all is WHAT is the growth story of the company and HOW would you compare the growth story to its current P/E, of course don’t forget quantitative analysis. Once your conviction is firm it is time to buy. Value of the company does not always correlate with the price BUT it will not continue indefinitely, price will catch up once the market realized that your stock is a gem. That is why he said 5 years because a good company with strong growth potential will have a huge changes in its valuation, you just need to wait for your stock to mature. That is why Munger said this:

"Big money is made in the waiting"





THOSE words from Buffett could cost you a fortune in losses and in missed opportunities if you apply them literally.


Yes of course there is a lot of opportunity in volatility, and as a VI you are going to miss it, just imagine buy stock every time it goes down and sell every time its up, right? so YES you will make money from that. But don’t forget to ask this question: Can you do it consistently? Because if NOT it could result to losses.




Buffet does not buy stock; he buys companies.


Mangun should have known the story of PetroChina.
Here is the link: http://www.youtube.com/watch?v=sLXNn-im4ec

He made 3.5 billion USD from 500 million USD investment, He didn't buy the whole company.








You, on the other hand, invest in stocks, unless you are buying enough of a company’s shares to earn a seat on its board of directors, like Buffett does. If you are on the board, then you really do not care if the stock market is open or not.


Actually a piece of share represents whole business. So technically if a whole business is selling for 10 billion pesos at 2 pesos per share and you buy 10 shares then you bought whole business for 10 billion pesos.





Another reason why the above mentioned quote has little relationship to the local stock market is that US companies pay dividends and Filipino companies do not.


We view dividend in many ways, a company who does not pay dividend could be viewed as a “good move” for you as a shareholder and the company especially for company with strong future growth that needs capital for expansion of course company's value will increase. In our part as an investor who did not receive the dividend must remember that the stock’s value will grow and eventually price will follow.





In the Philippines, where most public companies are overwhelmingly owned by a small group of people who probably come from the families that started these firms, little or no dividends are paid. Therefore, the only way that public-company owners can make money is through stock-price appreciation and not profit participation through dividends.


Mangun thinks that dividends is the only way to profit in stock market. He talks about stock-price appreciation and yet he does not understand it simply because he doesn't look at stock in a VI's perspective.


"CORPORATE EARNINGS DRIVE STOCK PRICES" - Peter Lynch
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: rds on Sep 17, 2013, 12:41 PM
bakit pa iba-iba ang title thread nito?
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 17, 2013, 12:52 PM
^I want to give emphasis on the topic.

Babalik ito sa dating title pagNapost na lahat ng Q&A ni Peter Lynch about investing in volatile markets.
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 17, 2013, 12:56 PM
Q&A: Peter Lynch on Investing in Volatile Markets


What is the official definition of a market correction and bear market?



Peter Lynch: I get a lot of questions regarding the differences in the major declines in the stock market. A correction is nothing more than a Wall Street euphemism for losing a lot of money very rapidly. While it is valuable to debate why it happens, I think the most important thing to remember is that it is normal.

That's right, normal. Just think about how often the market moves like that. Since 1970, we've had 21 of these corrections – or drops – of 10% or more. Bear markets, which are decidedly less frequent than corrections, are defined as declines of 20% or more. Investors have experienced 11 bear markets in the last 50 years, based on intraday extremes in the S&P 500®. Investors who understand the fundamentals of the market don't panic or pull out when we experience declines, because over the long term they know the stock market is the place to be.
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: lemreyes on Sep 17, 2013, 01:36 PM
i sure hope you don't change stock positions as often as you change this post title :D
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 17, 2013, 02:22 PM
Minsan ka lang magpost wala pang SaySay. if that's what makes you happy, what can I do
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: personalfinanceapprentice on Sep 17, 2013, 03:39 PM
Actually a piece of share represents whole business. So technically if a whole business is selling for 10 billion pesos at 2 pesos per share and you buy 10 shares then you bought whole business for 10 billion pesos.

We're probably mincing words here, but one share represents part of a business, not the whole business. You are also entitled to part of the profits (dividends), not the whole pie.

In your example you also did not mention how many total shares the Php10B company is divided into. If it's divided in to 5 billion shares at 2 pesos each and you bought 10 shares then you have ownership of 10/5000000000 of the business. You are also given as much "power" to chart the direction of the company.

Since Mangun is a TA disciple, and Buffet (and I assume you too) is a VI disciple, naturally there are conflicts in ideology.

However, what the article seems to get at is that if you're a small time investor, with no real decision making power in the company, the best way to profit is to exploit the volatility. For anyone using VI or some other form of fundamental analysis, that is of course far from the truth.

But from his perspective, if you have no power, then you're just along for the ride. His "recommendation" simply amounts to riding along if it's profitable and getting off when it stops - or, preferably, is about to stop - being so. And even Buffet, as you cited, sells his holdings. So the principle seem to be the same. Only the timing seems to be different; though Mangun makes no mention of how quickly to sell, I assume that based on his background.




"Mangun thinks that dividends is the only way to profit in stock market. He talks about stock-price appreciation and yet he does not understand it simply because he doesn't look at stock in a VI's perspective."

I'm probably misunderstanding you; even disregarding his background, and simply reading this article, it is clear that he knows dividends is not the only way. It is also clear that he prefers stock price appreciation to dividends.


"We view dividend in many ways, a company who does not pay dividend could be viewed as a “good move” for you as a shareholder and the company especially for company with strong future growth that needs capital for expansion of course company's value will increase. In our part as an investor who did not receive the dividend must remember that the stock’s value will grow and eventually price will follow."

I agree in general. But going over the article, his main point is that the profits, instead of being distributed, to the share-holders to attract more investors or entice them to stay (like in the U.S.) through dividends, is simply being kept by oligarchs.

For start-ups or those still with relatively low-capitalization, keeping dividends is the way to go. The same is true for companies that are still aggressively expanding. However a lot of companies in the PSE are old companies still owned primarily by family members, and whose companies are locking in value in the company instead of sharing it or using it to expand.

His argument seems to be that we should not be taken in by dividends nor place too much faith in making money through a dividend-investing approach.
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 17, 2013, 04:33 PM
Hi PFA,

You don't agree to what I said and it's ok.
Let's not argue, I think we are both firm in our beliefs, let's not waste our time.

Thanks
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: rds on Sep 17, 2013, 04:47 PM

In your example you also did not mention how many total shares the Php10B company is divided into. If it's divided in to 5 billion shares at 2 pesos each and you bought 10 shares then you have ownership of 10/5000000000 of the business. You are also given as much "power" to chart the direction of the company.

Is there any problem if you only a very small piece of the entire business. It's not about how much power you have that will make the stock (business) profitable, it's the company's system and the people behind (may not necessarily be you).

Besides, how are you so sure that if you take over that whole company (like TEL), you will not make a mess and you will outperform MVP's performance.

Pasalamat ka nga that at that very small amount you invest in stocks, MVP is working his ass to make the business and your investment becomes profitable.
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 17, 2013, 04:53 PM

Pasalamat ka nga that at that very small amount you invest in stocks, MVP is working his ass to make the business and your investment becomes profitable.


^ you really nailed it.


It's hard to argue because there are people who just can't get.
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: jmces on Sep 17, 2013, 05:00 PM
even sir isaac newton cannot measure the foolishness of men  :D
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 17, 2013, 05:04 PM
^yah, he lost money in stock market right?
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: jmces on Sep 17, 2013, 05:33 PM
big time as warren puts it
"Long ago, Sir Isaac Newton gave us 3 laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing: He lost a bundle in the South Sea Bubble, explaining later, 'I can calculate the movement of the stars, but not the madness of men.' If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases." - Warren Buffett
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 17, 2013, 07:53 PM
big time as warren puts it
"Long ago, Sir Isaac Newton gave us 3 laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing: He lost a bundle in the South Sea Bubble, explaining later, 'I can calculate the movement of the stars, but not the madness of men.' If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases." - Warren Buffett

Like^
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 17, 2013, 07:55 PM
Q&A: Peter Lynch on Investing in Volatile Markets



You always say to invest for the long-term. What do you mean by long-term investing?


Peter Lynch: A lot of people think long-term investing is three weeks from next Wednesday, but when I talk about long-term investing I mean 5, 10, 20 years. During that length of time the market can experience ups and downs due to what I call "BACKGROUND NOISE" Events occur – hurricanes, wars, political instability, currency and bank crises – that make investors nervous and cause market volatility. It does get nasty at times, but it shouldn't cloud investors' judgments about thinking long-term. The key organ here is your stomach. Everyone has the brainpower, but not everyone has the stomach for it.
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: lemreyes on Sep 18, 2013, 12:42 AM
Minsan ka lang magpost wala pang SaySay. if that's what makes you happy, what can I do
Peace! It was just a joke. :D
Buffett and Lynch fan myself so I'm following this thread. Keep em' coming.
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: jmces on Sep 18, 2013, 08:47 AM
 :hihi:
Peace! It was just a joke. :D
Buffett and Lynch fan myself so I'm following this thread. Keep em' coming.
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: personalfinanceapprentice on Sep 18, 2013, 01:48 PM
Is there any problem if you only a very small piece of the entire business. It's not about how much power you have that will make the stock (business) profitable, it's the company's system and the people behind (may not necessarily be you).

Besides, how are you so sure that if you take over that whole company (like TEL), you will not make a mess and you will outperform MVP's performance.

Pasalamat ka nga that at that very small amount you invest in stocks, MVP is working his ass to make the business and your investment becomes profitable.


I'm not sure why your reply assumed I had a problem with a small portion of ownership. What I was pointing out was that you do not get the "whole business" for buying just 10 shares out of (possibly) 5 billion shares.

While I'm sure I cannot do better than MVP, that wasn't my point. If I have no say in the direction of the company, and it gives very little dividends (not the case for TEL), then the only way to profit is to buy low and sell high - whether the time in between is 1 week, 1 year, or 1 decade.

When I can earn a seat on the board, it's a little different. I can sit tight, never sell, and simply use my equity as collateral for a loan with which to start new ventures (at least in the states - since WB was the example - I've read you can do that. I'm not sure how applicable that is here in PH).

And even here in the Philippines, if you have enough ownership to sit on the board, you can have the option to sell that directly to a third party looking to get into the board or looking to increase his voting power. In this case, the transaction may not simply be dependent on how much the stock is worth today on the market. It my depend more on book values or other metrics, and may even be sold at a premium if the buyer is "motivated".

And even if the stock plunges and then delists, when you have enough to sit on the board, you aren't just forced to liquidate at a loss. You can continue being a partner in the business, and still make money. Or at least keep your shares until such a time they are worth more - something you can actively help with since you now have decision making powers.

That is the main difference with being a "big" or "small" owner.

And technically, MVP is working his ass off for the Salim family (did I get the name right?) and himself (since he is still technically a salaried employee; I also assume he owns some shares at least), more than he works for me (assuming I owned even 10 board lots of TEL). Although it benefits me, that is almost incidental. I am just along for the ride.
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: jmces on Sep 18, 2013, 02:11 PM
Sir pfa are you into FA? or TA?
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: personalfinanceapprentice on Sep 18, 2013, 02:26 PM
Sir pfa are you into FA? or TA?

Kahit pfa lang pre, di mo naman ako boss:)

Honestly, don't have enough skill with either to flaunt it. I'm learning both, in tandem with all the economic concepts I need to get familiar with. Though I follow/believe in FA (and even VI, if it were not so time consuming to do) more than TA.
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 18, 2013, 02:49 PM
Good Afternoon Sir PFA,



I'm not sure why you're reply assumed I had a problem with a small portion of ownership. What I was pointing out was that you do not get the "whole business" for buying just 10 shares out of (possibly) 5 billion shares.


As a VI you always view it this way: If a company as a whole is selling at 10 billion pesos and represented at 2 pesos each share and you are willing to buy at 2 pesos means you bought the company at 10 billion pesos market cap, it's just that you bought only 10 shares. You are willing to buy a stock(10 shares) from the company that is worth 10 billion pesos.

If the 4,999,999,990 billion shares went up for 50%, your 10 shares will also increase 50%.(correct me if I'm wrong mahina po ako sa math)

Of course the satisfaction that you will feel is not as good compare to other guy who has 1 million shares, but you both got 50% profit. So percentage wise you got the same returns even if you only have 10 shares.(Mahina rin po ako sa percent calculations, magaling sa math si freefront, pakicorrect na lang po)


I said that^ because that's how Buffett look at the company before he BUY.

----------------------------------


What I was pointing out was that you do not get the "whole business" for buying just 10 shares out of (possibly) 5 billion shares.


I did NOT say you get the WHOLE business by just buying 10 shares. Ba't po ninyo ginawang Literal?


Pakicorrect na lang po kung may mga mali sa sinabi ko.

Thank you
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 18, 2013, 02:56 PM
Any parting thoughts for investors?
 


Peter Lynch: A couple of things. First, if you're going to need money within 12 months to pay for a wedding or put a down payment on a house, the stock market is not the place to be. You can flip a coin over where the market is headed over the next year. I have no idea whether the next 1,000 points for the Dow or Nasdaq will be in positive or negative territory. But if you're in the market for the long haul – 5, 10, or 20 years – then time is on your side and you should stick to your long-term investment plan. I would argue that the next 10,000 and 20,000 points for the market will be up. That's been the long-term trend. The bottom line is to have a responsible plan for your investments and know what you own and why you own it. There's too much at stake not to.   
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: personalfinanceapprentice on Sep 18, 2013, 03:35 PM
Good Afternoon Sir Wills,

Then I guess it was a misunderstanding. You posted:

Actually a piece of share represents whole business. So technically if a whole business is selling for 10 billion pesos at 2 pesos per share and you buy 10 shares then you bought whole business for 10 billion pesos.

Which was why I misunderstood you.

As you clarified, a piece of share does not represent the whole business and buying just 10 shares does not mean you bought the whole business.

Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 18, 2013, 04:12 PM
Good Afternoon Sir Wills,

Then I guess it was a misunderstanding. You posted:

Which was why I misunderstood you.

As you clarified, a piece of share does not represent the whole business and buying just 10 shares does not mean you bought the whole business.

Represent in a different context po.


I was pointing out that Mangun should perform extensive study about Buffett's strategy before bashing.


Thank you po Sir PFA.
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: personalfinanceapprentice on Sep 18, 2013, 04:39 PM
Hi Wills,

If you don't mind, I'd like to share my opinion about Mangun's article.

Although I do with the issues he brings up with dividends here and oligarchy, my take, weirdly enough, is that he said nothing of substance that the vast majority of investors - despite their various disciplines and level of knowledge - don't already know or aren't doing already.

The whole "buy the stock, not the company" thing was meant for shock value, and to elicit discussion. Far from bashing, he was merely re-packaging a basic concept in the guise of counter-intuitive (or anti-VI, if you prefer) conclusion (the term, as I heard it used before, was counter-intuitive wisdom; but I fear using the word wisdom will just spiral this into a needless argument).

He simply argued to buy-low sell-high, discounted dividend-investing (which I like btw), and used sleight of hand - oligarchs, a WB quote - to gloss over the somewhat lacking conclusion. Of course you buy low and sell high. That's what everyone does. Even VI disciples do it; albeit in a certain way (finding undervalued companies as opposed to market timing).

But what it lacks in substance, it makes up for in cleverness. Drawing attention to price action is likely to get a reader interested in TA and price movements. And Mangun happens to sell stock recommendations, which are made via TA.

Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 18, 2013, 05:29 PM
Sir PFA,

I don't mind it's all good:)

TA and VI have a different view, one example is "buy low", chart will tell you a stock AAA is low but VI will have a different opinion on stock AAA. This is just one example of many things.


That's why I said to you before we don't need to argue dahil wala pong katapusan ang topic na tulad po nito.


I already shared my view regarding Mangun's article and it's up for the readers if they agree or not.


I may not agree with you but I respect your opinion.


Thank you
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: GIG on Sep 18, 2013, 06:58 PM
Nicely done wills! Now we are ready for more of your posts.
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: rds on Sep 18, 2013, 09:07 PM
I'm not sure why your reply assumed I had a problem with a small portion of ownership. What I was pointing out was that you do not get the "whole business" for buying just 10 shares out of (possibly) 5 billion shares.

That's not how I understand with your post...

Quote
When I can earn a seat on the board, it's a little different. I can sit tight, never sell, and simply use my equity as collateral for a loan with which to start new ventures (at least in the states - since WB was the example - I've read you can do that. I'm not sure how applicable that is here in PH).

And even here in the Philippines, if you have enough ownership to sit on the board, you can have the option to sell that directly to a third party looking to get into the board or looking to increase his voting power. In this case, the transaction may not simply be dependent on how much the stock is worth today on the market. It my depend more on book values or other metrics, and may even be sold at a premium if the buyer is "motivated".

And even if the stock plunges and then delists, when you have enough to sit on the board, you aren't just forced to liquidate at a loss. You can continue being a partner in the business, and still make money. Or at least keep your shares until such a time they are worth more - something you can actively help with since you now have decision making powers.

That is the main difference with being a "big" or "small" owner.

see...you have a big concern with having a just a small piece of share because you don't have the above mentioned "advantages" or "privileges" when owning the whole company (or big part of it) than just buying a small share.

...and therefore, you conclude that...

Quote
then the only way to profit is to buy low and sell high - whether the time in between is 1 week, 1 year, or 1 decade.
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 18, 2013, 10:13 PM
Nicely done wills! Now we are ready for more of your posts.

Thanks GIG
Title: Re: Q&A: Peter Lynch on Investing in Volatile Markets
Post by: Wills on Sep 18, 2013, 10:48 PM
Q&A: Peter Lynch on Investing in Volatile Markets



You always say to invest for the long-term. What do you mean by long-term investing?


Peter Lynch: A lot of people think long-term investing is three weeks from next Wednesday, but when I talk about long-term investing I mean 5, 10, 20 years. During that length of time the market can experience ups and downs due to what I call "BACKGROUND NOISE" Events occur – hurricanes, wars, political instability, currency and bank crises – that make investors nervous and cause market volatility. It does get nasty at times, but it shouldn't cloud investors' judgments about thinking long-term. The key organ here is your stomach. Everyone has the brainpower, but not everyone has the stomach for it.



I found this post from international forum:

Forum name: thehynie

I think this temperament thing is huge. Years ago, when I was an institutional salesperson on Wall Street, I began to notice that some of the portfolio managers I covered consistently made good investment decisions, and some made consistently bad decisions. They all had great information, were smart people, but some were just able to integrate their knowledge of the external environment with their self-knowledge, and make consistently good decisions. At the opposite extreme, my best friend used to pay brokers to tell him when a former colleague of his traded, a guy who was almost infallibly wrong! I had a couple of clients like that, too, folks who did all the right thinking, and then inexplicably managed to come up with the wrong decision, usually under some kind of external pressure that had gotten applied inside their personal firewall--a self-inflicted wound.

I found it fascinating that Buffett mentioned he doesn't like to know the stock price as he did his analysis, because it might influence him. That's what I mean about integrating your slef-knowledge with your external knowledge in the decision-making process. In my Security Analysis final exam at Columbia (over 30 years ago), we were given the facts on a company and asked to value it. We were not told the name or price. I valued the company at 33% below the market. I was a little down at having been so far off in my final exam. The bear market soon arrived and guess what--the stock was right where I had valued it. As Mick Jagger said at the Super Bowl the other night "All things come to he who waits!" I wonder if Buffett learned that technique at Columbia and whether this kind of blind valuation exercise had been handed down from the days of Graham himself?

As far as temperament goes, I still think the best investment advice I ever heard came from Rudyard Kipling, and it goes like this: "If you can keep your head when all about you. Are losing theirs..."
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 19, 2013, 12:59 AM
If... by Rudyard Kipling



If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;

If you can wait and not be tired by waiting,
Or being lied about, don't deal in lies,
Or being hated, don't give way to hating,
And yet don't look too good, nor talk too wise:

If you can dream - and not make dreams your master;
If you can think - and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;

If you can bear to hear the truth you've spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to broken,
And stoop and build 'em up with wornout tools:

If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss;

If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: 'Hold on!'

If you can talk with crowds and keep your virtue,
Or walk with kings - nor lose the common touch,
If neither foes nor loving friends can hurt you,
If all men count with you, but none too much;

If you can fill the unforgiving minute
With sixty seconds' worth of distance run -
Yours is the Earth and everything that's in it,
And - which is more - you'll be a Man my son!


Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Sep 19, 2013, 08:51 AM
 :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 20, 2013, 09:00 AM
Tell the story about your wife stumbling on a big stock for you in the supermarket.


Peter Lynch: I had a great luck company called Hanes. They test marketed a product called L'Eggs in Boston and I think in Columbus, Ohio, maybe three or four markets. And Carolyn, ah, brought this product home and she was buying and she said, "It's great." And she almost got a black belt in shopping. She's a very good shopper. If we hadn't had these three kids, she now -- when Beth finally goes off to college, I think we'll be able to resume her training. But she's a very good shopper and she would buy these things. She said, "They're really great." And I did a little bit of research.

I found out the average woman goes to the supermarket or a drugstore once a week. And they go a woman's specialty store or department store once every six weeks. And all the good hosiery, all the good pantyhose is being sold in department stores. They were selling junk in the supermarkets.

They were selling junk in the drugstores. So this company came up with a product. They rack-jobbed it, they had all the sizes, all the fits, a down they never advertised price. They just advertised "This fits. You'll enjoy it." And it was a huge success and it became my biggest position and I always worried somebody'd come out with a competitive product, and about a year-and-a-half they were on the market another large company called Kaiser-Roth came out with a product called No Nonsense. They put it right next to L'eggs in the supermarket, right next to L'eggs in the drugstore. I said, "Wow, I gotta figure this one out." So I remember buying -- I bought 48 different pairs at the supermarket, colors, shapes, and sizes. They must have wondered what kind of house I had at home when I got to the register. They just let me buy it.

So I brought it into the office. I gave it to everybody. I said, "Try this out and come back and see what's the story with No Nonsense." And people came back to me in a couple weeks and said, "It's not as good." That's what FUNDAMENTAL RESEARCH is. So I held onto Hanes and it was a huge stock and it was bought out by Consolidated Foods, which is now called Sara Lee, and it's been a great division of that company. It might have been a thirty bagger instead of a ten bagger, if it hadn't been bought out.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 22, 2013, 04:18 AM
The beginning of the bull market in 1982 and the environment. Were you surprised?


Peter Lynch: 1982 was a very scary period for this country. We've had nine recessions since World War II. This was the worst. 14 percent inflation. We had a 20 percent prime rate, 15 percent long governments. It was ugly. And the economy was really much in a free-fall and people were really worried, "Is this it? Has the American economy had it? Are we going to be able to control inflation?" I mean there was a lot of very uncertain times. You had to say to yourself, "I believe it in. I believe in stocks. I believe in companies. I believe they can control this. And this is an anomaly.

Double-digit inflation is rare thing. Doesn't happen very often. And, in fact, one of my shareholders wrote me and said, "Do you realize that over half the companies in your portfolio are losing money right now?" I looked up, he was right, or she was right. BUT I WAS READY. I mean I said, "These companies are going to do well once the economy comes back. We've got out of every other recession. I don't see why we won't come out of this one." And it came out and once we came back, the market went north.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 22, 2013, 11:05 AM
Nobody told you it was coming.


Peter Lynch: It's lovely to know when there's recession. I don't remember anybody predicting 1982 we're going to have 14 percent inflation, 12 percent unemployment, a 20 percent prime rate, you know, the worst recession since the Depression. I don't remember any of that being predicted. It just happened. It was there. It was ugly. And I don't remember anybody telling me about it. So I don't worry about any of that stuff. I've always said if you spend 13 minutes a year on economics, you've wasted 10 minutes.


So what should people think about?


Peter Lynch: Well, they should think about what's happening. I'm talking about economics as forecasting the future. If you own auto stocks you ought to be very interested in used car prices. If you own aluminum companies you ought to be interested in what's happened to inventories of aluminum. If your stock are hotels, you ought to be interested in how many people are building hotels. These are facts. People talk about what's going to happen in the future, that the average recession last .2 years or who knows? There's no reason why we can't have an average economic expansion that lasts longer. I mean I deal in facts, not forecasting the future. THAT'S CRYSTAL BALL STUFF. That doesn't work. Futile.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 22, 2013, 11:39 PM
You have to go to bed wiser than you got up. As you try to master what you are trying to do – people who do that almost never fail utterly. Very few have ever failed with that approach. You may rise slowly, but you are sure to rise.


- Charlie Munger
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 23, 2013, 10:10 AM
Can the LITTLE GUY play with the BIG GUY in the stock market?


Peter Lynch: There's always been this position that the small investor has no chance against the big institutions. And I always wonder whether that's the person under four-foot-eight. I mean they always said the small investor doesn't have a chance. And there's two issues there. First of all, I think that he or she can do it, but, number two, the question is, people do it anyway. They invest anyway. And if they so believe this theory that the small investor has no chance, they invest in a different format. They said, "This is a CASINO. I'll buy stock this month. I'll sell it a month later," same kind of performance that they do everywhere. When they look at a house, they're very careful. They look at the school system. They look at the street. They look at the plumbing. When they buy a refrigerator, they do homework.

If they're so convinced that the small investor has no chance, the stock market's a big game and they act accordingly, they hear a stock and they buy it before sunset, they're going to get the kind of results that prove the small investor can do poorly. Now if you buy a -- you make a mistake on a car, you make a mistake on a house, you don't blame the professional investors. But now if you do STUPID RESEARCH, you buy some company that has NO sales, NO earnings, a TERRIBLE financial position and it goes down, you say, "Well, it because of the programmed trading of those professionals," that's because YOU DIDN'T DO YOUR HOMEWORK. So I -- I've tried to convince people they can do a job, they can do very well, BUT they have to do certain things.


-----------------------------------------

The message is clear.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Sep 23, 2013, 02:18 PM
very clear, but i dont know why some people just dont get it  :scratch:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: INDO on Sep 23, 2013, 04:01 PM
...thanks sir wills for starting this thread and directing me here.

...mahabang basahan to  :watchuthink:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 23, 2013, 11:34 PM
very clear, but i dont know why some people just dont get it  :scratch:

hehe
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 23, 2013, 11:39 PM
...thanks sir wills for starting this thread and directing me here.

...mahabang basahan to  :watchuthink:

Bro INDO, if you want to learn VI(Buffett's way) you must ignore charts and should realise that charts are useless(really useless).

It's true you could pick some of Buffett's strategy and use it along with TA but I suggest you don't do that.

Hope you will learn a lot form this thread.

If meron ka need to clarify PM mo Boss TSO, Boss GIG and if busy talaga sila, sorry ka na lang, no choice ka kundi ako na lang matatanungan mo PM mo lang ako.:)
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: INDO on Sep 24, 2013, 01:19 AM
Bro INDO, if you want to learn VI(Buffett's way) you must ignore charts and should realise that charts are useless(really useless).

It's true you could pick some of Buffett's strategy and use it along with TA but I suggest you don't do that.

Hope you will learn a lot form this thread.

If meron ka need to clarify PM mo Boss TSO, Boss GIG and if busy talaga sila, sorry ka na lang, no choice ka kundi ako na lang matatanungan mo PM mo lang ako.:)

dami salamat sir... kayong tatlo na i PM ko kung sakali  :hihi: :hihi:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 24, 2013, 09:41 AM
Wouldn't one of those things be letting you do it for them?


Peter Lynch: Well, the small investor can do three things. They can avoid the market entirely. They can just say, ah, "I can't stand it. It's too volatile for me. I'll just put my money in money market funds or put my money in the bank." That's one choice. The other choice is they can invest directly in the stock market by buying stocks individually, or they can buy mutual funds and invest in stock. I think they can do the course of investing in mutual funds and every now and then, they find some stocks, they have a chance to make a big hit. I think the average person could know three or four or five companies very well.

They could lecture on those three or four or five companies, and if one or two of 'em becomes attractive, they buy 'em. THEY JUST CAN'T WAKE UP IN THE MORNING AND SAY, "NOW's the time to buy this. NOW's the time to buy IBM. NOW's the time to by GE. NOW's the time to buy Dow Chemical. NOW's the time to buy some biotechnology company," if they don't know something about it. You have to know the story. And people have lots of edges and they THROW them away.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: GIG on Sep 24, 2013, 11:00 AM
Wouldn't one of those things be letting you do it for them?


They could lecture on those three or four or five companies, and if one or two of 'em becomes attractive, they buy 'em. They just can't wake up in the morning and say, "Now's the time to buy this. Now's the time to buy IBM. Now's the time to by GE. Now's the time to buy Dow Chemical. Now's the time to buy some biotechnology company," if they don't know something about it. You have to know the story. And people have lots of edges and they THROW them away.


. . . para na akong sirang plaka . . . sige na nga . . . I agree . . .  I agree . . .  I agree hehehehe!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 24, 2013, 12:05 PM
^heheheh
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 24, 2013, 12:40 PM
Talk about market timing.


Peter Lynch: The market itself is very volatile. We've had 95 years completed this century. We're in the middle of 1996 and we're close to a 10 percent decline. In the 95 years so far, we've had 53 declines in the market of 10 percent or more. NOT 53 down years. The market might have been up 26 finished the year up four, and had a 10 percent correction. So we've had 53 declines in 95 years. That's once every two years. Of the 53, 15 of the 53 have been 25 percent or more. That's a bear market. So 15 in 95 years, about once every six years you're going to have a big decline. Now no one seems to know when there are gonna happen. At least if they know about 'em, they're not telling anybody about 'em. I don't remember anybody predicting the market right more than once, and they predict a lot. So they're gonna happen. If you're in the market, you have to know there's going to be declines. And they're going to cap and every couple of years you're going to get a 10 percent correction. That's a euphemism for losing a lot of money rapidly. That's what a "correction" is called.

And a bear market is 20-25-30 percent decline. They're gonna happen. When they're gonna start, no one knows. If you're not ready for that, you shouldn't be in the stock market. I mean STOCMACH is the key organ here. It's not the BRAIN. Do you have the stomach for these kind of declines? And what's your timing like? Is your horizon one year? Is your horizon ten years or 20 years? If you've been lucky enough to save up lots of money and you're about to send one kid to college and your child's starting a year from now, you decide to invest in stocks directly or with a mutual fund with a one-year horizon or a two-year horizon, that's silly.

That's just like betting on red or black at the casino. What the market's going to do in one or two years, you don't know. Time is on your side in the stock market. It's on your side. And when stocks go down, if you've got the money, you don't worry about it and you're putting more in, you shouldn't worry about it. You should worry what are stocks going to be 10 years from now, 20 years from now, 30 years from now. I'm very confident.

-----------------------

Again the message is clear.

You should worry on the stock that you will pick NOT the whole stock market.

What would they(your stock) be in 10 years or more from now.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 25, 2013, 08:15 AM
What does that say to you about their frame of mind? (Small Investors)


Peter Lynch: Well, for some reason, the public looks at stocks differently than they look at everything else. When they buy a refrigerator, they do research. When they buy a microwave oven, they do research. They'll get Consumer Reports. They'll ask a customer "What's your favorite kind of oven? What kind of car would you buy?" Then they'll -- they'll put $10,000 in some zany stock that they don't even know what it does that they heard on a bus on the way to work and wonder why they lose money, and they do it before sunset.

Well, you've got plenty of time. You could have bought Wal-Mart ten years after it went public -- Wal-Mart went public in 1970. You could have bought it ten years later and made 30 times your money. You could have said, "I'm very cautious. I'm very careful. I'm gonna wait. I want to make sure this company -- they're just in Arkansas and I want to watch 'em go to other states." So you watch, five years later the stock's up about four-fold. You say, "I'm still not sure of this company. They have a great balance sheet, great record." I'm going to wait another -- wait another five years, it goes up another four-fold. It's now up twenty-fold. You still haven't invested. You say, "Now I think it's time to invest in Wal-Mart." You still could have made 30 times your money because ten years after Wal-Mart went public they were only in 15 percent of the United States. They hadn't saturated that 15 percent and they were very low cost. They were in small towns. You could say to yourself, "Why can't they go to 17? Why can't they go to 19? Why can't they go to 21? I'll get on the computer. Why can't they go to 28?" And that's all they did. They just replicated their formula. That doesn't take a lot of courage. That's HOMEWORK.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 26, 2013, 07:27 AM
The high and the low analysis.


Peter Lynch: People spend all this time trying to figure out "What time of the year should I make an investment? When should I invest?" And it's such a waste of time. It's SO FUTILE. I did a great study, it's an amazing exercise. In the 30 years, 1965 to 1995, if you had invested a thousand dollars, you had incredible good luck, you invested at the low of the year, you picked the low day of the year, you put your thousand dollars in, your return would have been 11.7 compounded. Now some poor unlucky soul, the Jackie Gleason of the world, put in the high of the year. He or she picked the high of the year, put their thousand dollars in at the peak every single time, miserable record, 30 years in a row, picked the high of the year. Their return was 10.6 That's the only difference between the high of the year and the low of the year. Some other person put in the first day of the year, their return was 11.0. I mean the odds of that are very little, but people spend an unbelievable amount of mental energy trying to pick what the market's going to do, what time of the year to buy it. It's just not worth it.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Sep 26, 2013, 09:03 AM
The high and the low analysis.


Peter Lynch: People spend all this time trying to figure out "What time of the year should I make an investment? When should I invest?" And it's such a waste of time. It's SO FUTILE. I did a great study, it's an amazing exercise. In the 30 years, 1965 to 1995, if you had invested a thousand dollars, you had incredible good luck, you invested at the low of the year, you picked the low day of the year, you put your thousand dollars in, your return would have been 11.7 compounded. Now some poor unlucky soul, the Jackie Gleason of the world, put in the high of the year. He or she picked the high of the year, put their thousand dollars in at the peak every single time, miserable record, 30 years in a row, picked the high of the year. Their return was 10.6 That's the only difference between the high of the year and the low of the year. Some other person put in the first day of the year, their return was 11.0. I mean the odds of that are very little, but people spend an unbelievable amount of mental energy trying to pick what the market's going to do, what time of the year to buy it. It's just not worth it.

 :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Sep 27, 2013, 09:09 AM
wala akong breakfast  :bored:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 27, 2013, 09:55 AM
wala akong breakfast  :bored:

Ayokong nagugutom ka


So they just buy and hold?


Peter Lynch: They should buy, hold, and when the market goes down, add to it. Every time the market goes down 10 percent, you add to it, you'd be much -- you would have better return than the average of 11 percent, if you believe in it, if it's money you're not worried about. As the market starts going down, you say, "Oh, it'll be fine. It'll be predictable." When it starts going down and people get laid off, a friend of yours, loses their job or a company has 100,000 employees and they lay off two. The other 98,000 people start to worry or somebody says their house price just went down, these are little thoughts that start to creep to the front of your brain. And they're the back of your brain. And human nature hasn't changed much in 5,000 years. There's this thing of greed versus fear. The market's going up, you're not worried. All of a sudden it starts going down and you start saying, "I remember my uncle told me, you know, somebody lost it all in the Depression. People were jumping out of windows. They were selling pencils and apples."

It must have been a great decade to buy a pencil or an apple, but they were always -- there must have been everybody selling pencils. That start to -- we laugh about it. People start to think about these things with the market going down. These ugly thoughts start coming into the picture. GOTTA GET 'EM OUT. You have to wipe those out and you -- you either BELIEVE IN IT OR YOU DON'T.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Sep 27, 2013, 10:09 AM
Ayokong nagugutom ka


So they just buy and hold?


Peter Lynch: They should buy, hold, and when the market goes down, add to it. Every time the market goes down 10 percent, you add to it, you'd be much -- you would have better return than the average of 11 percent, if you believe in it, if it's money you're not worried about. As the market starts going down, you say, "Oh, it'll be fine. It'll be predictable." When it starts going down and people get laid off, a friend of yours, loses their job or a company has 100,000 employees and they lay off two. The other 98,000 people start to worry or somebody says their house price just went down, these are little thoughts that start to creep to the front of your brain. And they're the back of your brain. And human nature hasn't changed much in 5,000 years. There's this thing of greed versus fear. The market's going up, you're not worried. All of a sudden it starts going down and you start saying, "I remember my uncle told me, you know, somebody lost it all in the Depression. People were jumping out of windows. They were selling pencils and apples."

It must have been a great decade to buy a pencil or an apple, but they were always -- there must have been everybody selling pencils. That start to -- we laugh about it. People start to think about these things with the market going down. These ugly thoughts start coming into the picture. GOTTA GET 'EM OUT. You have to wipe those out and you -- you either BELIEVE IN IT OR YOU DON'T.


ayun o! :thankyou:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 29, 2013, 11:32 AM
If you focus on the price, you’re assuming that the market knows more than you do. That may be the truth, but in that case you shouldn’t own it. The stock market is there to serve you, not to instruct you.


- Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 30, 2013, 06:59 AM
BRK Annual Meeting yr. 2009


From 2003 through 2008, Berkshire's market price didn't increase by the amount of retained earnings, why don't you change Berkshire's dividend policy?



Buffett: If we had to sell our business on December 31, 2008, we would have had a loss. Reinvested earnings did not produce [gains]. We use book value as a proxy for business value. We measure against the S&P 500—our intrinsic value has never had a five-year period when we underperformed the S&P 500.

Munger: I don't get too excited about these oddball things that come along once in 50 years. I think Wells Fargo [for example] will come out of this mess much stronger.

Buffett: In a terrified market, Wells Fargo got to below $9—when aspects of their business were never better, and their business model is fabulous. Pushed by a student, I said that if I had to put all of my money in one stock, it would be Wells Fargo at $9.00. Wells will be a lot better off a couple of years from now than if all this business had never happened, unless they have to issue lots of shares, which they shouldn't. You never want to be in a position to have to sell [due to a margin call] or emotionally. Why would someone sell Wells Fargo at $9.00 when they bought it at $25.00, and now it's better off? It's crazy. I own a farm about 30 minutes from here, and if you own a farm, you don't get a price on it every day. Look at the asset for value, not the price—as you would with a farm. People let the stock price, not business results, [affect their assessment of a company]. Read Chapter 8 of The Intelligent Investor. The fact that a [price] quote is available every day turns into a liability.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Sep 30, 2013, 09:55 AM
 :coffee:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 30, 2013, 11:11 AM
BRK Annual Meeting yr. 2001


What are your thoughts on short selling?


Buffett: It's an interesting item to study. It's ruined a lot of people. You can go broke doing it.

You'll see way more stocks that are dramatically overvalued than dramatically undervalued. It's common for promoters to cause a stock to become valued at 5-10 times its true value, but rare to find a stock trading at 10-20% of its true value. So you might think short selling is easy, but it's not. Often stocks are overvalued because there is a promoter or a crook behind it. They can often bootstrap into value by using the shares of their overvalued stock. For example, it it's worth $10 and is trading at $100, they might be able to build value to $50. Then, Wall Street says, "Hey! Look at all that value creation!" and the game goes on. [As a short seller,] you could run out of money before the promoter runs out of ideas."

Everything we've ever thought about shorting worked out eventually, but it's very painful. It's a whole lot easier to make money on the long side. You can't make big money shorting because the risk of big losses means you can't make big bets.

Munger: Being short and seeing a promoter take the stock up is very irritating. It's not worth it to have that much irritation in your life.

Buffett: We would never short anyway because we're too big.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Sep 30, 2013, 06:44 PM
What do you think of discounted cash flow (DCF) models?



Buffett: All investing is laying out cash now to get some more back in the future. The concept of “a bird in the hand” came from Aesop in about 600 BC. He knew a lot, but not that [he lived in] 600 BC. He couldn’t know everything. [laughter] The question is, how many birds are in the bush? What is the discount rate? How CONFIDENT are you that you’ll get [the bird]? Et cetera. THAT'S WHAT WE DO. If you need to use a computer or calculator to figure it out, you shouldn’t [buy the investment]. Those types of [situations] fall into the “too-hard” bucket. It should be obvious. It should shout at you, without all the spreadsheets. We see something better.

Munger: Some of the WORST business DECISIONS I’ve seen came with DETAILED analysis. The higher math was false precision. They do that in business schools, because they’ve got to do something.

Buffett: The priesthood has to look like they know more than “a bird in the hand.” You won’t get tenure if you say “a bird in the hand.” Falseprecision is totally crazy. The markets saw it in the Long-Term Capital Management [hedge fund] in 1998. It only happens to people with high IQs. The markets of mid-September last year were [such that] you can’t calculate standard deviations. People’s actions don’t observe laws of math. It’s a terrible mistake to think higher math will take you a long way— you don’t need to understand it, [and] it may lead you down the wrong path.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 01, 2013, 06:03 AM
Source: BRK Annual Meeting yr. 2008

Are investment banks so complex that the head is not aware of the risks?


Buffett: Exceptionally good question. The answer is probably yes in most places, though there are a few CEOs I respect a lot. Gen Re had 23,000 derivative contracts. I could have worked full time on that, and I probably still couldn't have gotten my head around it all. And we had exposures that I thought were possible and heads of business units didn't — I don't want slim, I want none. I am Chief Risk Officer at Berkshire. If something goes wrong, I cannot assign it to a committee. I think big investment banks and big commercial banks are almost too big to manage effectively in the way they have elected to run their business. It will work most of the time. You may not see the risk. A 1-in-50-year risk - it won't be in the interest of a 62 year old executive who is retiring at 65 to worry about it. I worry about everything. Many CEOs say they didn't know about what was going on.

It's easier to admit he doesn't know what's going on than to admit that he knew what was going on and let it go on. I've been asked for advice on regulation. Somehow, the press hasn't picked up on this too much. OFHEO [Office of Federal Housing Enterprise Oversight] supervised Fannie [Mae] and Freddie [Mac]—their activities had a public element, and were semi-regulated. For 200 people [at OFHEO] it was their sole job to examine the books. They were two-for-two with two of the biggest accounting scams in the history of the world. The person at the top must have it in their DNA to see risks. In many ways, there are firms that in terms of risk are too big to manage. If too big to fail, there are interesting policy implications.

Munger: It is crazy to allow things, which are run with knavery, to get too big to fail. As an industry, there is a crazy culture of greed and overreaching and overconfidence, trading algorithms. It is demented to allow derivative trading such that clearance risks are embedded in the system. Assets are all "good until reached for" on balance sheets. We had $400 million of that at General Re, "good until reached for". In the drug business, you must prove it is good. It is a crazy culture, and to some extent, an evil culture. Accounting people really failed us. Accounting standards ought to be dealt with like engineering standards.

Buffett: Salomon [Salomon Brothers during the 1991 scandal] was trading with Marc Rich who had fled the country. They said they wanted to keep trading with him. Only by total directive could we stop it. I think the Fed did the right thing with Bear [Stearns]. They would have failed on Sunday night, and walked to a bankruptcy judge. They had $14.5 trillion of derivative contracts — not as bad as it sounds, but the parties that had those contracts would have been required to undo the contracts to establish the liability from the estate. With the $400 million at Gen Re, we had 4-5 years. At Bear, it would have been 4-5 hours. It would have been a spectacle. Two of the witnesses at the testimony said, 'we understood we couldn't borrow unsecured, but we didn't understand we couldn't borrow secured.' The world does not have to lend you money. If they don't want to lend you money, an extra 10 basis points won't make a difference. It depends on people's willingness to lend you money, which comes down to how other people feel about you. If you are dependent on borrowed money, you have to wake up every day WORRIED about what the world thinks of you.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 01, 2013, 09:06 AM
 :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 01, 2013, 11:02 AM
Petrochina


45% was a crazy amount of dividends to offer but China(Petrochina) kept its word. I am never quite as happy as I am in the US, because the laws are more uncertain elsewhere, but the point is to buy things cheap. Russia is just a bad geopolitical environment. On the other hand, China has kept their word on paying the dividends. In fact, when the dividends check comes in, it is calculated out 10 or so decimals, these guys keep their word.


- Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 01, 2013, 09:56 PM
1 Share, $40 dollars, $5 million - Warren Buffett

Coca cola went public I think it was 1919 for $40 a share, 1 year later it was selling for 19 dollars it went down 50% in 1 year and you might think that some kind of a disaster and you might think that sugar prices increased, the bottlers went rebellious and the whole bunch of things…. you can always find a few reasons why that wasn't the ideal moment to buy it.

Years later you had seen the great depression, you had seen world war 2, you had seen sugar rationing, you had seen thermal nuclear weapons and the whole thing… there's always the reason, BUT IN THE END if you've bought 1 share for 40 bucks and reinvested the dividends it will be worth $5 million now(1998).
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 01, 2013, 09:58 PM
1 Share, $40 dollars, $5 million - Warren Buffett

Coca cola went public I think it was 1919 for $40 a share, 1 year later it was selling for 19 dollars it went down 50% in 1 year and you might think that some kind of a disaster and you might think that sugar prices increased, the bottlers went rebellious and the whole bunch of things…. you can always find a few reasons why that wasn't the ideal moment to buy it.

Years later you had seen the great depression, you had seen world war 2, you had seen sugar rationing, you had seen thermal nuclear weapons and the whole thing… there's always the reason, BUT IN THE END if you've bought 1 share for 40 bucks and reinvested the dividends it will be worth $5 million now(1998).





So they just buy and hold?


Peter Lynch: They should buy, hold, and when the market goes down, add to it. Every time the market goes down 10 percent, you add to it, you'd be much -- you would have better return than the average of 11 percent, if you believe in it, if it's money you're not worried about. As the market starts going down, you say, "Oh, it'll be fine. It'll be predictable." When it starts going down and people get laid off, a friend of yours, loses their job or a company has 100,000 employees and they lay off two. The other 98,000 people start to worry or somebody says their house price just went down, these are little thoughts that start to creep to the front of your brain. And they're the back of your brain. And human nature hasn't changed much in 5,000 years. There's this thing of greed versus fear. The market's going up, you're not worried. All of a sudden it starts going down and you start saying, "I remember my uncle told me, you know, somebody lost it all in the Depression. People were jumping out of windows. They were selling pencils and apples."

It must have been a great decade to buy a pencil or an apple, but they were always -- there must have been everybody selling pencils. That start to -- we laugh about it. People start to think about these things with the market going down. These ugly thoughts start coming into the picture. GOTTA GET 'EM OUT. You have to wipe those out and you -- you either BELIEVE IN IT OR YOU DON'T.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 02, 2013, 10:10 AM
BRK Annual Meeting yr. 2001


What do you think of the airline industry?


Buffett: "The big problem is not aggregate costs, but costs versus competitors." Buffett recalled US Air's difficulties competing against Southwest and concluded, "If your costs are out of line, you're going to get killed eventually."

[Munger: "Airline pilot unions are really tough. It's interesting to see people paid as well as airline pilots to have such a tough union. No airline can afford a shutdown very long."]

Buffett: If you're in a business that cannot take a long strike, then you're playing a game of chicken with labor. Ironically, if you're weak, you're in a stronger negotiating position.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: RFMarine on Oct 02, 2013, 04:42 PM
coca cola is one of the businesses that stand the test of time. Many businesses that were patok 100 years ago are not patok anymore like those involved in typewriters and horse drawn carriages
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 02, 2013, 09:49 PM
The message there is not about coca cola.

Also make no mistake to understand it as his(Buffett) strategy, he is just pointing out that even a simple strategy as that you could make money.

Don't focus on yr. 1919 to 1998, it could also be done in a 30 year span.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 04, 2013, 08:07 AM

University of Nebraska Business Magazine yr. 2001


What is your opinion of the importance of technology in business education today?

Buffett: I love what technology is doing for the world, including me. I don’t think it is easy to pick who the technology winners will be in ten years, like it is with chewing gum or soft drinks. But, that is an investment decision. We are the world’s leaders in technology and it is an engine that will do wonders for this country over time.

It’s a tool.For a student to leave business school and not know how technology affects business and a mind to keep up with the progress of technology would be insupportable. Technology is the future of business. It is transforming society. If I were starting out in business today, I would be very focused on technology.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Oct 04, 2013, 09:37 AM
Seems like a lot of our autodidacts here read Livermore. So I did a little background check on him.

Turns out he won big the first time because he shorted the market (big risk big gain). He went bankrupt soon after (within 5 years).

HIs 2nd success came during the bull run of WWI (everyone is supposed to make money in a bull run). His notable success here is when he again shorted the market at the end of the bull run (he seemed to have a knack for this short selling thing). In 1932 he was worth $100M, he was bankrupt by 1934. He did had a new wife in 1933, so maybe that was a factor.

He wrote his famous book after this and committed suicide in 1940. HIs wife of 1933 was a 4 time widow - all previous 4 husbands committed suicide. So Livermore was suicide number 5. Wow, is that a coincidence or what!?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Oct 04, 2013, 09:39 AM
By the way Livermore claimed that he ultimately failed because he didn't follow his own advice.

It actually reminded me more of an advice I heard long ago - It's not what you have but what you do with it. The context is a bit different but I think it applies just as well for growing your wealth which is what investing intends after all.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 04, 2013, 10:09 AM

He wrote his famous book after this and committed suicide in 1940. HIs wife of 1933 was a 4 time widow - all previous 4 husbands committed suicide. So Livermore was suicide number 5. Wow, is that a coincidence or what!?


hmmm interesting! What kind of a woman is that? 5 suicides says it all!


It's not what you have but what you do with it. The context is a bit different but I think it applies just as well for growing your wealth which is what investing intends after all.

Agree on that
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 04, 2013, 01:33 PM
Seems like a lot of our autodidacts here read Livermore. So I did a little background check on him.

Turns out he won big the first time because he shorted the market (big risk big gain). He went bankrupt soon after (within 5 years).

HIs 2nd success came during the bull run of WWI (everyone is supposed to make money in a bull run). His notable success here is when he again shorted the market at the end of the bull run (he seemed to have a knack for this short selling thing). In 1932 he was worth $100M, he was bankrupt by 1934. He did had a new wife in 1933, so maybe that was a factor.

He wrote his famous book after this and committed suicide in 1940. HIs wife of 1933 was a 4 time widow - all previous 4 husbands committed suicide. So Livermore was suicide number 5. Wow, is that a coincidence or what!?

yes sir he is very good in shorting, the great bear of wall street :)
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: bauer on Oct 04, 2013, 01:47 PM
@wilch23,

Good background check on Livermore. Interesting!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Oct 04, 2013, 04:36 PM
So that means he can't be our hero, since no shorting in the PSE? Which is good for us, esp Value Investors, since shorting makes stock investing too much like gambling.

On the other hand, I'm sure he has a lot of other sound ideas.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: singkit_1588 on Oct 04, 2013, 08:07 PM
So that means he can't be our hero, since no shorting in the PSE? Which is good for us, esp Value Investors, since shorting makes stock investing too much like gambling.

On the other, I'm sure he has a lot of other sound ideas.

is it good po ba na walang shorting sa pse or not??
what is shorting anyway?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: lemreyes on Oct 04, 2013, 11:21 PM
By the way Livermore claimed that he ultimately failed because he didn't follow his own advice.

Emotions kick in and all the experiences and logic flies out of the window.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Oct 05, 2013, 12:37 AM
Emotions kick in and all the experiences and logic flies out of the window.

It just may be that, but take note that i used the word "claimed".
Because we can never really know. I'm saying this because shorting a stock is a very risky business, if you happened to bet wrong, you can lose everything and more.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 05, 2013, 08:56 AM
Emotions kick in and all the experiences and logic flies out of the window.

No matter how good we are in analysis it would be useless if we do not master temperament.

I could not imagine to live a life full of worries and disappointments, the price go down you worry and could not sleep, price go up you feel very happy and you celebrate about it then tomorrow's price will disappoint you, it's a cycle, what kind of life you have if you live in that cycle?

It is true life is easy for VI.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 05, 2013, 09:03 AM
Buffett & Gates at Columbia Business School yr. 2009


Do you think the current rally is for real?


Buffett: What's going to happen tomorrow, huh? Let me give you an illustration. I bought my first stock in 1942. I was 11. I had been dillydallying up until then. I got serious. What do you think the best year for the market has been since 1942? Best calendar year from 1942 to the present time. Well, there's no reason for you to know the answer. The answer is 1954. In 1954, the Dow … dividends was up 50%. Now if you look at 1954, we were in a recession a good bit of that time. The recession started in July of '53. Unemployment peaked in September of '54. So until November of '54 you hadn't seen an uptick in the employment figure. And the unemployment figure more than doubled during that period. It was the best year there was for the market. So it's a terrible mistake to look at what's going on in the economy today and then decide whether to buy or sell stocks based on it. You should decide whether to buy or sell stocks based on how much you're getting for your money, long-term value you're getting for your money at any given time. And next week doesn't make any difference because next week, next week is going to be a week further away. And the important thing is to have the right long-term outlook, evaluate the businesses you are buying. And then a terrible market or a terrible economy is your friend. I don't care, in making a purchase of the Burlington Northern, I don't care whether next week, or next month or even next year there is a big revival in car loadings or any of that sort of thing. A period like this gives me a chance to do things. It's silly to wait. I wrote an article. If you wait until you see the robin, spring will be over.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Oct 05, 2013, 09:12 AM
No matter how good we are in analysis it would be useless if we do not master temperament.

I could not imagine to live a life full of worries and disappointments, the price go down you worry and could not sleep, price go up you feel very happy and you celebrate about it then tomorrow's price will disappoint you, it's a cycle, what kind of life you have if you live in that cycle?

It is true life is easy for VI.

Maybe it's not the strategy that gives you stress, it's your temperament, although you can train yourself to be more in control.

No matter whether you are VI, TA, or any other alphabet soup, you will get stressed if you are a worrier and OC.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Oct 05, 2013, 09:13 AM
Dividend is like a rear view mirror, stock price is the windshield.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 05, 2013, 09:59 AM
Dividend is like a rear view mirror, stock price is the windshield.

I don't get this if you are driving a car, can you elaborate?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 05, 2013, 10:01 AM
Maybe it's not the strategy that gives you stress, it's your temperament, although you can train yourself to be more in control.

No matter whether you are VI, TA, or any other alphabet soup, you will get stressed if you are a worrier and OC.

About temperament, can you put that in context(TA wise) for our TA readers to chew on.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 05, 2013, 10:23 AM
It's good that you used the word "claimed", I am also in doubt.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 05, 2013, 11:56 AM
BRK Annual Meeting yr. 2002


Your thoughts on index funds?


Buffett: Just pick a broad index like the S&P 500. Don't put your money in all at once; do it over a period of time. I recommend John Bogle's books -- any investor in funds should read them. They have all you need to know.

[CM: One could imagine a period like Japan 13 years ago, however, in which indexing over time wouldn't work.]
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 05, 2013, 12:10 PM
BRK Annual Meeting yr. 2003


What's your opinion of cigar butts vs quality businesses?


[CM: If See's Candy had asked $100,000 more [in the purchase price; Buffett chimed in, "$10,000 more"], Warren and I would have walked -- that's how dumb we were.]

[Ira Marshall said you guys are crazy -- there are some things you should pay up for, like quality businesses and people. You are underestimating quality. We listened to the criticism and changed our mind. This is a good lesson for anyone: the ability to take criticism constructively and learn from it. If you take the indirect lessons we learned from See's, you could say Berkshire was built on constructive criticism. Now we don't want any more today. [Laughter]]

Buffett: The qualitative [evaluating management, competitive advantage, etc.] is harder to teach and understand, so why not just focus on the quantitative [e.g., cigar butt investing]? Charlie emphasized quality [of a business] much more than I did initially. He had a different background.

It makes more sense to buy a wonderful business at a fair price. We've changed over the years in this direction. It's not hard to watch businesses over 50 years and learn where the big money can be made.

Even when you get a new important idea, the old ideas are still there. There wasn't a strong line of demarcation when we moved from cigar butts to wonderful businesses. But over time, we moved.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Oct 05, 2013, 08:42 PM
I don't get this if you are driving a car, can you elaborate?

Dividends are usually based on past performance.
The stock price is trying to show you what's ahead.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 07, 2013, 08:56 AM
is it good po ba na walang shorting sa pse or not??
what is shorting anyway?

shorting is borrowing/buying of stocks that you think is going to be lower, then you will sell it while the price is high then pay for it once the price go down.
e.g. short MEG @ 4php, sell it @4, then once price go down e.g. @3 php pay your borrowed shares
it is helpful during bear markets when it is hard to profit by price appreciation
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 07, 2013, 09:08 AM
No matter how good we are in analysis it would be useless if we do not master temperament.

I could not imagine to live a life full of worries and disappointments, the price go down you worry and could not sleep, price go up you feel very happy and you celebrate about it then tomorrow's price will disappoint you, it's a cycle, what kind of life you have if you live in that cycle?

It is true life is easy for VI.

true since VI requires less action :D and yes fear and greed is evil need to get these 2 out of my system 100% lol.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 07, 2013, 09:10 AM
So that means he can't be our hero, since no shorting in the PSE? Which is good for us, esp Value Investors, since shorting makes stock investing too much like gambling.

On the other hand, I'm sure he has a lot of other sound ideas.

if they will allow shorting i am seeing one benefit for us, surely those sharks will push the prices lower, cheaper for us to buy :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 07, 2013, 12:43 PM
Student Visit January yr. 2007



Q - Besides the type of management that you look for, when you look at financials you make decisions rather quickly. In regards to the financial information and the business overall what factors do you look at?


Buffett: We make quick decisions because we have filters before we get to the point of making a decision.

Filter #1 – Can we understand the business? What will it look like in 10-20 years? Take Intel vs. chewing gum or toilet paper. We invest within our circle of competence. Jacob’s Pharmacy created Coke in 1886. Coke has increased per capita consumption every year it has been in existence. It’s because there is no taste memory with soda. You don’t get sick of it. It’s just as good the 5th time of the day as it was the 1st time of the day.

Filter #2 – Does the business have a durable competitive advantage? This is why I won’t buy into a hula-hoop, pet rock, or a Rubik’s cube company. I will buy soft drinks and chewing gum. This is why I bought Gillette and Coke.

Filter #3 – Does it have management I can trust?

Filter #4 – Does the price make sense?

Since 1972 we have made no change in the marketing, process etc. Take See’s candy. You cannot destroy the brand of See’s candy. Only See’s can do that. You have to look at the brand as a promise to the customer that we are going to offer the quality and service that is expected. We link the product with happiness. You don’t see See’s candy sponsoring the local funeral home. We are at the Thanksgiving Day Parades though.




What filters do you use when looking at companies?

[CM: Well, opportunity cost is a huge filter in life. If you've got two suitors who are eager to have you, but one is way better than the other, you're going to choose that one rather than the other. That's the way we filter stock buying opportunities. Our ideas are so simple. People keep asking us for mysteries, but all we have are the most elementary ideas.]
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 07, 2013, 12:52 PM
Buffett & Gates at Columbia Business School November yr.2009



How would you recommend an individual investor who follows the Graham and Dodd philosophy to allocate their capital today?

Well, it depends whether they are going to be an active investor. Graham distinguished between the defensive and the enterprising and that. So if you are going to spend a lot of time on investment, you know I just advise looking at as many things as possible and you will find some bargains. And when you find them, you have to act. It doesn't -- it hasn't changed at all since I was here in 1950, 1951. And it won't change the rest of my life. You start turning pages. When I got out of school, I turned every page in Moody's 10,000-some pages twice, looking for companies. And you have to find them yourself. The world isn't going to tell you about great deals. You have to find them yourself. And that takes a fair amount of time. So if you are not going to do that, if you are just going to be a passive investor, then I just advise an index fund more consistently over a long period of time. The one thing I will tell you is the worst investment you can have is cash. Everybody is talking about cash being king and all that sort of thing. Most of you don't look like you are overburdened with cash anyway. Cash is going to become worth less over time. But good businesses are going to become worth more over time. And you don't want to pay too much for them so you have to have some discipline about what you pay. But the thing to do is find a good business and stick with it.

[Becky - Does that mean you think we are through the roughest times? You had always kept the cash word around, too.]

We always keep enough cash around so I feel very comfortable and don't worry about sleeping at night. But it's not because I like cash as an investment. Cash is a bad investment over time. But you always want to have enough so that nobody else can determine your future essentially. The worst -- the financial panic is behind us. The economic spillout which came to some extent from that financial panic is still with us. It will end. I don't know if it will end tomorrow or next week or next month. Or maybe a year. But it won't go on forever. And to sit around and try and pick the bottom, people were trying to do that last March and the bottom hadn't come in unemployment and the bottom hadn't come in business but the bottom had come in stocks. Don't pass up something that's attractive today because you think you will find something way more attractive tomorrow.



"Fundamentals are forever" - Bogle
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 07, 2013, 01:33 PM
simple yet effective  :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 07, 2013, 02:18 PM
simple yet effective  :D
:D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 07, 2013, 02:19 PM
BRK Annual Meeting yr. 1997



What impacts have Graham/Dodd and Phil Fisher had on your investment philosophy? What percentage of your investment philosophy would you attribute to each of them?


Buffett: Well, good things would have happened with following either party. Graham obviously had more influence on me than Phil. I worked for Ben, I went to school under him, and his three basic ideas: look at stocks as businesses; have a proper attitude toward the market; and operate with a margin of safety--they all come straight from Graham. Phil Fisher opened my eyes a little more toward trying to find a wonderful business. Charlie did more of that than Phil did, but Phil was espousing that entirely, and I read his books in the early 60s. Phil's still alive, and I owe Phil a lot, but Ben was one of a kind.

[CM:  Ben Graham was a truly formidable mind, and he also had a clarity in writing, and we talk over and over again about the power of a few simple ideas thoroughly assimilated, and that happened with Graham's ideas which came to me indirectly through Warren, but some also directly from Graham. The interesting thing for me is that Buffett the former protégé--by the way Buffett was the best student Graham had in 30 years of teaching at Columbia--became better than Graham. That's the natural outcome--as Milton said, "If I've seen a little farther than other men, it's by standing on the shoulders of giants." So, Warren stood on Ben's shoulders, but he ended up seeing more than Ben. No doubt somebody will come along and do a lot better than we have.]

I enjoyed making money more than Ben. With Ben it really was incidental, at least by the time I knew him. The process, the whole game, didn't interest him more than a dozen other things may have interested him. With me, I just find it interesting, and therefore I've spent a much higher percentage of my time thinking about investing, and thinking about businesses. I probably know way more about businesses than Ben ever did. He had other things that interested him. I pursued the game quite a bit differently than he did, and therefore comparing the record is not proper.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 08, 2013, 08:44 AM
BRK Annual Meeting yr. 2004


What advice would you give to new investors?



Buffett: I haven’t been continually learning the basic principles [of sound investing], which are still Ben Graham’s. They were affected in a significant way by Charlie and Phil Fisher in terms of looking at better businesses. And I’ve learned more about how businesses operate over time.

You need an intellectual framework, which you can get mostly from The Intelligent Investor. Then, think about businesses you can get your mind around if you really work at it. Then, you will do well if you have the RIGHT temperament.

[CM: I’ve watched Warren for decades. Warren has learned a lot. He can pooh pooh investing in PetroChina, but he’s learned, which has allowed him to [expand his circle of competence so he could invest in something like PetroChina.

If you don’t keep learning, other people will pass you by.

Temperament alone won’t do it – you need a lot of curiosity for a long, long time.]

-----------------------------------------------------------------------------
BRK Annual Meeting yr. 2005


Buffett: It’s hard for individual investors to successfully pick stocks or time the market. The best investment you can make is in your own abilities. Anything you can do to develop your own abilities or business is likely to be more productive than investing in foreign currencies.


When I was seven years old, I first took an interest in stocks. My dad was in the business, so I’d go with him to the office and I saw interesting things. [When I was a little older,] I went to the library and read every book on markets and investing.

When I was 11, I bought my first stock – three shares. I was following charts. When I was 19, I read The Intelligent Investor and it changed my whole framework.

My advice is to read a lot. There are no secrets in the business that only the priesthood knows. It’s all right there.

It requires qualities of TEMPERAMENT way more than qualities of INTELLECT.

Once you have a 125 IQ, much more doesn’t matter. Look for opportunities that fit your framework. Try to learn every day, but you can’t act every day. It’s important to enjoy the game, just as it is to enjoy bridge or baseball [if you’re going to play those games seriously].

----------------------------------------------------------------------------------
BRK Annual Meeting yr. 2005


Buffett: Ben Graham said you’re neither right nor wrong if you’re investing with the crowd – you’re right if your facts and reasoning are right. Once you have the facts, you have to think about what they mean. You don’t take a survey.

You should focus on what’s important and knowable. There are many things that are important but not knowable, like [whether there will be] a nuclear attack tomorrow. You can’t focus on those.

As Ben Graham said in chapter 8 of The Intelligent Investor: The market is there to serve you, not instruct you. If it does something silly, it gives you a chance to do something. It just sets prices. If it doesn’t give you an opportunity, go play bridge and come back the next day. And the nice thing is that the prices will be different.

During the Long-Term Capital Management crisis, we were getting calls on Sunday from people. By the way, you can make a lot of money on calls on Sunday – that means things are really screwed up. Just make sure you’re the callee and not the caller.

At that time, there was [an unprecedented] 30 basis point spread between on- versus off-the-run 30-year Treasuries. All you have to do [in such situations] is make sure you can play out your hand under all circumstances. If you can and you have the RIGHT FACTS – and you let the market serve rather than instruct you – you can’t miss.

Munger: I’d say some of you probably can miss. [Laughter]

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 08, 2013, 09:04 AM
One of the most important lesson in Value Investing

The qualitative [evaluating management, competitive advantage, etc.] is harder to teach and understand, so why not just focus on the quantitative [e.g., cigar butt investing]? Charlie emphasized quality [of a business] much more than I did initially. He had a different background.

-Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Oct 08, 2013, 10:44 AM
Pls give your conclusions from the excerpts. Kasi puro old times yan so correlation to current situation is needed. Thanks
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 10, 2013, 08:45 AM
 :'(cdi kmpleto ang araw walang bago lol
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 10, 2013, 09:30 AM
BRK Annual Meeting yr. 2004


If you were starting out today, what would you do the same or differently?


Buffett: If we were to do it over again, we’d do it pretty much the same way. The world HASN'T CHANGED that much. We’d READ EVERYTHING in sight about businesses and industries we think we’d understand. And, working with far less capital, our investment universe would be far broader than it is currently.

There’s nothing different, in my view, about analyzing securities today vs. 50 years ago.


---------------------------------------------------
BRK Annual Meeting yr. 2006


Buffett: We formed our first partnership 50 years and two days ago, on May 4, 1956, with $105,000. If we were starting again, Charlie would say we shouldn’t be doing this, but if we were, we’d be investing in securities around the world. Charlie would say we couldn’t find 20, but we don’t need 20 – we only need a few that can pay off very big. We’d also be buying [stocks in] smaller companies.

If we were planning to buy [entire] businesses, we’d have a tough time. We’d have no reputation and only $1 million.

Charlie started out in real-estate development because with only a little capital, brain power and energy, you could magnify the returns in real estate unlike in other sectors.

I’d just do it one foot in front of the other over time. But the basic principles wouldn’t be different. If I’d been running a little partnership three years ago, I’d have started out 100% in Korea.

Munger: You should find something to invest in and then compare everything else against that. That’s your opportunity cost. That’s what you learn in freshman economics, even if it hasn’t made it into modern portfolio theory. That’s why modern portfolio theory is so ASININE.

Buffett: It really is.

Munger: When Warren said he’d put 100% of his fund in Korea, maybe he wouldn’t quite do that, but pretty much. Most people won’t find a lot of great things [to invest in]. Instead, you’ll want to find a few things that are much better than anything else. Act on these.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 10, 2013, 09:38 AM
Pls give your conclusions from the excerpts. Kasi puro old times yan so correlation to current situation is needed. Thanks


There’s nothing different, in my view, about analyzing securities today vs. 50 years ago.



Buffett's style is all about analysing the business.

Stock market participants behaviour hasn't change much also since day one.

--------------------------------------

Wilch23 mr. Buffett earned more when he has small capital versus buying the whole company with big capital and taking a seat as a board member.(percentage wise)
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 10, 2013, 09:48 AM
 :thankyou:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: GIG on Oct 10, 2013, 08:09 PM
Haay! busog ang brain. Parang 2 hrs sa National bookstore . . . salamat!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: ferrariEverest on Oct 10, 2013, 09:05 PM
Haay! busog ang brain. Parang 2 hrs sa National bookstore . . . salamat!
hahaha, tambay ka rin pala dun? ayos :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 11, 2013, 10:27 AM
haha national bookstore nga
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 14, 2013, 11:19 AM
You talk about learning from mistakes, I really believe it's better to learn from other people's mistake as much as possible.

- Warren Buffett

---------------------
You can only live life forward - Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 14, 2013, 11:30 AM
Most fundamental part of Benjamin Graham's lesson - Warren Buffett


I want a simple business, easy to undersand, great economics now and honest and able management. Then I should see about in general way where they gonna be 10 years from now. And if I can't see where they gonna be 10 years from now I don't want to buy it, basically I don't buy stock that if they close the NYSE tomorrow for 5 years I won't be happy owning it.

I buy a farm and I don't get a quote on it for 5 years I'm happy if the farm does ok(business wise), I buy an apartment house and I don't get a quote on it for 5 years I'm happy if the apartment produce the returns that I expect, but people buy stocks and they look at the price the next morning and they decide whether they're doing well or not doing well, it's crazy.

They're buying a piece of the business that's what Graham's most fundamental part of what he taught me "You're not buying a stock, you are buying part ownership in the business, you'll do well if the business does well and if you don't pay a totally silly price - B. Graham" and that's what its ALL about, you want to buy a business that you understand.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 14, 2013, 01:13 PM
 :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 15, 2013, 09:47 AM
BRK Annual Meeting yr. 2007



[RE: How Buffett Would Invest with a Small Amount of Money]

If I were working with a very small sum – you all should hope this doesn’t happen – I’d be doing almost entirely different things than I do(buying whole business). Your universe expands – there are thousands of times as many options if you’re investing $10,000 rather than $100 billion, other than buying entire businesses. You can earn very high returns with very small amounts of money. Everyone can’t do it, but if you know what you’re doing, you can do it. We cannot earn phenomenal returns putting $3, $4 or $5 billion in a stock. It won’t work – it’s not even close.

If Charlie and I had $500,000 or $2 million to invest, we’d find little things we could do, not all of it in stocks.

Munger: But there’s no point in our thinking about that now.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 15, 2013, 10:05 AM
BRK Annual Meeting yr. 2008

Advice on personal career


You have to find your passion in life. I would choose the same job. I enjoy it. It is a terrible mistake to sleepwalk through your life. Unless Shirley MacLaine is right, you won’t have another one. My dad had a business with [investment] books on his shelves, and they turned me on. This was before Playboy. If he was a minister, I’m not sure I would have been as enthused. If you have obligations, you have to deal with realities. I tell students to go work for an organization you admire or an individual you admire, which usually means that most MBAs I meet become self-employed. [laughter] I went to work for Ben Graham. I never asked my salary. Get the right spouse. Charlie talks about the man who spent twenty years looking for the perfect woman and found her. Unfortunately, she was looking for the perfect man. If you are lucky, you will be happy and as a result, you will behave better. It makes it easier.

CM: You’ll do better if you have passion for something in which you have aptitude. If Warren had gone into ballet, no one would have heard of him.

WB: Or would have heard of me very differently. [laughter]
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Oct 15, 2013, 10:15 AM
Most fundamental part of Benjamin Graham's lesson - Warren Buffett


I want a simple business, easy to undersand, great economics now and honest and able management. Then I should see about in general way where they gonna be 10 years from now. And if I can't see where they gonna be 10 years from now I don't want to buy it, basically I don't buy stock that if they close the NYSE tomorrow for 5 years I won't be happy owning it.

I buy a farm and I don't get a quote on it for 5 years I'm happy if the farm does ok(business wise), I buy an apartment house and I don't get a quote on it for 5 years I'm happy if the apartment produce the returns that I expect, but people buy stocks and they look at the price the next morning and they decide whether they're doing well or not doing well, it's crazy.

They're buying a piece of the business that's what Graham's most fundamental part of what he taught me "You're not buying a stock, you are buying part ownership in the business, you'll do well if the business does well and if you don't pay a totally silly price - B. Graham" and that's what its ALL about, you want to buy a business that you understand.

Apparently, Buffet buys stocks to increase his wealth over time (long term) which is very different from most stock investors, who need cash flow (dividends or sell at a higher price) from their stock investment for their regular needs. So unless you have an income source decoupled from your stocks which can cover all your regular expenses, you cannot follow his example. Just a thought.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Oct 15, 2013, 10:23 AM
BRK Annual Meeting yr. 2007



[RE: How Buffett Would Invest with a Small Amount of Money]

If I were working with a very small sum – you all should hope this doesn’t happen – I’d be doing almost entirely different things than I do(buying whole business). Your universe expands – there are thousands of times as many options if you’re investing $10,000 rather than $100 billion, other than buying entire businesses. You can earn very high returns with very small amounts of money. Everyone can’t do it, but if you know what you’re doing, you can do it. We cannot earn phenomenal returns putting $3, $4 or $5 billion in a stock. It won’t work – it’s not even close.

If Charlie and I had $500,000 or $2 million to invest, we’d find little things we could do, not all of it in stocks.

Munger: But there’s no point in our thinking about that now.

Most important qualification of his statements - "... not all of it in stocks."

I noted that he is not buying stocks but companies. Then again, most businessmen understands that you can have 50% ROI with 500K but not 500M. The bigger the
investment the smaller the ROI in general. That is why after a while, a businessman will diversify, because the core business is max out - putting in more capital will have diminishing returns. That's when he looks at other businesses, properties or the stock market.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 15, 2013, 11:50 PM
Most important qualification of his statements - "... not all of it in stocks."

I noted that he is not buying stocks but companies. Then again, most businessmen understands that you can have 50% ROI with 500K but not 500M. The bigger the
investment the smaller the ROI in general. That is why after a while, a businessman will diversify, because the core business is max out - putting in more capital will have diminishing returns. That's when he looks at other businesses, properties or the stock market.



Yes and that is why he said he could make as much as 50% profit inside the stock market when he has small money compare to large sums of money. Now here's the point he said that if an investor is working with small amount of money(like us) his universe of opportunity expands compare to investor working with large sums of money and he meant it in different context, like you could make 50% return investing in bonds and make 50% return in small stocks.


Buffett earns huge profits in buying shares of stocks than buying whole business
In investing in stocks, Buffett mentioned that he can make 50% profit with small amount of money, and he did it before when he was just starting out and he said that he could still do it again today because investing 50 years ago compare to now hasn't change much and he mentioned that we should invest in inefficient markets(emerging markets), his favourite is China and Korea(south not north haha).


Ito nga pala ang kasunod ng post na nauna:

----------------------------------------------------
BRK Annual Meeting yr. 2008


With small sums of money, what strategies would you pursue?


Buffett: If I were working with small sums of money, it would open up thousands of possibilities. We have found very mispriced bonds. We found them in Korea a few years ago. You could make big returns but had to be of small size. I wouldn’t be in currencies with a small amount of money. I had a friend who used to buy tax liens. I’d look in small stocks OR specialized bonds. Wouldn’t you say that, Charlie?

Munger: Sure.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 16, 2013, 08:54 AM
 :coffee:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Oct 16, 2013, 10:33 AM
I don't wanna touch bond trading...
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 16, 2013, 10:35 AM
^ me as well

No worries for us we're good in "small stocks" here in PH :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 16, 2013, 11:31 AM
BRK Annual Meeting yr. 2009


If you were starting a $26 million fund, what would you do differently with a smaller asset base? How many positions would you hold, and what kind of turnover would you have? What would you do if some investments lost 50% and some gained?


Buffett: We would hold the half-dozen stocks we liked best. We would do the same thing if they lost 50%. Cost has NOTHING to do with it. We look at price and think about what something is worth. Keep it in the FEW you know.

Munger: He [Buffett] has tactfully suggested you adopt a different way of thinking. [laughter]


[Comment of the person who took this note: As Buffett stated, cost basis has nothing to do with investment judgment (apart from tax considerations). Nevertheless, many investors (like the questioner) pay way too much attention to what they’ve paid, rather than its value.]
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 16, 2013, 11:37 AM
 :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 17, 2013, 11:14 AM
"You do not need to be a genius. You need to have emotional stability, inner peace and be able to think for yourself, [since] you’re subjected to all sorts of stimuli. It’s not a complicated game; you don’t need to understand math. It’s simple, but not easy."

- Waren Buffett



"Emotional makeup is more important than technical skill." - Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 17, 2013, 11:21 AM
"You do not need to be a genius. You need to have emotional stability, inner peace and be able to think for yourself, [since] you’re subjected to all sorts of stimuli. It’s not a complicated game; you don’t need to understand math. It’s simple, but not easy."

- Waren Buffett



"Emotional makeup is more important than technical skill." - Warren Buffett

inner peace :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: INDO on Oct 17, 2013, 01:12 PM
"You do not need to be a genius. You need to have emotional stability, inner peace and be able to think for yourself, [since] you’re subjected to all sorts of stimuli. It’s not a complicated game; you don’t need to understand math. It’s simple, but not easy."

- Waren Buffett



"Emotional makeup is more important than technical skill." - Warren Buffett

emotional stability is a must and this is what i need sa trading life ko!  :watchuthink:

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 18, 2013, 08:57 AM
BRK Annual Meeting yr. 2003


What's the temperament of successful investors?

Munger: I think there's something to be said for developing the disposition to own stocks WITHOUT fretting.

Buffett: I think it's almost impossible to do well investing over time without this(temperament). If you focus on the price, you're assuming that the market knows more than you do. That may be the truth, but in that case you shouldn't own it. The stock market is there to SERVE you, not to INSTRUCT you.



Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 18, 2013, 08:59 AM
 :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 18, 2013, 09:10 AM
BRK Annual Meeting yr. 2004

On temperament

Munger: We read a lot. I don’t know anyone who’s wise who doesn’t read a lot. But that’s not enough: You have to have a temperament to grab ideas and do sensible things. Most people don’t grab the right ideas or don’t know what to do with them.

Buffett: The key is to have a “money mind,” which is not IQ, and then you have to have the RIGHT temperament. If you CAN'T CONTROL yourself, you’re going to have DISASTERS. Charlie and I have seen it. The whole world in the late 1990s went a little mad in terms of investments. How could that happen? Don’t people learn? What we learn from history is that people don’t learn from history.

["Grade yourself on your temperament. Temperament is the ability to not be swayed by the market. See what you are supposed to see." - comment from the person who took this note]
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 22, 2013, 11:28 AM
BRK Annual Meeting yr. 2006


Could you explain more about the circle of competence?

Buffett: We are best at evaluating businesses where we can come to a judgment that they will look a lot like they do now in five years. The businesses will change, but the fundamentals won’t. Iscar will be better – maybe a lot bigger – in five years, but the fundamentals will be the same. [In contrast,] look at how much telecom has changed.

Charlie says we have three boxes: In, Out and Too Hard. You don’t have to do everything well. At the Olympics, if you run the 100 meters well, you don’t have to do the shot put.

Tom Watson [the founder of IBM] said, “I’m no genius. I’m smart in spots and I stay around those spots.” We have a lot of managers who are the same. You don’t want to compete with Pete Liegl [the CEO of Forest River, Inc.] because he’ll kill you in the RV business. But he doesn’t try to tell us how to run the insurance business.

I was virtually there at the birth of Intel. I was on the board of Grinnell College with Bob Noyce [one of the founders of Intel] and Grinnell invested $300,000 into it at inception. [I easily could have as well, but] I had no idea then and still don’t now what Intel will look like in five years. Even people in the industry don’t. Some businesses are very, very hard to predict.

Munger: A foreign correspondent, after talking to me for a while, once said: “You don’t seem smart enough to be so good at what you’re doing. Do you have an explanation?” [Laughter]

Buffett: Was he referring to me or you? [Laughter]

Munger: I said, “We know the edge of our competency better than most.” That’s a very worthwhile thing. It’s not a competency if you don’t know the edge of it.


[BRK Annual Meeting yr. 2007 - What makes the difference is whether the people running them know their strengths and weaknesses and play when it is to their advantage and DO NOTHING when it is not.]

--------------------------------

Don't invest on business that you can't predict.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Oct 22, 2013, 11:39 AM
But we don't predict, we only speculate! Hehe
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 22, 2013, 01:55 PM
Well, you guys speculate the numbers and VIs don't predict the numbers! LOL
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 23, 2013, 05:13 AM
One of the best!

BRK Annual Meeting yr. 2009


What two industries are the first you should learn when developing your circle of competence?

Look for simple businesses. If I gave you $10M to invest right now and you only had three weeks to spend it and you could only spend it in Omaha, you’d look for simple, understandable, strong businesses. You look at the Nebraska Furniture Mart (NFM). You wouldn’t look at the third best fast food chain. You might look at McDonald’s, because it is number one and will probably always been number one. They have share of mind. What about Oracle? Too hard. GM? Too hard. You can’t predict the future for these two companies. Too many variables.

Investment knowledge is cumulative, and things you learn will make you better in the future. Stick to things you understand. Mrs. B at NFM wouldn’t get paid in Berkshire stock. Why? She doesn’t know stocks, but she knows furniture down cold. How do you beat Bobby Fisher? Play him in anything except chess. Even young people have a circle of competence even if they don’t have their thoughts perfectly organized.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 23, 2013, 10:37 AM
Student Visit 2007



Is there a moral connection to who you invest in?

Charlie and I went to Memphis to look at a chewing tobacco company. In the end, we decided we didn’t want to own it. We would buy stock in a tobacco company, but we didn’t want to own it.

A good example is Charlie’s favorite company, Costco. They are the #3 distributor in the US of cigarettes, but you wouldn’t avoid buying it because of that. You’ll drive yourself crazy trying to keep track of these things. Our philosophy is that it’s impossible to grade marketable securities, but we’ll buy the stocks without any problems, but we just won’t be in certain businesses.

My view is that energy production should move to nuclear. It’s clean, cheap and safe. Coal emissions are bad for the environment; however it’s still a good company. It’s impossible to grade marketable securities on moral activity. Berkshire Hathaway has and will buy what trades, but will not buy companies that engage in certain behaviors. PetroChina owns 40% of the oil in the Sudan that is government owned. If they did not own it, someone else would. Also, you have to keep in mind, if PetroChina did not buy it its possible the Sudanese would own 100% of the oil rights and that’s not so good either.

I find it funny that people find time to protest PetroChina for ownership of the Sudanese oil, but with the $300 billion or so of imported goods from China, these same people don’t protest Chinese goods. They protest investment in Chinese companies though.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Oct 23, 2013, 03:56 PM
I don't know whether to laugh or cry, I presume it's Buffet talking here.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: chinito77 on Oct 23, 2013, 06:30 PM
Nice articles sir wills for posting what buffet said here. :cool2:

:yoohoo:

Ikaw na bagong idol ko  :watchuthink:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 23, 2013, 10:13 PM
^salamat na-appreciate mo ang thread na ito.

Ikaw ang Idol ko na entrepreneur dahil matapang na bata ka!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 23, 2013, 10:15 PM
The question is have I bought a company when the numbers tells me not to and how much is qualitative and how much is quantitative... The best buys had been when the numbers almost tells you not to, I mean… because then you feel so strong about the product and not just the fact you're getting a used cigar butt cheap.

- Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 23, 2013, 10:28 PM
Emory's Goizueta Business School and McCombs School of Business at UT Austin yr. 2008



Who do you think will be one of the next greatest investors and are you partial to favoring someone with a similar investment style as yours?


Buffett: We just finished looking for someone. The Board has 3 candidates to replace me as CEO and 4 candidates to replace me as investor. They are all doing fine where they are, but they would be willing to come over to Berkshire for less pay.

In 1969, I wound up my partnership and I had to help people find someone to manage their money. I recommended Bill Ruane of Sequoia Fund, Sandy Gottesman, who is currently on the board at Berkshire, and Walter Schloss, who I wrote about in “The Superinvestors of Graham and Dodds-ville”. There’s no way they could miss.

But I don’t know many of the newer investors, they’re not my contemporaries. It’s not enough to just look at track records. They aren’t predictive and there will always be a few people that do well. I know guys who can make 50% a year with $5 million, but not with $1 billion. The problem with guys that do well is they attract so much money that it neutralizes their advantage. It’s hard to identify them, and even harder to make a deal to keep them from attracting other capital. It’s like betting on a 12 year old horse that won at 3 years old. It’s also important to AVOID MANAGERS WHO USE LEVERAGE. It’s the reason that investors with 160 IQs FLAME OUT.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: adam on Oct 24, 2013, 12:24 AM
Hi sir wills,

what does it mean by this "AVOID MANAGERS WHO USE LEVERAGE"?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 24, 2013, 11:14 AM
When choosing a candidate to replace him(Buffett) as an investor in Berkshire he avoids managers who uses leverage. Why?

Buffett knows the history of stock market and witnessed disasters because of using leverage, watch mo sa youtube yung Story of Long term Capital Management, sobrang high tech, sobrang talino ng grupo na yun at pati sarili nilang pera nilagay nila dun dahil matatalino sila, may extensive experience sila at may system sila na talagang sophisticated and yet bumagsak pa rin sila.

For us the lesson there is don't use leverage, I believe in leverage if you are entrepreneur but if you are investor or managing a portfolio.... Leverage is a NO NO!

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Oct 24, 2013, 11:54 AM
Leverage means betting more than what you have, in trading, that includes puts, shorts etc
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: chinito77 on Oct 24, 2013, 04:00 PM
^salamat na-appreciate mo ang thread na ito.

Ikaw ang Idol ko na entrepreneur dahil matapang na bata ka!

Naku po sir... wala pa ako napapatunayan.. still has a lot to learn from experiences and wisdom of older people like you  :cool2:

When choosing a candidate to replace him(Buffett) as an investor in Berkshire he avoids managers who uses leverage. Why?

Buffett knows the history of stock market and witnessed disasters because of using leverage, watch mo sa youtube yung Story of Long term Capital Management, sobrang high tech, sobrang talino ng grupo na yun at pati sarili nilang pera nilagay nila dun dahil matatalino sila, may extensive experience sila at may system sila na talagang sophisticated and yet bumagsak pa rin sila.

For us the lesson there is don't use leverage, I believe in leverage if you are entrepreneur but if you are investor or managing a portfolio.... Leverage is a NO NO!



Totoo po un sa entreprenuership lng magagamit ang katalinuhan.. hehe stock market has a lot of factors to consider..  :yoohoo: kasama na dun emotion m.  :harhar:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 25, 2013, 07:38 AM
Leverage means betting more than what you have, in trading, that includes puts, shorts etc

Yan ang malaking dahilan ng 1929 Great Depression
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 25, 2013, 08:53 AM
BRK Annual Meeting yr. 2009



Could you explain your opportunity cost decisions of the past year?

Buffett: Opportunity costs have been in the forefront of our minds during the last 18 months. It’s tougher to calibrate A, versus B, versus C in a fast-changing environment. Tougher and possibly more profitable. We got lots of calls [for potential investments]—most we ignored. We were called by Goldman Sachs on a Wednesday for $5 billion, and we [already] had a $5 billion commitment to Constellation Energy, $3 billion on Dow Chemical, $6.5 billion on the Wrigley Mars deal. We never want to get dependent on banks. It’s a good sign that we haven’t had the flurry [of phone calls] like last year. Normally, we would not have sold Johnson & Johnson if it were 10 – 15 points higher, [but we wanted to have a comfortable amount of cash on hand]. Our definition of comfortable is very comfortable.

[Comment: The real cost of any purchase isn’t the actual dollar cost. Rather, it’s the opportunity cost — the value of the investment you didn’t make, because you used your funds to buy something else.]
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: chinito77 on Oct 25, 2013, 01:09 PM
Leverage means betting more than what you have, in trading, that includes puts, shorts etc

Yan ang malaking dahilan ng 1929 Great Depression

I have worked in a big local bank for a while in commercial loans dept, there are clients that do take loans (avail their credit line/ discounting line) for investment in stocks. Though they also had legit running business.

People sometimes are just too greedy..  :-\
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: ferrariEverest on Oct 25, 2013, 01:41 PM
I have worked in a big local bank for a while in commercial loans dept, there are clients that do take loans (avail their credit line/ discounting line) for investment in stocks. Though they also had legit running business.

People sometimes are just too greedy..  :-\
...and/or simply opportunistic/taking advantage of certain situations.

How many clients did so, if you could recall? I presume not too many did.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 25, 2013, 03:30 PM
I have worked in a big local bank for a while in commercial loans dept, there are clients that do take loans (avail their credit line/ discounting line) for investment in stocks. Though they also had legit running business.

People sometimes are just too greedy..  :-\

Wow really? Kakatakot yun! Double effort pagganun!  Sakit sa ulo hanap mo
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: chinito77 on Oct 25, 2013, 04:12 PM
...and/or simply opportunistic/taking advantage of certain situations.

How many clients did so, if you could recall? I presume not too many did.

Wow really? Kakatakot yun! Double effort pagganun!  Sakit sa ulo hanap mo

Yung loan officer ko po nun ay medyo bago pa lng (immediate boss ko), nasa 80 accnts hawak niya.. around 30 ay very active. I can remember 4 of them.

Madalas ko nakaka kwentuhan due to the processing na requests nila madalas.. minsan mga loan release ay worth 50k or 100k lng. Dagdag trabaho para sa marketing assistant (me)  :harhar: kasi dadami monitoring ko at documents na kelangan gawin. Tapos anliliit ng mga amount.  :harhar:

Imagine loan line nung 2 ay 20m at 30m may mga legit transactions na malalaki.. pero nakakaasar lng mga tinge2. Ayaw pa i merge sa ibang loans nila. Para daw ma monitor nila.  :bored:

Minsan gusto nila makipag sapalaran eh.. due to low rates nasa 10-13% per year (prevailing that time) kaya m kitain sa stocks yun eh.

Though yung remaining na 2 ay small players.. 3m at 5m lng loan line. Sila yung may mga release na 50k minsan.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Oct 25, 2013, 04:50 PM
So if you have a 50K loan and bought stocks and lost it all, how much did you lose? 50K pa rin di ba? problem is that you have to repay it plus interest.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 25, 2013, 04:57 PM
I have worked in a big local bank for a while in commercial loans dept, there are clients that do take loans (avail their credit line/ discounting line) for investment in stocks. Though they also had legit running business.

People sometimes are just too greedy..  :-\

and foolish :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 28, 2013, 12:37 PM
Emory's Goizueta Business School and McCombs School of Business at UT Austin yr. 2008


What are your views on diversification?



Buffett: If it’s your game, diversification doesn’t make sense. It’s crazy to put money into your 20th choice rather than your 1st choice. “Lebron James” analogy. If you have Lebron James on your team, don’t take him out of the game just to make room for someone else. If you have a harem of 40 women, you never really get to know any of them well.

Charlie and I operated mostly with 5 positions. If I were running 50, 100, 200 million, I would have 80% in 5 positions, with 25% for the largest. In 1964 I found a position I was willing to go heavier into, up to 40%. I told investors they could pull their money out. None did. The position was American Express after the Salad Oil Scandal. In 1951 I put the bulk of my net worth into GEICO. Later in 1998, LTCM was in trouble. With the spread between the on-the-run versus off-the-run 30 year Treasury bonds, I would have been willing to put 75% of my portfolio into it. There were various times I would have gone up to 75%, even in the past few years. If it’s your game and you really know your business, you can load up.

In stocks, it’s the only place where when things go on sale, people get unhappy. If I like a business, then it makes sense to buy more at 20 than at 30. If McDonalds reduces the price of hamburgers, I think it’s great.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 28, 2013, 01:08 PM
Lecture at the University of Florida Business School yr. 1998


What are your views on diversification?

Once you are in the business of evaluating businesses and you decide that you are going to bring the effort and intensity and time involved to get that job done, then I think diversification is a terrible mistake to any degree. I got asked that question the other day at SunTrust. If you really know BUSINESSES, you probably shouldn’t own more than six of them.

If you can identify six wonderful businesses, that is all the diversification you need. And you will make a lot of money. And I can guarantee that going into a seventh one instead of putting more money into your first one is gotta be a terrible mistake. Very few people have gotten rich on their seventh best idea. But a lot of people have gotten rich with their best idea.

So I would say for anyone working with normal capital who really knows the businesses they have gone into, six is plenty, and I probably have half of what I like best. I don’t diversify personally. All the people I’ve known that have done well with the exception of Walter Schloss, Walter diversifies a lot. I call him Noah, he has two of everything.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 28, 2013, 01:11 PM
Emory's Goizueta Business School and McCombs School of Business at UT Austin yr. 2008


What are your views on diversification?



Buffett: If it’s your game, diversification doesn’t make sense. It’s crazy to put money into your 20th choice rather than your 1st choice. “Lebron James” analogy. If you have Lebron James on your team, don’t take him out of the game just to make room for someone else. If you have a harem of 40 women, you never really get to know any of them well.

Charlie and I operated mostly with 5 positions. If I were running 50, 100, 200 million, I would have 80% in 5 positions, with 25% for the largest. In 1964 I found a position I was willing to go heavier into, up to 40%. I told investors they could pull their money out. None did. The position was American Express after the Salad Oil Scandal. In 1951 I put the bulk of my net worth into GEICO. Later in 1998, LTCM was in trouble. With the spread between the on-the-run versus off-the-run 30 year Treasury bonds, I would have been willing to put 75% of my portfolio into it. There were various times I would have gone up to 75%, even in the past few years. If it’s your game and you really know your business, you can load up.

In stocks, it’s the only place where when things go on sale, people get unhappy. If I like a business, then it makes sense to buy more at 20 than at 30. If McDonalds reduces the price of hamburgers, I think it’s great.

Warren Buffett — 'Diversification is protection against ignorance. It makes little sense if you know what you are doing.'
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 28, 2013, 01:22 PM
^Good one
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: ferrariEverest on Oct 28, 2013, 04:18 PM
Warren Buffett — 'Diversification is protection against ignorance. It makes little sense if you know what you are doing.'
Yun yun eh!

Diversification, in general, ay insurance for ignorance... AND more importantly, fattens the wallets of brokers. Ang gusto kasi ng brokers (at partner nilang stock/trading membership sites) ay GUMASTOS KAYO NG GUMASTOS
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 28, 2013, 05:12 PM
Yun yun eh!

Diversification, in general, ay insurance for ignorance... AND more importantly, fattens the wallets of brokers. Ang gusto kasi ng brokers (at partner nilang stock/trading membership sites) ay GUMASTOS KAYO NG GUMASTOS

exactly :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 28, 2013, 08:24 PM
“In hindsight, I think the correct lesson to learn from 2008-2009 was to hold cash. And I didn’t have cash at the time….I have now gone back to the 10% allocations that I had done for most of my investing career, with the caveat that I always want—except in times of extremely severe distress—to [not] be fully invested. And so for example, as I talk to you today, I’m sitting on plenty of cash….It is an interesting market right now. There are very few bargains around, but the bargains we have been able to find are wildly undervalued, so it actually lends itself very well to be a concentrated investor. I could not today come up with 20 stocks that I thought were undervalued, but I could easily come up with 5 or 6…I think the game is just perfect for me to play with a concentrated portfolio and holding cash. So that’s where we are, and I think it’s the way to go. I think Munger always says that a well diversified portfolio just needs 4 stocks.”

- Mohnish Pabrai
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 29, 2013, 09:22 AM
 :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 29, 2013, 10:44 AM
BRK Annual Meeting yr. 2008


How do you get confident enough with that [smaller] level of diversification?

Buffett: If we were running only our own money, putting 75% of our net worth in a single position is not a problem if it is something we really have high confidence in. Putting 500% or more of your net worth in a position is a problem. Several times I have had 75% of my non-Berkshire net worth in a situation. You will see things where it would be a mistake not to act. You won’t see them often, and the press and your friends won’t be talking about them. Wouldn’t you say, Charlie? 75% is not a real significant amount?

Munger: Sometimes, I have had more than 100% in an individual investment.

Buffett: You just had a good banker. Look at LTCM — they put 25x their money in things that had to converge but couldn’t play out the hand. There are people in this room with more than 90% of their worth in Berkshire. I saw things in 2002 in junk bonds that would have been worth going heavily into. You could have bought Cap Cities in 1974 — selling for one-third the property value, with the best manager, and in a good business. You could have put 100% in Coca-Cola when we bought it and that wouldn’t have been a dangerous position.

CM: Students learn corporate finance at business schools. They are taught that the whole secret is diversification. But the exact rule is the opposite. The ‘know-nothing’ investor should practice diversification, but it is CRAZY if you are an EXPERT. The goal of investment is to find situations where it is safe not to diversify. If you only put 20% into the opportunity of a life-time, you are not being rational. Very seldom do we get to buy as much of any good idea as we would like to.



--------------------------------

A very interesting question to ask ourselves, are we an expert? Only you can answer that.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 29, 2013, 11:00 AM
Why do you think more people don't follow your advice?

Buffett: The advice doesn’t promise enough...it’s not a “get rich quick” scheme, which is what a lot of other philosophies promise.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: singkit_1588 on Oct 29, 2013, 11:07 AM
Why do you think more people don't follow your advice?

Buffett: The advice doesn’t promise enough...it’s not a “get rich quick” scheme, which is what a lot of other philosophies promise.

swakto...
most people kasi eun ung gusto..
“get rich quick” scheme
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 29, 2013, 11:12 AM
swakto...
most people kasi eun ung gusto..
“get rich quick” scheme
yup so be careful if you hear those words
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 29, 2013, 11:13 AM
i can wait indefinitely, i dont want fast i want boring :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: singkit_1588 on Oct 29, 2013, 11:18 AM
yup so be careful if you hear those words
sir wills,
parang pang scammer lng yung mga ganyang words ah...
ung tipong wala ka na daw gagawin.haha :rofl:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 29, 2013, 11:37 AM
BRK Annual Meeting yr. 2005


What have been your best investments ever?

Buffett: See’s was very important to us to learn about [running a] business, and to provide cash for a lot of other things.

[Also,] buying the first half of GEICO for $40 million, given what we’ve gotten out of it and its future potential. (We later paid $2 billion for the 2nd half.) GEICO still has enormous possibilities for growth.

In the past I’ve touted the American Express card – well today, I’m going to tout the GEICO credit card. That being said, I advise you to pay off your credit card. It’s a terrible mistake to get hooked on revolving credit at high interest rates.

I met with 21 groups of students last year and what I tell them is, even if you don’t remember anything else I say, please don’t get hooked on credit card debt.

GEICO is a great, great business model, run by a superb person and businessman, Tony Nicely.

Munger: The search expenses that brought us Ajit Jain – I cannot think of a better investment. This is a good life lesson: getting the right people into your system is the most important thing you can do.

---------------------------------------

Now this note has a very important lesson for all of us!

"[Also,] buying the first half of GEICO for $40 million, given what we’ve gotten out of it and its future potential. (We later paid $2 billion for the 2nd half.) GEICO still has enormous possibilities for growth."


^That is how Buffett view Stock(s) that he invest in, VALUE and GROWTH is always in his mind! "given what we've gotten" - VALUE, "its future potential" - GROWTH.  Future growth potential story of a business/Stock can be unlock using qualitative analysis, you enrich your skill in qualitative analysis by reading a lot of business stuff. YOU CANNOT enrich that skill in a massive way by just observing the market you have to give extra effort, time and money(to buy books).


 "(We later paid $2 billion for the 2nd half.) GEICO still has enormous possibilities for growth."

Buffet is willing to pay a higher price on the same stock because he still see the growth of the company.

Try to notice that Buffett doesn't talk about future quoted price of the Stock or being precise in predicting the future earnings, he only talks/discuss the future qualitative of the business WHY? because Qualitative factors dictates ALL the numbers that you SEE!


Bottom-line is you have to learn how to value a company and also you have to be sure that you are going to get the future earnings, growth etc. It's all about confidence with your skill. The more sure you are the better result you'll have.

If you are going to listen to other people's analysis how can you say to yourself that you are sure about the value and growth story of the stock your holding especially in times of chaos?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 29, 2013, 11:51 AM
sir wills,
parang pang scammer lng yung mga ganyang words ah...
ung tipong wala ka na daw gagawin.haha :rofl:

Most people are duped by those words because of credentials.

Words are always validated by credentials.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 29, 2013, 11:56 AM
BRK Annual Meeting yr. 2005


What have been your best investments ever?

Buffett: See’s was very important to us to learn about [running a] business, and to provide cash for a lot of other things.

[Also,] buying the first half of GEICO for $40 million, given what we’ve gotten out of it and its future potential. (We later paid $2 billion for the 2nd half.) GEICO still has enormous possibilities for growth.

In the past I’ve touted the American Express card – well today, I’m going to tout the GEICO credit card. That being said, I advise you to pay off your credit card. It’s a terrible mistake to get hooked on revolving credit at high interest rates.

I met with 21 groups of students last year and what I tell them is, even if you don’t remember anything else I say, please don’t get hooked on credit card debt.

GEICO is a great, great business model, run by a superb person and businessman, Tony Nicely.

Munger: The search expenses that brought us Ajit Jain – I cannot think of a better investment. This is a good life lesson: getting the right people into your system is the most important thing you can do.

---------------------------------------

Now this note has a very important lesson for all of us!

"[Also,] buying the first half of GEICO for $40 million, given what we’ve gotten out of it and its future potential. (We later paid $2 billion for the 2nd half.) GEICO still has enormous possibilities for growth."


^That is how Buffett view Stock(s) that he invest in, VALUE and GROWTH is always in his mind! "given what we've gotten" - VALUE, "its future potential" - GROWTH.  Future growth potential story of a business/Stock can be unlock using qualitative analysis, you enrich your skill in qualitative analysis by reading a lot of business stuff. YOU CANNOT enrich that skill in a massive way by just observing the market you have to give extra effort, time and money(to buy books).


 "(We later paid $2 billion for the 2nd half.) GEICO still has enormous possibilities for growth."

Buffet is willing to pay a higher price on the same stock because he still see the growth of the company.

Try to notice that Buffett doesn't talk about future quoted price of the Stock or being precise in predicting the future earnings, he only talks/discuss the future qualitative of the business WHY? because Qualitative factors dictates ALL the numbers that you SEE!


Bottom-line is you have to learn how to value a company and also you have to be sure that you are going to get the future earnings, growth etc. It's all about confidence with your skill. The more sure you are the better result you'll have.

If you are going to listen to other people's analysis how can you say to yourself that you are sure about the value and growth story of the stock your holding especially in times of chaos?

bibili ako ng stock A kasi sabi ni ano ok daw = deads  :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 29, 2013, 12:19 PM
^Right
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: INDO on Oct 29, 2013, 12:40 PM
bibili ako ng stock A kasi sabi ni ano ok daw = deads  :D

pero hindi mo rin pwede balewalain yung mga sinasabi nila lalo na kung yung may sabi is more experienced.... paborito ko kasi itong kasabihan na "Listen to your elder's advice, not because they are always RIGHT but because they have more experiences of being wrong"  :watchuthink:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 29, 2013, 01:23 PM
pero hindi mo rin pwede balewalain yung mga sinasabi nila lalo na kung yung may sabi is more experienced.... paborito ko kasi itong kasabihan na "Listen to your elder's advice, not because they are always RIGHT but because they have more experiences of being wrong"  :watchuthink:

kahit sino pa ang magsabi basta stock tip i dont care. experiences in investing ibang usapan yun :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: singkit_1588 on Oct 29, 2013, 01:31 PM
kahit sino pa ang magsabi basta stock tip i dont care. experiences in investing ibang usapan yun :D

nung sinabing bibilhin ni MVP ung GMA few years ago, biglang tumaas ung stock price ng GMA db?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 29, 2013, 01:37 PM
nung sinabing bibilhin ni MVP ung GMA few years ago, biglang tumaas ung stock price ng GMA db?

tapos hindi naman diba :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: ferrariEverest on Oct 29, 2013, 02:11 PM
tapos hindi naman diba :D
Kung ano man nangyari dun, ang moral lesson ay wag makinig or magpa-impluwensya sa chismis/funnymentals  :D

pero hindi mo rin pwede balewalain yung mga sinasabi nila lalo na kung yung may sabi is more experienced.... paborito ko kasi itong kasabihan na "Listen to your elder's advice, not because they are always RIGHT but because they have more experiences of being wrong"  :watchuthink:
Syempre Sir, ok makinig sa nakatatanda or mas experienced.

Listen to the advice... BUT validate the advice.

Saka siguraduhin po applicable sa inyo or maa-adapt mo sa iyong sarili yung advice na narinig mo. Sa madaling salita, filter if necessary. i-adapt yung bagay sa iyo, at balewalain/isantabi muna yung hindi applicable sa iyo

Kasi kahit gaano kaganda yung advice, kung hindi ka naman handa (in terms of experience or mental preparedness/sarado utak mo) or hindi para sayo yung advice, balewala yun at hindi ka makikinabang/hindi makikinabang masyado.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 29, 2013, 02:13 PM
Kung ano man nangyari dun, ang moral lesson ay wag makinig or magpa-impluwensya sa chismis/funnymentals  :D
Syempre Sir, ok makinig sa nakatatanda or mas experienced.

Listen to the advice... BUT validate the advice.

Saka siguraduhin po applicable sa inyo or maa-adapt mo sa iyong sarili yung advice na narinig mo. Sa madaling salita, filter if necessary. i-adapt yung bagay sa iyo, at balewalain/isantani muna yung hindi applicable sa iyo

Kasi kahit gaano kaganda yung advice, kung hindi ka naman handa (in terms of experience or mental preparedness/sarado utak mo) or hindi para sayo yung advice, balewala yun at hindi ka makikinabang/hindi makikinabang masyado.

yown  :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: INDO on Oct 29, 2013, 02:22 PM

Listen to the advice... BUT validate the advice.

 

strongly agree :)
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Oct 29, 2013, 04:08 PM
Agree! In other words, Be Skeptical.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 29, 2013, 08:45 PM

Listen to the advice... BUT validate the advice.


MiSMO, LIKE!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 29, 2013, 09:01 PM
The purpose of this thread is to teach us all to be self-reliant in stock investing.

Hope you guys are enjoying this thread thanks! :)
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: ferrariEverest on Oct 29, 2013, 09:09 PM
Agree! In other words, Be Skeptical.
Not really, Sir. Pag skeptical kasi, it connotes mistrust or doubt. May pagdududa o kawalan ng tiwala agad. If you are a skeptic, then you are not genuinely listening to the other person's advice.

Ang proper term would be open-minded pero vigilant, careful, cautious, or prudent.  :cool2:

The purpose of this thread is to teach us all to be self-reliant in stock investing.

Hope you guys are enjoying this thread thanks! :)
That's the key word. D ko pa nabasa lahat pero syempre, enjoy na enjoy, Sir. Maraming Salamat
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 29, 2013, 09:18 PM
Welcome Sir FE
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: ferrariEverest on Oct 29, 2013, 09:27 PM
Alam ko tapos na tayo pareho sa "self-reliance" stage na yan, kaya magbike naman tayo next time para maiba naman, bro :D Sama tayo dun kina Sir noobyExpert. Maghahanda muna ko para d ako maiwan sa trail (gusto ko ako mauuna, hehe), tagal ko na d nagbike (more or less 5-8 years) LOL

Meanwhile, please keep posting yung laman ng baul mo ng karunungan :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 30, 2013, 06:38 AM
^Sure bro next week la mesa tayo! Si nooby expert na bro baka hindi satin pawisan yun haha
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 30, 2013, 08:53 AM
The purpose of this thread is to teach us all to be self-reliant in stock investing.

Hope you guys are enjoying this thread thanks! :)

i am enjoying evry piece of info that you post here  :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 30, 2013, 12:39 PM
i am enjoying evry piece of info that you post here  :D

:)
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: chinito77 on Oct 31, 2013, 01:10 AM
Alam ko tapos na tayo pareho sa "self-reliance" stage na yan, kaya magbike naman tayo next time para maiba naman, bro :D Sama tayo dun kina Sir noobyExpert. Maghahanda muna ko para d ako maiwan sa trail (gusto ko ako mauuna, hehe), tagal ko na d nagbike (more or less 5-8 years) LOL

Meanwhile, please keep posting yung laman ng baul mo ng karunungan :D

^Sure bro next week la mesa tayo! Si nooby expert na bro baka hindi satin pawisan yun haha

Wala po ba diyan sir nag Airsoft? Wala ako kalaro eh.. Gusto ko ulit mag airsoft.  :hihi:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: chinito77 on Oct 31, 2013, 01:22 AM
Warren Buffett — 'Diversification is protection against ignorance. It makes little sense if you know what you are doing.'

That is why I am thinking of getting out of VUL/UITF/Mutual Funds... Fund Managers diversify it into 10,15,20 or more stocks.  :bahalaka:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Oct 31, 2013, 09:56 AM
That is why I am thinking of getting out of VUL/UITF/Mutual Funds... Fund Managers diversify it into 10,15,20 or more stocks.  :bahalaka:

yes and they ask you for slaes load and annual fees, and the equities where they put the funds are always biased to their parent company
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Oct 31, 2013, 11:37 AM
Wala po ba diyan sir nag Airsoft? Wala ako kalaro eh.. Gusto ko ulit mag airsoft.  :hihi:

Game ako diyan turuan mo ko ha :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 04, 2013, 11:23 AM
Over the short term, there may be no correlation between the success of a company’s operations and the success of its stock. Over the long term, there’s a 100% correlation.

- Peter Lynch
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Nov 04, 2013, 02:37 PM
short term = voting machine
long term = weighing machine :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 04, 2013, 03:09 PM
^Right!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Nov 04, 2013, 07:45 PM
short term = voting machine
long term = weighing machine :D

Care to explain? TIA
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 04, 2013, 10:12 PM
Short term - voting machine: Prices are being dictated by market participants sentiment.

Long term - weighing machine: In the long run the value of the stock puts weight on the price, another explanation
                                                  is prices of ALL stocks are dictated by their value(north or south) in the long run.


That is why Buffett said I buy stock with the notion that the market will close in the next 5 years because price of stock and company's performance takes time to correlate.

Our Stock Market is highly inefficient that means most of the time prices of our stocks here does not show its true value but of course in the long term value will still reign. Unlike in US(efficient market) a mispriced stocks takes little time only to adjust.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 04, 2013, 10:57 PM
You mention volatility--it doesn't make any difference to us whether the volatility of the stock market is a half a percentage of a point a day, or a quarter percent a day, or five percent a day. In fact, we'd probably make a lot more money if volatility was higher because it would create more mistakes in the market. Volatility is a huge plus to the real investor. - Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Nov 05, 2013, 09:15 AM
Short term - voting machine: Prices are being dictated by market participants sentiment.

Long term - weighing machine: In the long run the value of the stock puts weight on the price, another explanation
                                                  is prices of ALL stocks are dictated by their value(north or south) in the long run.


That is why Buffett said I buy stock with the notion that the market will close in the next 5 years because price of stock and company's performance takes time to correlate.

Our Stock Market is highly inefficient that means most of the time prices of our stocks here does not show its true value but of course in the long term value will still reign. Unlike in US(efficient market) a mispriced stocks takes little time only to adjust.

naexplain na ni boss wills :D

You mention volatility--it doesn't make any difference to us whether the volatility of the stock market is a half a percentage of a point a day, or a quarter percent a day, or five percent a day. In fact, we'd probably make a lot more money if volatility was higher because it would create more mistakes in the market. Volatility is a huge plus to the real investor. - Warren Buffett

 :cool2:
Title: Re: Wisdom from Lion's Mouth (for autodidact)
Post by: Wills on Nov 05, 2013, 11:20 AM
W. Buffett's view on RISK


Business risk can arise in various ways. It can arise from the capital structure. When somebody sticks a ton of debt into a business, if there's a hiccup in the business, then the lenders foreclose. It can come about by their nature--there are just certain businesses that are very risky. Back when there were more commercial aircraft manufacturers, Charlie and I would think of making a commercial  airplane as a sort of bet-your-company risk because you would shell out hundreds and hundreds of millions of dollars before you really had customers, and then if you had a problem with the plane, the company could go. There are certain businesses that inherently, because of long lead time, because of heavy capital investment, basically have a lot of risk.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Nov 05, 2013, 02:41 PM
Sooner or later, everything that Buffet said will be posted here! Hehe
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 05, 2013, 02:58 PM
W. Buffett's view on RISK

Commodity businesses have a lot of risk unless you're a low-cost producer, because the low-cost producer can put you out of business. Our textile business was not the low-cost producer. We had fine management, everybody worked hard, we had cooperative unions, all kinds of things. But we weren't the low-cost producers so it was a risky business. The guy who could sell it cheaper than we could made it risky for us. We tend to go into businesses that are inherently low risk and are capitalized in a way that that low risk of the business is transformed into a low risk for the enterprise.
The risk beyond that is that even though you identify such businesses, you pay too much for them. That risk is usually a risk of time rather than principal, unless you get into a really extravagant situation. Then the risk becomes the risk of you yourself--whether you can retain your belief in the real fundamentals of the business and not get too concerned about the stock market. The stock market is there to serve you and not to instruct you. That's a key to owning a good business and getting rid of the risk that would otherwise exist in the market.

--------------------------------------------------------

Then the risk becomes the risk of you yourself--whether you can retain your belief in the real fundamentals of the business and not get too concerned about the stock market. The stock market is there to serve you and not to instruct you. That's a key to owning a good business and getting rid of the risk that would otherwise exist in the market.

^One of the most important lesson!

Its not the market it's YOU!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: GIG on Nov 05, 2013, 06:52 PM
Sooner or later, everything that Buffet said will be posted here! Hehe

nice one wilch23 hahahhaha!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: chinito77 on Nov 06, 2013, 12:39 AM
Game ako diyan turuan mo ko ha :D

No problem po sir, kaya pa naman po tumakbo?  :hihi: Hahanap ako now madami kalaro, bago ulit ako bibili ng rifle. hehe  :hihi:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 06, 2013, 12:40 AM
No problem po sir, kaya pa naman po tumakbo?  :hihi: Hahanap ako now madami kalaro, bago ulit ako bibili ng rifle. hehe  :hihi:

Bata pa ko oi!!!!  :rofl:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 06, 2013, 08:21 AM
W. Buffett's view on RISK

Ben said that just imagine that when you bought a stock you in effect bought into a business where you have this obliging partner who comes around every day and offers you a price at which he'll either buy or sell and that price is identical. No one ever gets that in a PRIVATE business, where daily you get a buy-sell offer by a party. But you get that in the stock market, and that's a HUGE advantage. And it's a bigger advantage if this partner of yours is a heavy-drinking manic depressive. (laughter) The crazier he is, the more money you're going to make.

So, as an investor, you love volatility. NOT if you're on margin, but if you're an investor you're not on margin, and if you're an investor you love to get these wild swings because it means more things are going to get misplaced. 

Actually, volatility in recent years has dampened from what it used to be. It looks bigger because people think in terms of Dow points, but volatility was much higher many years ago than it is now. The amplitude of the swings used to be really wild and that gave you more opportunity.

----------------------------------------------------------------------------

"Actually, volatility in recent years has dampened from what it used to be. It looks bigger because people think in terms of Dow points, but volatility was much higher many years ago than it is now. The amplitude of the swings used to be really wild and that gave you more opportunity."

^Now we know why he advised students to invest in inefficient markets! Buffett literally said to his young audience to look for investments in inefficient markets. Hello Philippines! LOL
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: ferrariEverest on Nov 06, 2013, 11:45 AM
Bata pa ko oi!!!!  :rofl:
Oo nga chinito, d pa lolo yan si Wills, nagba-bike pa yan, magkakasing edad lang tayo  :hihi:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 06, 2013, 01:02 PM
Oo nga chinito, d pa lolo yan si Wills, nagba-bike pa yan, magkakasing edad lang tayo  :hihi:

hehe
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 06, 2013, 01:07 PM
W. Buffet and C. Munger's view on RISK

Munger: Well it came to be that corporate finance departments at universities developed the notion of risk-adjusted returns. My best advice to all of you would be to totally ignore this development. Risk had a very good colloquial meaning, meaning a substantial chance that something could go horribly wrong, and the finance professors sort of got volatility mixed up with a bunch of foolish mathematics and to me it's less rational than what we do. And I don't think we're going to change.

Buffett: Finance departments believe that volatility equals risk. They want to measure risk, and they don't know how to do it, basically. So they said volatility measures risk. I've often used the example of the Washington Post's stock. When I first bought it in 1973 it had gone down almost 50%, from a valuation of the whole company of close to $170 million down to $80 million. Because it happened pretty fast, the beta of the stock had actually increased, and a professor would have told you that the company was more risky if you bought it for $80 million than if you bought it for $170 million. That's something I've thought about ever since they told me that 25 years ago and I still haven't figured it out. (laughter)
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 06, 2013, 01:38 PM
BRK Annual Meeting yr. 1994


RISK


Buffett: Charlie and I decided long ago that in an investment lifetime it's just too hard to make hundreds of smart decisions. That judgment became ever more compelling as Berkshire's capital mushroomed and the universe of investments that could significantly affect our results shrank dramatically. Therefore, we adopted a strategy that required our being smart- and not too smart at that - only a very few times. Indeed, we'll now settle for one good idea a year.

Munger: The strategy we've adopted precludes our following standard diversification dogma. Many pundits would therefore say the strategy must be riskier than that employed by more conventional investors. We disagree. We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort level he must feel with its economic characteristics before buying into it. In stating this opinion, we define risk, using dictionary terms, as "the possibility of loss or injury".

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 06, 2013, 01:44 PM
BRK Annual Meeting yr. 2001

RISK

Buffett: We regard using [a stock's] volatility as a measure of risk is nuts. Risk to us is 1) the risk of permanent loss of capital, or 2) the risk of inadequate return. Some great businesses have very volatile returns -- for example, See's usually loses money in two quarters of each year -- and some terrible businesses can have steady results.

Munger: How can professors spread this? I've been waiting for this craziness to end for decades. It's been dented, but it's still out there.

Buffett: If someone starts talking to you about beta, zip up your pocketbook.


-------------------------------------------------------

BRK Annual Meeting yr. 2004

RISK

Buffett: We think the best way to minimize risk is to THINK. Our default is [to have our capital] in short-term instruments and only do something when it makes sense.


----------------------------------------

"for example, See's usually loses money in two quarters of each year -- and some terrible businesses can have steady results."

^WOW!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 06, 2013, 01:50 PM
BRK Annual Meeting yr. 2007

On BETA and RISK

Buffett: Volatility does not measure risk. The problem is that the people who have written about and taught volatility do not understand risk. Beta is nice and mathematical, but it’s wrong. Past volatility does not determine risk.

Take farmland here in Nebraska: the price of land went from $2,000 to $600 per acre. The beta of farms went way up, so according to standard economic theory, I was taking more risk buying at $600. Most people would know that’s nonsense because farms aren’t traded. But stocks are traded and jiggle around and so people who study markets translate past volatility into all kinds of measures of risk. The whole concept of volatility is useful for people whose career is teaching, but useless to us.

Risk comes from the nature of certain kinds of businesses by the simple economics of the business, and from not knowing what you’re doing. If you understand the economics and you know the people, then you’re not taking much risk.

Munger: We’d argue that what’s taught is at least 50% twaddle, but these people have high IQs. We recognized early on that very smart people do very dumb things, and we wanted to know why and who, so we could avoid them. [Laughter]

Buffett: We are willing to lose $6 billion in one catastrophe, but our insurance business over time is not very risky. If you own a roulette wheel, you sometimes have to pay 35-to-1, but that’s okay. We would love to own a lot of roulette wheels.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 07, 2013, 09:39 AM
BRK Annual Meeting yr. 2004



What do you think of setting an asset allocation?


Buffett: We don’t hold any committee meetings. The business of saying you should have 50% in stocks, 30% in bonds…it’s nonsense.

The idea of recommending that assets should be split 60/40 [between stocks and bonds], and then have a big announcement that you’re moving to 65/35 is pure nonsense. It just doesn’t make any sense.


Munger: Berkshire doesn’t do much conventional asset allocation. We just search for good opportunities and don’t want to put up artificial barriers. In this sense, we’re totally out of step with modern portfolio management, but we think they’re wrong.

Buffett: Well over 80% of our assets are in the U.S.

Munger: When have you ever done a big asset allocation?

Buffett: Never. But if junk bonds had stayed low for longer, we could have invested $30 billion instead of $7 billion.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: chinito77 on Nov 07, 2013, 04:50 PM
Bata pa ko oi!!!!  :rofl:

Sorry po sir. Akala ko kasi may edad na kayo sa experiences niyo.  :hihi:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 07, 2013, 11:05 PM
Sorry po sir. Akala ko kasi may edad na kayo sa experiences niyo.  :hihi:

Siguro dahil na rin sa nature ng trabaho ko, may hawak akong retired colonel, ex police man(ang kaso niya is hired killer)<----hindi ako nagbibiro pero ngayon mabait na siya at iba't ibang klase ng tao :) Kaya napilitan tayong tumanda! haha

Payo ko nga pala sayo wag na wag kang ma-i-intimidate sa mga masmatanda sayo and people with authority, before we had a negotiation with CEO of Figaro at alam mo ba nadali namin siya ng 600k!LOL
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: ferrariEverest on Nov 07, 2013, 11:15 PM
^ Ano ba trabaho mo, bro?

D ba babae yung CEO ng Figaro? Mataray ba? Mukhang mabait naman yun e.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: chinito77 on Nov 07, 2013, 11:31 PM
Siguro dahil na rin sa nature ng trabaho ko, may hawak akong retired colonel, ex police man(ang kaso niya is hired killer)<----hindi ako nagbibiro pero ngayon mabait na siya at iba't ibang klase ng tao :) Kaya napilitan tayong tumanda! haha

Payo ko nga pala sayo wag na wag kang ma-i-intimidate sa mga masmatanda sayo and people with authority, before we had a negotiation with CEO of Figaro at alam mo ba nadali namin siya ng 600k!LOL

Ah sir wag po kayo mag alala. Hahaha may experience na ako dyan. Nung nakabanga ako ng motor, cya na may kasalanan ako pa gusto gatasan. Hehe though di nmn kalakihan ang amount. Mga 20k ata lahat gastos ko kasama pagamot niya at repait ng motor niya.

Pero di na naulit yun. Hehe :hihi: sindakan lang minsan ang style tama po ba? Bsta dpt nasa lugar din para kung pumalag hndi ka madehado.  :hihi:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 08, 2013, 01:57 PM
^ Ano ba trabaho mo, bro?

D ba babae yung CEO ng Figaro? Mataray ba? Mukhang mabait naman yun e.

Hindi ko madisclose d2 trabaho ko baka walang maniwala haha!

Dati babae sila magkakapartner tapos nabankrupt or muntik mabankrupt yata then may sumalba na company at ayun lalaki ang CEO na nilagay, matanda na siya around 65 - 75 siguro ang edad.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 08, 2013, 01:58 PM
Ah sir wag po kayo mag alala. Hahaha may experience na ako dyan. Nung nakabanga ako ng motor, cya na may kasalanan ako pa gusto gatasan. Hehe though di nmn kalakihan ang amount. Mga 20k ata lahat gastos ko kasama pagamot niya at repait ng motor niya.

Pero di na naulit yun. Hehe :hihi: sindakan lang minsan ang style tama po ba? Bsta dpt nasa lugar din para kung pumalag hndi ka madehado.  :hihi:

Yup you're right and also highly organised thoughts wins!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Nov 08, 2013, 02:54 PM
sir Wills lawyer kayo? :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 08, 2013, 05:36 PM
Nope hindi jmces
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Nov 09, 2013, 08:20 AM
It just occurred me that the better way to exploit the wisdom of Buffet is not to just read nor listen to him but rather to make money off him. In other words, buy Berkshire stocks then just go do whatever other stuffs you like while waiting for the money to flow in.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: richpulubi on Nov 09, 2013, 10:40 AM
It just occurred me that the better way to exploit the wisdom of Buffet is not to just read nor listen to him but rather to make money off him. In other words, buy Berkshire stocks then just go do whatever other stuffs you like while waiting for the money to flow in.

I've posted this question before, but it seems the stock A doesn't perform as well as the US index.  BRK A is about $170K a share now.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 10, 2013, 12:38 AM
It just occurred me that the better way to exploit the wisdom of Buffet is not to just read nor listen to him but rather to make money off him. In other words, buy Berkshire stocks then just go do whatever other stuffs you like while waiting for the money to flow in.

I disagree. How can you learn what Buffett do if you just buy his company and forget?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 10, 2013, 07:30 AM
Again, one of the best!!!!


BRK Annual Meeting 2007

How often do you review each position in your portfolio?

Buffett: It breaks down into two periods of my life: when I had more ideas than money, I was constantly reviewing my portfolio, figuring out which stock to unload to buy a new one.

Today, I have more money than ideas so we aren’t really thinking of selling when the alternative is cash. But we’re always collecting information on every company we own – it is a continuous process, but not with the idea that daily, weekly or monthly activity will result.

If we needed money for a very big deal, $20-, $30- or $40-billion, and we had to sell $10 billion in equities, we’d use information we’ve been collecting daily to decide what to sell.

Munger: Even in Warren’s early days, he wasn’t thinking about his #1 choice [his single favorite stock] – he could put that aside [because he’d never sell it].

Buffett: We think about adding more to certain stocks and have done so. We add to ones that look attractive and that we can buy. If you look at the portfolio at the end of 2007 you’ll see that certain positions have been increased by billions of dollars. We like many of our positions and if they get cheap, we’ll buy more.

Sometimes there’s not enough stock or we might cross certain thresholds that cause reporting requirements or going above 10%, which triggers the short-swing rule.

Munger: It’s not as easy as it looks to buy these big positions. When we were buying Coca-Cola, we bought every share we could – we bought 30-40% of the volume, yet it still took us a long time to accumulate our position. However, we like it better when we have these problems now than when we didn’t earlier.

Buffett: We usually feel we can buy 20% of the daily volume and not move the market too much. That means if we want to buy $5 billion, we have to wait for $25 billion to trade and not a lot of stocks trade that much.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: chinito77 on Nov 10, 2013, 09:02 PM
It just occurred me that the better way to exploit the wisdom of Buffet is not to just read nor listen to him but rather to make money off him. In other words, buy Berkshire stocks then just go do whatever other stuffs you like while waiting for the money to flow in.

Am I dreaming or what.... This post seems familiar with some other article here....

Oh well... Berkshire shares is way to expensive.. My net worth is not enough to buy 1 BRK-A shares at $170k  :wall:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Nov 11, 2013, 08:20 AM
I disagree. How can you learn what Buffett do if you just buy his company and forget?

Do you think Buffet really knows how to design or fix a train or say concoct an ice cream recipe? No, he exploits others' knowledge to make money too.

Why do you have to learn his ways, just exploit his knowledge. Same principle. That is if your goal is to make money from investing. Now if you just want to learn what he does, then that's a different story.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 11, 2013, 08:37 AM
You want to exploit the result of his wisdom and I want to exploit the wisdom on how to bring result.

I like to dig my own treasure. Why do I want to learn from him? Because he has a time tested method.

It seems that Buffett only buys whole business is fix in your mind.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: bauer on Nov 11, 2013, 11:36 AM
I disagree. How can you learn what Buffett do if you just buy his company and forget?

It's correct.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: ferrariEverest on Nov 11, 2013, 02:30 PM
Why do you have to learn his ways, just exploit his knowledge. Same principle. That is if your goal is to make money from investing. Now if you just want to learn what he does, then that's a different story.
Making money is not the sole reason for doing investing. Sometimes it IS the sole reason, but sophisticated investors/traders tend to evolve as they go through the journey. For some, making money is just a byproduct.

Why learn someone's ways? For one, it gives you a more accurate glimpse of someone's expertise. This way, you have a better chance of exploiting his/her knowledge even further. It's difficult to exploit someone's knowledge if you are incapable of understanding that person's thoughts or actions. Besides, merely copying or piggybacking someone else is VERY boring (this is how mediocre people operate, whether anyone agrees or not).

At some point, you need to blaze your own trail, so you may find greater success. ;)
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 11, 2013, 08:11 PM
Making money is not the sole reason for doing investing. Sometimes it IS the sole reason, but sophisticated investors/traders tend to evolve as they go through the journey. For some, making money is just a byproduct.

Why learn someone's ways? For one, it gives you a more accurate glimpse of someone's expertise. This way, you have a better chance of exploiting his/her knowledge even further. It's difficult to exploit someone's knowledge if you are incapable of understanding that person's thoughts or actions. Besides, merely copying or piggybacking someone else is VERY boring (this is how mediocre people operate, whether anyone agrees or not).

At some point, you need to blaze your own trail, so you may find greater success. ;)

WOW FE nice one LIKE!


---------------------------------

If we look at it in a different angle, we are standing on the shoulders of giants through exploiting their wisdom.

Reading these thread will give you 40 years of lesson in investing, let's be honest and ask ourselves could we really learn Buffett's wisdom on our own? If so, how long? 60 years?! While here we just read and think, read and think then read and think again, again, again and again!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 11, 2013, 09:22 PM
From Graham's class, Warren took away three main principles that required nothing more than the stern discipline of mental independence:

a stock is the right to own a little piece of a business. A stock is worth a certain fraction of what you would be willing to pay for the whole business.

use a margin of safety. Investing is built on estimates and uncertainty. A wide margin of safety ensures that the effects of good decisions are not wiped out by errors.

Mr. Market is your servant, not your master. Graham postulated a moody character called Mr. Market, who offers to buy and sell stocks every day, often at prices that don't make sense. Mr market's moods should not influence your view of price. However, from time to time he does offer the chance to buy low and sell high.


- The Snowball

^repost to remind us.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Nov 12, 2013, 10:03 AM
its just like learning any other skill, you can learn it on your own but it is faster to learn from a master, but you cannot be a master by mere copying that is why we just get all the techniques we can get and use them to create our own :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 12, 2013, 11:49 AM
^Nice one
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 12, 2013, 11:54 AM
BRK Annual Meeting yr. 2007


What are your expectations for future returns on stocks?

Buffett: When I closed the Buffett Partnership, I felt (and wrote to my investors) that the prospective return was about the same for equities and municipal bonds over the next decade, and I was roughly right. It’s not the same today. I’d have 100% of bonds in short-term bonds. Forced to choose between owning the S&P 500 vs. 20-year bonds, I’d buy stocks – and it would not be a close decision. But I wouldn’t have an equity investment with someone who charged high fees.

We don’t have the faintest idea where the S&P or bonds will be in three years, but over 20 years we’d prefer to own stocks.

Munger: We think there will be a disruption not too many years ahead.

Buffett: Of course, you could have said that and have been right at any point in the past century – there are always disruptions – but stocks have still done well. We’d rather have good stocks than sit around and hope they get cheaper, so anytime we see something good, we buy, hopefully in size.


(Follow-up question) If you were to follow up on your Fortune article from 1999 about the lean and fat periods (Mr. Buffett on the Stock Market), what would you be writing? You talked about 17-year periods. How is it turning out now, since we’re halfway through the next one?

Buffett: There’s nothing magical about 17-year periods – I just had a little fun with it because there were two 17-year periods, and there are 17-year locusts.

In 1999, people were extrapolating from the experience of the previous 17 years and had unrealistic expectations. They were bound to be disappointed.

If I were writing something now, I’d say I’d have expectations beyond 4.75% – I don’t know how much more, but more for sure. I would not have high expectations for equities, but better than for bonds.

Munger: Since that article was written, the experience from owning equities has been pretty lean, so Warren’s been right so far and I suspect is right now to have modest expectations.

Buffett: It’s hard to be right every day or week or month – that’s what happens if you’re on TV too often. [Tilson - He mentioned 1974 and a few other years in which he made market predictions; I wrote a column about this in 1999, Buffett’s Prescient Market Calls, suggesting my readers heed Buffett’s warning in the Fortune article. Incidentally, Buffett’s Market Call #5 highlighted in my article proved to be particularly correct: from 1993-2002 the S&P 500 compounded at 9.4% annually, far less than the 16.1% of the 10 previous years]. But every now and then, things really get out of whack. But the gradations in between are too tough. If you own great businesses, you should just hold on most of the time, maybe sell if the valuations get extremely high and buy more if they get really cheap like in the early 1970s.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Nov 12, 2013, 03:12 PM
its just like learning any other skill, you can learn it on your own but it is faster to learn from a master, but you cannot be a master by mere copying that is why we just get all the techniques we can get and use them to create our own :D

I just want to say I don't mind copying success, but what I'm saying is, for me my objective is to make money out of investing, so if I can just buy Berkshire and let them do the work then why even bother learning it (not my priority)? Isn't this a better way of exploiting their knowledge? I also get to do what I want.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Nov 12, 2013, 03:13 PM
Same principle with UITF etal
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: ferrariEverest on Nov 12, 2013, 03:24 PM
I just want to say I don't mind copying success, but what I'm saying is, for me my objective is to make money out of investing, so if I can just buy Berkshire and let them do the work then why even bother learning it (not my priority)? Isn't this a better way of exploiting their knowledge? I also get to do what I want.
I understand your point. Kasi ang primary basis ng replies nyo ay most likely yung age nyo.  :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Nov 12, 2013, 03:52 PM
Actually I think the reason most of us here don't want to just hand it to say Buffet, or more realistically PhilEquity is we want to feel in control, second, it must be more fulfilling if the gain comes from our "diskarte". Me? I'm half way over that, haha.

Let me throw another wrench in here. If you read books on investing, can you still be considered an autodidact investing wise?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: ferrariEverest on Nov 12, 2013, 04:15 PM
Actually I think the reason most of us here don't want to just hand it to say Buffet, or more realistically PhilEquity is we want to feel in control, second, it must be more fulfilling if the gain comes from our "diskarte". Me? I'm half way over that, haha.

Let me throw another wrench in here. If you read books on investing, can you still be considered an autodidact investing wise?
Sir,
autodidact, in short, ibig sabihin ay "self-taught". Kaya tingin ko oo. Mahirap yung pure autodidact, sobrang mabagal na proseso ng pag-aaral yun at hindi realistic. Unless isolated ka sa sibilisasyon (ex. mag isa ka sa isang isla), almost always, may matututunan tayo sa ibang tao.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Nov 12, 2013, 06:06 PM
in the philippines, once you let fund managers do the work, they will automatically get their commission, even if its just 1% compounded x years is sayang para sakin madamot ako eh :D and whenever my portfolio goes red or i made a wrong decision i cannot blame anyone else but myself, unlike with these managers i can easily say "fund manager wlaang kwenta sana ako nalang" :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 13, 2013, 06:13 AM
Student Visit yr. 2005


Do you expect the stock market premium to continue to be 6.5% over bonds?

I don't think that the stock market will return 6.5% over bonds in the future. Stocks usually yield a little more, but that isn't ordained. Every once in a while, stocks will get very cheap, but it isn't ordained in scripture that this is so. Risk premiums are mostly nonsense. The world isn't calculating risk premiums.

The best book prior to Graham was written by Edgar Lawrence Smith in 1924 called Common Stocks as Long Term Investments. It was a study that evaluated how bonds compared to stocks in various decades of the past. There weren't a whole lot of publicly traded companies back then. He thought he knew what he was going to find. He thought that he'd find that bonds outperformed stocks during periods of deflation, and stocks outperformed during inflationary times. But what he found was that stocks outperformed the bonds in nearly all cases. John M. Keynes then enumerated the reasons that this was so. He said that over time you have more capital working for you, and thus dividends would grow higher. This was novel information back then and investors then went crazy and started buying stocks for these higher returns. But then they started to get crazy, and no longer really applied the sound tactics that made the reasons given in the book true. Be careful that when you buy something for a sound reason, make sure that the reason stays sound.

If you buy GM, you need to write the price and the respective market valuation. Then write down why you are buying the business. If you can't, then you have no business doing it.

Quote from Ben Graham: “You can get in more trouble with a sound premise than an unsound premise because you'll just throw out the unsound premise”.

------------------------------------------------------------


Sa mga hindi makaGets ng tunay na ibig sabihin ng BUY and HOLD:


"John M. Keynes then enumerated the reasons that this was so. He said that over time you have more capital working for you, and thus dividends would grow higher. This was novel information back then and investors then went crazy and started buying stocks for these higher returns. But then they started to get crazy, and no longer really applied the sound tactics that made the reasons given in the book true. Be careful that when you buy something for a sound reason, make sure that the reason stays sound."

The essence of our job as an investor:

"If you buy GM, you need to write the price and the respective market valuation. Then write down why you are buying the business. If you can't, then you have no business doing it."



^In this Q & A nasagot na ang lahat ng kalituhan ng mag taong lito :hihi:

Paghindi niyo pa nagets yan, wag ng mgtry mapapagod lang kayo :bahalaka:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 13, 2013, 07:47 AM
Actually I think the reason most of us here don't want to just hand it to say Buffet, or more realistically PhilEquity is we want to feel in control, second, it must be more fulfilling if the gain comes from our "diskarte". Me? I'm half way over that, haha.

I like the way you think wilch!hehehe

Let me throw another wrench in here. If you read books on investing, can you still be considered an autodidact investing wise?

I think the answer is yes, not every investing book is spoon-feeding. If you could talk to the author of the book and explain to you everything then its not an autodidact anymore.

You mentioned "books on investing", that's the answer to your question by reading bookS you contemplate on every information that you get from different sources and trying your best to grasp the lesson by yourself so it's a "self-taught" process.

Now if you're trying to know more than you'll ever understand thats a different story! :rofl:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 14, 2013, 05:10 AM
BRK Annual Meeting yr. 1999


You have espoused a constant ROE on the stock market of about 13%, over time. Do you think that such an expectation is reasonable if you factor into equity and ROE the effect of stock options granted to managements? When option programs are present in a company, what do you think is a realistic way of valuing them on a cash basis?


Buffett: The questioner is Jon Brandt, the son of a very good friend of mine for many years. Jon is referring to an article I wrote for Fortune in the 1970’’s - and he’’s also referring to the tremendous ROE shown on the S&P 500, which includes the effects of restructurings.

Even allowing for the effects of stock options, I have still been surprised by the returns on equity shown by the S&P 500. As for options, we look at what the value of average option issuance is going to be over the next five years and figure what they’’d be worth as warrants to the [issuing] company. That’’s what we use as a cost to shareholders.

This should be shown as an expense in the income statement. I think a number of auditors believed it should be a cost but their clients pressured them and caved, and then Congress got called in. I think it’’s a scandal. Charlie?

Munger: It’’s fundamentally wrong not to have honest accounting. It’’s wrong to have little corruptions, that later can become big corruptions. The accounting in America is corrupt. It is not a good idea to have corrupt accounting.

Buffett: It’’s like campaign reform. Once you get a number of players benefitting, it’’s hard to get reform. It’’s the same thing with options accounting. It would have been better to have reform a couple decades ago, when it wasn’’t such a big thing.

That doesn’’t mean that we’’re against options. They could make sense here at some point, but not with Charlie and me.


---------------------------------------------------------

BRK Annual Meeting yr. 2003


Munger: I don't know if we'll ever see stocks in general at mouthwatering levels that we saw in 1973-4 or 1982 even. I think there's a very excellent chance that neither Warren or I will see those opportunities again, but that's not all bad. We'll just keep plugging away.

Buffett: It's not out of [the realm of] possibility though. You can never predict what markets will do. In Japan, a 10 year bond is yielding 5/8 of 1%. [Who could have ever imagined that?]

Munger: If that could happen in Japan, something much less bad could happen in the US. We could be in for a period in which the average fancy paid investment advisor just won't do very well.

Chaotic markets might not be good for society, but create opportunities for us.

There were some great opportunities in junk bonds last year and we invested in a few. But money is pouring into junk bonds right now, $1 billion per week. The world hasn't changed that much.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 17, 2013, 07:32 AM
BRK Annual Meeting yr. 2003


What's your investment hurdle rate?


Buffett: 10% is the figure we quit on -- we don't want to buy equities when the real return we expect is less than 10%, whether interest rates are 6% or 1%. It's arbitrary. 10% is not that great after tax.

Munger: We're guessing at our future opportunity cost. Warren is guessing that he'll have the opportunity to put capital out at high rates of return, so he's not willing to put it out at less than 10% now. But if we knew interest rates would stay at 1%, we'd change. Our hurdles reflect our estimate of future opportunity costs.

Buffett: We could take the $16 billion we have in cash earning 1.5% and invest it in 20-year bonds earning 5% and increase our current earnings a lot, but we're betting that we can find a good place to invest this cash and don't want to take the risk of principal loss of long-term bonds [if interest rates rise, the value of 20-year bonds will decline].
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 17, 2013, 07:47 AM
BRK Annual Meeting yr. 1997


Investors eventually repeat their mistakes. How can you prevent this--through fast growth or safety?


Buffett: If you understood a business perfectly and the future of the business, you would need VERY LITTLE in the way of a margin of safety. So, the more vulnerable the business is, assuming you still want to invest in it, the larger margin of safety you'd need. If you're driving a truck across a bridge that says it holds 10,000 pounds and you've got a 9,800 pound vehicle, if the bridge is 6 inches above the crevice it covers, you may feel okay, but if it's over the Grand Canyon, you may feel you want a little larger margin of safety in terms of driving only drive a 4,000 pound truck across. It depends on the nature of the underlying risk. We don't get the margin of safety now that we got in the 1970s.

The best thing is to learn from other guys' mistakes. Patton used to say, "It's an honor to die for your country; make sure the OTHER GUY gets the honour." There are a lot of mistakes that I've repeated. The biggest one, the biggest category over time, is being reluctant to pay up a little for a business that I knew was really outstanding. The cost of that I think is in the billions, and I'll probably keep making that mistake. The mistakes are made when there are businesses you can understand and that are attractive and you don't do something about them. I don't worry at all about the mistakes that come about like when I met Bill Gates and didn't buy Microsoft or something like that. Most of our mistakes have been mistakes of omission rather than commission.


Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Nov 18, 2013, 09:09 AM
Sub title for this thread - OMAHA SHRINE

Hehe suggestion lang.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 18, 2013, 09:15 AM
Sub title for this thread - OMAHA SHRINE

Hehe suggestion lang.

:rofl:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Nov 18, 2013, 09:18 AM
sana meron ding libreng ticket papunta sa ASM ng berkshire sa mga masugid na visitors :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 18, 2013, 09:19 AM
sana meron ding libreng ticket papunta sa ASM ng berkshire sa mga masugid na visitors :D

hehe sana nga
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 18, 2013, 09:23 AM
Lecture at the University of Florida Business School yr. 1998


Why do large caps outperform small caps?


We don't care if a company is large cap, small cap, middle cap, micro cap. It doesn't make any difference. The only questions that matter to us:

Do we understand the business?
Do we like the people running it?
And does it sell for a price that is attractive?


From my personal standpoint running Berkshire now because we got, pro forma for Gen. Re, $75 to $80 billion to invest in and I only want to invest in five things, so I am really limited to very big companies. But if I were investing $100,000, I wouldn't care whether something was large cap or small cap or anything. I would just look for businesses I understood.

Now, I think, on balance, large cap companies as businesses have done extraordinarily well the last ten years--way better than people anticipated they would do. You really have American businesses earning close to something 20% on equity. And that is something nobody dreamed of and that is being produced by very large companies in aggregate. So you have had this huge revaluation upwards because of lower interest rates and much higher returns on capital. If America business is really a disguised bond that earns 20%, a 20% coupon it is much better than a bond with a 13% coupon. And that has happened with big companies in recent years, whether it is permanent or not is another question. I am skeptical of that. I wouldn't even think about it--except for questions of how much money we run--I wouldn't even think about the size of the business. See's Candy was a $25 million business when we bought it. If I can find one now, as big as we are, I would love to buy it. It is the certainty of it that counts.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 19, 2013, 10:12 AM
BRK Annual Meeting yr. 2000


What is the definition of Value vs. Growth stocks?

Buffett: No two distinct categories of business. PV of cash a company generates is what the business is worth. No distinction in our mind between growth & value. All decision you decide how much value you are going to get. When we buy a stock we think of it in terms of buying the whole enterprise.

Aesop's wrote the first investment primer "A bird in the hand (Lay out cash today) is worth two in the bush". Esop forgot to say when you get the two in the bush and what the interest rate was. People associate growth with the birds in the bush but they still have to figure out when they get the birds. People often are not thinking of the mathematics implicit in what they are doing.

Munger: All intelligent investing is value investing; then acquire more than you are paying for. Investing is where you find a few great companies and then sit on your ass.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 20, 2013, 09:54 AM
BRK Annual Meeting yr. 2008


From the partnership letters in 1964, you had a strategy called ‘generals relatively undervalued.’ We have recently begun to implement a technique where we buy something at 12x, when comps sell at 20x. Comps go to 10x. Is this pair trading?

Buffett: Yes, we didn’t know we started so early. Ben Graham did it in 1920. He did pair trading. He was right 4 out of 5, but the last one would kill him. We shorted the market to some degree. We would borrow stocks from universities. We were early in this. We wouldn’t short a stock because it was unattractive but as a general market short [hedge]. I would borrow from the Treasurer of Columbia [University], “which ones do you want”, “just give me all of them”. It provoked some odd looks when I told the universities I wanted to short all of their stocks. It was not a big deal. We might have made a little money on it in the 1960s, but it is not something we do these days. If you have good long ideas on businesses that are undervalued, it is not necessary to short. 130/30 [simultaneously holding a 130% exposure to a long portfolio; and a 30% exposure to a short portfolio] is being marketed today. Many will sell you the IDEA(Stock) OF THE DAY. No great statistical merit.

Munger: We made our money by being long wonderful businesses, not by using a long-short strategy.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 20, 2013, 10:09 AM
Lecture at the University of Florida Business School yr.1998


What is the benefit of being an out-of-towner as opposed to being on Wall Street?

Buffett: I worked on Wall Street for a couple of years and I have my best friends on both coasts. I like seeing them. I get ideas when I go there. But the best way to think about investments is to be in a room with no one else and just think. And if that doesn’t work, nothing else is going to work. The disadvantage of being in any type of market environment like Wall Street in the extreme is that you get over-stimulated. You think you have to do something every day. The Chandler family paid $2,000 for this company (Coke). You don’t have to do much else if you pick one of those. And the trick then is not to do anything else. Even not to sell at 1919, which the family did later on. So what you are looking for is some way to get one good idea a year. And then ride it to its full potential and that is very hard to do in an environment where people are shouting prices back and forth every five minutes and shoving reports in front of your nose and all that. Wall Street makes its money on activity. You make your money on inactivity.

If everyone in this room trades their PORTFOLIO around EVERY DAY with every other person, you will all end up broke. And the intermediary will end up with all the money. If you all own stock in a group of average businesses and just sit here for the next 50 years, you will end up with a fair amount of money and your broker will be broke. He is like the Doctor who gets paid on how often to get you to change pills. If he gave you one pill that cures you the rest of your life, he would make one sale, one transaction and that is it. But if he can convince you that changing pills every day is the way to great health, it will be great for him and the prescriptionists.<--(COL :hihi: ) You won’t be any healthier and you will be a lot worse off financially. You want to stay away from any environment that stimulates activity. And Wall Street would have the effective of doing that.

When I went back to Omaha, I would go back with a whole list of companies I wanted to check out and I would get my money’s worth out of those trips, but then I would go back to Omaha and think about it.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Nov 20, 2013, 04:31 PM
prescriptionists lol
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 20, 2013, 10:44 PM
BRK Annual Meeting yr. 2010



There are a record number of ‘value’ investors here this year. Are there fewer $100 bills? Should I go to run a business instead of being a value fund manager?

Buffett: There will always $100 bills, but less at times. There are always conflicts. Asset gathering can be more important than asset managing. There will always be opportunities to outperform. People still make the same mistakes. Charlie has a company called the Daily Journal Company. I own 100 shares. I got their annual report, and in fiscal year 2009, they bought $15m of stock, and it is now worth $45m. They sat on cash for a long time, but opportunities come around. You have to be prepared to grab them. Definitely it is possible with moderate amounts of money. Charlie will be more pessimistic.

Munger: Take the high road, it is far less crowded.

Buffett: Those who take the high road in Washington are seldom bothered with traffic. Money management – it is easy to scale up. It would have been harder for me to work as a plant manager. I wouldn’t want to become superintendent right about the time they are going to give me a gold watch.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 20, 2013, 10:50 PM
Student Visit yr. 2005


When did you know you were rich?

Buffett: I really knew I was rich when I had $10,000. I knew along time ago that I was going to be doing something I loved doing with people that I loved doing it with. In 1958, I had my dad take me out of the will, as I knew I would be rich anyway. I let my two sisters have all the estate.

I bet we all in this room live about the same. We eat about the same and sleep about the same. We pretty much drive a car for 10 years. All this stuff doesn't make it any different. I will watch the Super Bowl on a big screen television just like you. We are living the same life. I have two luxuries: I get to do what I want to do every day and I get to travel a lot faster than you.

You should do the job you love whether or not you are getting paid for it. Do the job you love. Know that the money will follow. I travel distances better than you do. The plane is nicer. But that is about the only thing that I do a whole lot different.

I didn't know my salary when I went to work for Graham until I got his first paycheck. Do what you love and don't even think about the money. I will take a trip on Paul Allen's Octopus ($400M yacht), but wouldn't want one for myself. A 60 man crew is needed. They could be stealing, sleeping with each other, etc. Professional sports teams are a hassle, especially when you have as much money as him. Fans would complain that you aren't spending enough when the team loses.

If there is a place that is warm in the winter and cool in the summer, and you do what you love doing, you will do fine. You're rich if you are working around people you like. You will make money if you are energetic and intelligent. This society lets smart people with drive earn a very good living. You will be no exception.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Nov 21, 2013, 09:23 AM
 :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 22, 2013, 06:53 AM
BRK Annual Meeting yr. 2006


How important is conviction in investing?

Buffett: You didn’t have to have a high IQ or a lot of investment smarts to buy junk bonds in 2002, or certain other things after Long-Term Capital Management blew up. You just had to have the courage of your convictions and the willingness to act when EVERYONE ELSE was terrified and paralyzed. The lesson of following LOGIC rather than EMOTION is obvious, but some people can follow it and some can’t.

Munger: When we were young, there weren’t very many smart people in the investment world. You should have seen the people in the bank trust departments. Now, there are armies of smart people at private investment funds, etc. If there were a crisis now, there would be a lot more people with a lot of money ready to take advantage.

Buffett: But in 2002, there were all these people with lots of money [and the opportunities were still there].

Munger: When you have a huge convulsion, like a fire in this auditorium right now, you do get a lot of weird behavior. If you can be wise [during such times, you’ll profit].

Buffett: Three years ago, you could find a number of companies in [South] Korea with strong balance sheets trading at three times earnings. (P/E of 3)

Munger: But there was a huge convulsion there.

Buffett: But that was 4-5 years ago. It had already passed.

Munger: You couldn’t name 20 more examples like it. [e.g., there are only a few examples in recent times of such weird behavior leading to huge, obvious bargains in entire asset classes.]

Buffett: Even if I could, I wouldn’t! [Laughter]

----------------------------

:)
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Nov 22, 2013, 06:59 AM
11 Lessons from Peter Lynch


1. Behind every stock is a company. Find out what it’s doing.

2. Never invest in any idea you can’t illustrate with a crayon.

3. Over the short term, there may be no correlation between the success of a company’s operations and the success of its stock. Over the long term, there’s a 100% correlation.

4. Buying stocks without studying the companies is the same as playing poker – and never looking at your cards.

5. Time is on your side when you own shares of superior companies.

6. Owning stock is like having children. Don’t get involved with more than you can handle.

7. When the insiders are buying, it’s a good sign.

8. Unless you’re a short seller, it never pays to be pessimistic.

9. A stock market decline is as predictable as a January blizzard in Colorado. If you’re prepared, it can’t hurt you.

10. Everyone has the brainpower to make money in stocks. Not everyone has the stomach.

11. Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Nov 22, 2013, 09:03 AM
 :thankyou: :coffee:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: chinito77 on Nov 23, 2013, 02:37 AM

11. Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.

Property Stocks and Bank stocks could be hit if there is a real estate bubble.. NPL's will rise.. Developers business will stagnate..

Higher interest rates in fixed income securities will lessen the appetite for stocks due to greater risks.

If the Economy crashes, slowed or bubble pops. It will have a domino effect on almost all sectors...
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Nov 25, 2013, 10:36 AM
Property Stocks and Bank stocks could be hit if there is a real estate bubble.. NPL's will rise.. Developers business will stagnate..

Higher interest rates in fixed income securities will lessen the appetite for stocks due to greater risks.

If the Economy crashes, slowed or bubble pops. It will have a domino effect on almost all sectors...

then that is the perfect shopping season :D
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Nov 26, 2013, 10:09 AM
Q&A with 6 Business Schools yr. 2009


How do you think about value?

The formula for value was handed down from 600 BC by a guy named Aesop. A bird in the hand is worth two in the bush. Investing is about laying out a bird now to get two or more out of the bush. The keys are to only look at the bushes you like and identify how long it will take to get them out. When interest rates are 20%, you need to get it out right now. When rates are 1%, you have 10 years. Think about what the asset will produce. Look at the asset, NOT THE BETA. I don’t really care about volatility. Stock price is not that important to me, it just gives you the opportunity to buy at a great price. I don’t care if they close the NYSE for 5 years. I care more about the business than I do about events. I care about if there’s price flexibility and whether the company can gain more market share. I care about people drinking more Coke.

 


I bought a farm from the FDIC 20 years ago for $600 per acre. Now I don’t know anything about farming but my son does. I asked him, how much it cost to buy corn, plow the field, harvest, how much an acre will yield, what price to expect. I haven’t gotten a quote on that farm in 20 years.




If I were running a business school I would only have TWO COURSES. The first would obviously be an investing class about how to value a business. The second would be how to think about the stock market and how to deal with the volatility. The stock market is funny. You have no compulsion to act and a bunch of silly people setting prices all the time, it is great odds. I want the market to be like a manic depressive drunk. Graham’s Ch. 8, in the book Intelligent Investor, on Mr. Market is the most important thing I have ever read. Now think about the NYSE. You have thousands of companies to choose from. For me, that universe has shrunk because I need to put large dollar amounts to work. Attitude is much more important than IQ. You can really get into trouble with a high IQ, i.e. Long-Term Capital. You need to have the right philosophical temperament.



---------------------------------------------------

"If I were running a business school I would only have two courses. The first would obviously be an investing class about how to value a business. The second would be how to think about the stock market and how to deal with the volatility." <---- One of the most important lesson from Buffett.
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: TSO on Nov 26, 2013, 11:52 AM
Quote
If I were running a business school I would only have TWO COURSES. The first would obviously be an investing class about how to value a business. The second would be how to think about the stock market and how to deal with the volatility.

I disagree with the literal meaning of the statement. If you run a business school with those two courses, you won't have any businessmen!

...no problems with everything in the first paragraph, of course. Equity investments are most successful when approached from a business-like standpoint.
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: bauer on Nov 26, 2013, 12:21 PM
^LOL. True indeed.  Nothing to analyze and invest on if there are no businesses in operation.
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Nov 26, 2013, 12:41 PM
I disagree with the literal meaning of the statement. If you run a business school with those two courses, you won't have any businessmen!

But that message is not for entrepreneurs.

Those students are asking him on how to value a business, so he answered it in that context.
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Nov 26, 2013, 12:59 PM
BRK Annual Meeting yr. 2003


How do you calculate intrinsic value?

Intrinsic value is terribly important but very fuzzy. We try to work with businesses where we have fairly high probability of knowing what the future will hold. If you own a gas pipeline, not much is going to go wrong. Maybe a competitor enters forcing you to cut prices, but intrinsic value hasn't gone down if you already factored this in. We looked at a pipeline recently that we think will come under pressure from other ways of delivering gas [to the area the pipeline serves]. We look at this differently from another pipeline that has the lowest costs [and does not face threats from alternative pipelines]. If you calculate intrinsic value properly, you factor in things like declining prices.

When we buy business, we try to look out and estimate the cash it will generate and compare it to the purchase price. We have to feel pretty good about our projections and then have a purchase price that makes sense. Over time, we've had more pleasant surprises than we would have expected.

I've never seen an investment banker's book in which future earnings are projected to go down. But many businesses' earnings go down. We made this mistake with Dexter shoes -- it was earning $40 million pretax and I projected this would continue, and I couldn't have been more wrong.

20% of Fortune 500 companies will be earning significant less in five years, but I don't know which 20%. If you can't come up with reasonable estimates for that, then you move on.

Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Nov 27, 2013, 08:21 AM
BRK Annual Meeting yr. 1997


What do you believe to be the most important tools in determining intrinsic value?  What rules or standards do you apply when using these tools?

Buffett: If we could see in looking at any business what its future cash flows would be for the next 100 years, and discount that back at an appropriate interest rate, that would give us a number for intrinsic value. It would be like looking at a bond that had a bunch of coupons on it that was due in a hundred years ... Businesses have coupons too, the only problem is that they're not printed on the instrument and it's up to the investor to try to estimate what those coupons are going to be over time. In high-tech businesses, or something like that, we don't have the faintest idea what the coupons are going to be. In the businesses where we think we can understand them reasonably well, we are trying to print the coupons out. If you attempt to assess intrinsic value, it all relates to cash flow. The only reason to put cash into any kind of investment now is that you expect to take cash out--not by selling it to somebody else, that's just a game of who beats who--but by the asset itself ... If you're an investor, you're looking on what the asset is going to do, if you're a speculator, you're commonly focusing on what the price of the object is going to do, and that's not our game. We feel that if we're right about the business, we're going to make a lot of money, and if we're wrong about the business, we don't have any hopes of making money.

Munger:  I would argue that one filter that's useful in investing is the idea of opportunity costs. If you have one idea that's available in large quantity that's better that 98% of the other opportunities, then you can just screen out the other 98% ... With this attitude you get a concentrated portfolio, which we don't mind. That practice of ours which is so simple is not widely copied, I don't know why. Even at great universities and intellectual institutions. It's an interesting question: If we're right, why are so many other places so wrong.

Buffett: There are several possible answers to that question! (laughter) The first question we ask ourselves is, would we rather own this business than more Coca-Cola, than more Gillette .... We will want companies where the certainty gets close to that, or we would figure we'd be better off buying more Coke. If every management, before they bought a business, said is this better than buying in our own stock or even buying Coca-Cola stock, there'd be a lot less deals done. We try to measure against what we regard as close to perfection as we can get.

Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: jmces on Nov 27, 2013, 08:49 AM
BRK Annual Meeting yr. 1997


What do you believe to be the most important tools in determining intrinsic value?  What rules or standards do you apply when using these tools?

Buffett: If we could see in looking at any business what its future cash flows would be for the next 100 years, and discount that back at an appropriate interest rate, that would give us a number for intrinsic value. It would be like looking at a bond that had a bunch of coupons on it that was due in a hundred years ... Businesses have coupons too, the only problem is that they're not printed on the instrument and it's up to the investor to try to estimate what those coupons are going to be over time. In high-tech businesses, or something like that, we don't have the faintest idea what the coupons are going to be. In the businesses where we think we can understand them reasonably well, we are trying to print the coupons out. If you attempt to assess intrinsic value, it all relates to cash flow. The only reason to put cash into any kind of investment now is that you expect to take cash out--not by selling it to somebody else, that's just a game of who beats who--but by the asset itself ... If you're an investor, you're looking on what the asset is going to do, if you're a speculator, you're commonly focusing on what the price of the object is going to do, and that's not our game. We feel that if we're right about the business, we're going to make a lot of money, and if we're wrong about the business, we don't have any hopes of making money.

Munger:  I would argue that one filter that's useful in investing is the idea of opportunity costs. If you have one idea that's available in large quantity that's better that 98% of the other opportunities, then you can just screen out the other 98% ... With this attitude you get a concentrated portfolio, which we don't mind. That practice of ours which is so simple is not widely copied, I don't know why. Even at great universities and intellectual institutions. It's an interesting question: If we're right, why are so many other places so wrong.

Buffett: There are several possible answers to that question! (laughter) The first question we ask ourselves is, would we rather own this business than more Coca-Cola, than more Gillette .... We will want companies where the certainty gets close to that, or we would figure we'd be better off buying more Coke. If every management, before they bought a business, said is this better than buying in our own stock or even buying Coca-Cola stock, there'd be a lot less deals done. We try to measure against what we regard as close to perfection as we can get.


 :cool2:
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Nov 28, 2013, 08:51 AM
BRK Annual Meeting yr. 1997


Could you comment on the matter of intrinsic value as it applies to some of the Inevitables?

Buffett: Well, we won't stick a price on it. They are absolutely wonderful businesses run by sensational people, and they are selling at prices that are higher than they've sold at most of the time. But they may well be worth it, either in present terms, or they may be a couple of years ahead of themselves. Gillette doesn't repurchase their shares ... Coke consistently repurchases their shares. We generally like the policy of companies that have really wonderful businesses repurchasing their shares. The problem with most companies repurchasing their shares is that they are frequently so-so businesses and they are repurchasing shares for purposes other than intensifying the interest of shareholders in a wonderful business. It's hard to do things intelligently with money in this world and Coke has been very intelligent about using their capital, particularly to fortify and develop their bottler network around the world, but there's only so far you can go with that, and to enhance the ownership of shareholders in a company like Coca-Cola [is great].

The bottling is actually kind of interesting ... Asa Canver back in the late 1880's essentially bought the whole Coca-Cola company for $2,000, and that may be the smartest purchase in the history of the world. Then in 1889, a couple of guys from Chattanooga came along, and in those days soft drinks were sold over the counter, and they said bottling's got a future and you're busy with the pump side of the business, so why don't you let us develop the bottling side of the business. And I guess Mr. Canver didn't think much of bottling, so he gave them a contract that gave them the rights, in perpetuity for almost all of the United States, and gave them the right to buy Coca-Cola syrup at a fixed price forever. (audience groans) So Asa, who had scored with his $2,000 in a major way, seems to have made one of the dumbest contracts in history.

And the Coca-Cola company was faced over the years with the problem of having this bottling system which soon became the dominant system of distribution for Coke, being subject to a contract where there was no price flexibility and where the contract ran for perpetuity. And of course every bottler on his deathbed would call his children and grandchildren around, and he would prop himself up, and he would croak out in his last breath, "Don't let 'em screw with the bottling contract." (laughter)

So the Coca-Cola company faced this for decades, and they couldn't really do anything about the bottling system for a long time, and Roberto and Don Keough and some other people spent 20, 25 years getting that rationalized ...it was a huge, huge project, but it made an enormous difference over time, and that's what I mean when I talk about intellectual capital. You know you're not going to get results on that in a day or a month or a year, but they decided that to get the job done they had to do this, and they used capital to get that job done, but they used capital beyond that to repurchase shares, and it's been very smart, and they're probably repurchasing shares even as we talk.

Munger: I do think the Coca-Cola company is one of the most interesting cases in the history of business, and it ought to be way more studied than it is. There's just lesson after lesson after lesson in the history of the Coca-Cola company. But it's too long a story for today.
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: chinito77 on Nov 28, 2013, 01:25 PM
But that message is not for entrepreneurs.

Those students are asking him on how to value a business, so he answered it in that context.

Sometimes people take words out of context.  :hihi:

then that is the perfect shopping season :D

True kaya kelangan natin makapag ipon ng madaming pera now. Para I am hoping makapag shopping ng properties someday when the bubble pops.  :hihi:
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: TSO on Nov 28, 2013, 03:46 PM
^ FYI, I was having some beer when I wrote that. ^^
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: chinito77 on Nov 28, 2013, 05:56 PM
^ FYI, I was having some beer when I wrote that. ^^

But for me it make some sense.  :hihi:
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Nov 29, 2013, 10:26 AM
BRK Annual Meeting yr. 2003


When you estimate intrinsic value in capital intensive companies like McDonald's and Walgreens where a very healthy and growing operating cash flow is largely offset by expenditures for new stores, restaurants, etc how do you estimate future free cash flow? And at what rate do you discount those cash flows?


We use the same discount rate across all securities. We may be more conservative in estimating cash in some situations.

Just because interest rates are at 1.5% doesn't mean we like an investment that yields 2-3%. We have minimum thresholds in our mind that are a whole lot higher than government rates. When we're looking at a business, we're looking at holding it forever, so we don't assume rates will always be this low.


---------------------------------------------------

BRK Annual Meeting yr. 2007


Buffett: We don’t formally have discount rates. Every time we start talking about this, Charlie reminds me that I’ve never prepared a spreadsheet, but I do in my mind.

We just try to buy things that we’ll earn more from than a government bond – the question is, how much higher? If government bonds are at 2%, we’re not going to buy a business that will return 4%.

I don’t call Charlie every day and ask him, “What’s our hurdle rate?” We’ve never used the term.

Munger: The concept of a hurdle rate makes nothing but sense, but a lot of people using this make terrible errors. I don’t think there’s any substitute for thinking about a whole lot of investment options and thinking about the returns from each.

The trouble isn’t that we don’t have one [a hurdle rate] – we sort of do – but it interferes with logical comparison. If I know I have something that yields 8% for sure, and something else came along at 7%, I’d reject it instantly. It’s like the mail-order-bride firm offering a bride who has AIDS – I don’t need to waste a moment considering it. Everything is a function of opportunity cost.

Buffett: I’ve been on 19 boards and seen a zillion presentations projecting a certain IRR [internal rate of return]. If the boards had burned them all, they’d have been better off. The IRR is based on what the CEO wants. The numbers are made up.

Munger: I have a young friend who sells private partnership interests to investors, and it’s hard to get returns in that field. I asked him, “What returns do you tell them you can get?” He said “20%.” I said, “How did you come up with that number?” He said, “If I told them anything lower, they wouldn’t give me the money.”

Buffett: There’s no one in the world who can earn 20% on big money. It’s amazing how gullible pension funds and other investors are. They want it so badly that they’ll believe even total nonsense.
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: bauer on Nov 29, 2013, 12:30 PM
Munger: I have a young friend who sells private partnership interests to investors, and it’s hard to get returns in that field. I asked him, “What returns do you tell them you can get?” He said “20%.” I said, “How did you come up with that number?” He said, “If I told them anything lower, they wouldn’t give me the money.”


^ Super LOL
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: wilch23 on Nov 29, 2013, 01:20 PM
The TOPIC of this thread has been changed!??
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: lemreyes on Nov 29, 2013, 02:48 PM
^ I know right.  ^_^

It's thanksgiving.  Thank you for this thread. 
Slow week at the office so I've backread from 1 to 36.
Its really necessary to read more than once.  Lots of new insights uncovered from backreading.
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Nov 30, 2013, 03:01 PM
Bader na bader kayo sa pagchange ng title :hihi:

I have 10 Q&A of Buffett about valuation that is why I changed the title because I want you guys to pay 200% attention! This 10 post is the most important part of the thread.
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: wilch23 on Nov 30, 2013, 10:04 PM
I disagree with the literal meaning of the statement. If you run a business school with those two courses, you won't have any businessmen!

...no problems with everything in the first paragraph, of course. Equity investments are most successful when approached from a business-like standpoint.

Why do we assume that businessmen only come from business school? from our local experience, more business school grads become employees than businessmen.
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: chinito77 on Dec 02, 2013, 12:45 AM
Why do we assume that businessmen only come from business school? from our local experience, more business school grads become employees than businessmen.

Are you referring to successful businessmen who were drop outs sir? But how about JAZA? He graduated from a business school.  :hihi:
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: wilch23 on Dec 02, 2013, 08:26 AM
Quote from: TSO on Nov 26, 2013, 11:52 AM

    I disagree with the literal meaning of the statement. If you run a business school with those two courses, you won't have any businessmen!

    ...no problems with everything in the first paragraph, of course. Equity investments are most successful when approached from a business-like standpoint.

Quote from: wilch23 on Nov 30, 2013, 10:04 PM

    Why do we assume that businessmen only come from business school? from our local experience, more business school grads become employees than businessmen.

Are you referring to successful businessmen who were drop outs sir? But how about JAZA? He graduated from a business school.  :hihi:

First comment above assumes that all businessmen comes from business school, which has been refuted.

Notice I didn't exclude business students from becoming businessmen, which is the objection of Chinito. Personal example, I'm now a businessman but I am an BS ECE grad.
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: TSO on Dec 02, 2013, 09:20 AM
Why do we assume that businessmen only come from business school? from our local experience, more business school grads become employees than businessmen.


Well, if we ignore the fact I was buzzed when I wrote that (meaning for the lulz lang un), how about I point out I never explicitly stated that the world wouldn't have any businessmen without business schools. :)

On the other hand, running a business school with just those two courses aren't likely to produce any businessmen hahahaha
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: jmces on Dec 02, 2013, 09:39 AM
Munger: I have a young friend who sells private partnership interests to investors, and it’s hard to get returns in that field. I asked him, “What returns do you tell them you can get?” He said “20%.” I said, “How did you come up with that number?” He said, “If I told them anything lower, they wouldn’t give me the money.”


^ Super LOL

hahahahaha
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Dec 02, 2013, 10:12 AM

On the other hand, running a business school with just those two courses aren't likely to produce any businessmen hahahaha


LOL!
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Dec 02, 2013, 10:16 AM
BRK Annual Meeting yr. 2000


Is the skill of judging risk just as important as calculating intrinsic value?

We perceive risk as items that impair future business. Wants to have mathematical risk on their side over a group of decisions. Not in the business of assuming a lot of risk in business. We look for moats around businesses. We look for castles (businesses) that have a moat surrounding it which is expanding as a primary consideration of a great business.


---------------------------------------------

Learn from this!

BETA vs REAL BUSINESS RISK!

Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: TSO on Dec 02, 2013, 10:22 AM
^ Readers must be aware that beta is still useful, even if it fails to completey capture business risks.
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Dec 02, 2013, 10:23 AM
^ Readers must be aware that beta is still useful, even if it fails to completey capture business risks.

Agree!

----------

We don't need to fear beta.. it's actually an opportunity :D
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Dec 04, 2013, 10:58 AM
BRK Annual Meeting yr. 2002


What valuation metrics do you use?

The appropriate multiple for a business compared to the S&P 500 depends on its return on equity and return on incremental invested capital. I wouldn't look at a single valuation metric like relative P/E ratio. I don't think price-to-earnings, price-to-book or price-to-sales ratios tell you very much. People want a formula, but it's not that easy. To value something, you simply have to take its free cash flows from now until kingdom come and then discount them back to the present using an appropriate discount rate. All cash is equal. You just need to evaluate a business's economic characteristics.
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: jmces on Dec 04, 2013, 11:10 AM
BRK Annual Meeting yr. 2002


What valuation metrics do you use?

The appropriate multiple for a business compared to the S&P 500 depends on its return on equity and return on incremental invested capital. I wouldn't look at a single valuation metric like relative P/E ratio. I don't think price-to-earnings, price-to-book or price-to-sales ratios tell you very much. People want a formula, but it's not that easy. To value something, you simply have to take its free cash flows from now until kingdom come and then discount them back to the present using an appropriate discount rate. All cash is equal. You just need to evaluate a business's economic characteristics.

 :rakenrol:
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Dec 09, 2013, 06:37 AM
BRK Annual Meeting yr. 1995


What do you think of the use of book values in making investment decisions?


Buffett: Book value is virtually not a consideration in investment decision-making at Berkshire. Their pursuit of high return businesses usually leads to companies with minimal book values. He added that the book value approach could work well with small sums of money, like Graham had managed, and that the approach had worked well for Graham-type practitioners like Buffett’’s friend Walter Schloss. The three most important concepts conveyed by Graham in ““The Intelligent Investor”” were the investor’’s attitude toward the market, the ““margin of safety””, and the practice of looking at companies as businesses, not stocks.

[Notetaker's comment] Munger proffered that ““projections generally do more harm than good, and are usually prepared by persons who have some sort of an interest in the outcome of actions based on the projections. They often have a precision that’’s deceptive.”” Buffett added that they’’ve never looked at a projection in connection with an equity or business that they’’ve acquired. ““It’’s a ritual to justify doing what an executive or a board wanted to do in the first place.”


---------------------------------------------------

BRK Annual Meeting yr. 2007

Buffett: We have a bias toward investing in the U.S., but I bought my first stock outside the United States at least 50 years ago and we’ve looked at plenty of marketable securities overseas. It would make no difference to us if Coke was headquartered in Amsterdam.

But nobody outside the U.S. has heard of us. Eitan Wertheimer found us. The Iscar acquisition has contributed to our becoming better known. Eitan is going through a procedure to get us better known abroad. [Buffett did not give any details about this “procedure”.]

I haven’t done a good selling job abroad. We could be fairly criticized for not doing enough to become better known [overseas].

We own stocks in Germany and 4% of POSCO, which is based in South Korea – it’s now worth over $1 billion. I can think of a half dozen investments [we currently have] outside the U.S. We don’t have to report them in our [SEC Form] 13F, so they don’t get picked up like our domestic investments.

We have to report our holdings in Germany once we reach 3% ownership. So if we buy a $10 billion [market-cap] company, that means once we buy $300 million worth we have to tell the world, and Charlie and I don’t like doing that. It screws up our future buying, so the 3% rule is a real minus.

I can assure you that the entire world is on our radar screen and we hope to be on its radar screen.

Munger: John Templeton made a fortune being in Japan very early and stocks there went to 30-40x earnings. It was an admirable piece of investment, but you know, we did alright during the same period. [Laughter]

-------------------------------------------

The three most important concepts conveyed by Graham in ““The Intelligent Investor”” were the:

1. Investor’’s attitude toward the market
2. the ““margin of safety””
3. the practice of looking at companies as businesses, not stocks.

Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: rds on Dec 09, 2013, 12:16 PM
[Notetaker's comment] Munger proffered that ““projections generally do more harm than good, and are usually prepared by persons who have some sort of an interest in the outcome of actions based on the projections.

How can "projection" do harm than good? When we do DCF method to evaluate, we use projection...
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Dec 09, 2013, 11:57 PM
"Projections generally" thats how Buffett quoted Munger.

Nothing wrong with projection all of us do that, what Buffett meant is we should do a realistic projections.

Munger dislike those market analysts....parang yung sa COL kaya tingnan mo ang daming napapahamak, kadalasan may masamang hangarin ang mga yan.

Make sure you lean more on qualitative when trying to project/estimate because that will give you a better judgement than DCF.

Problem with doing qualitative analysis is that there is no metric/system that you can use.... nakasalalay lahat sa iyong kaalaman, experience at lalim ng talino. So BUY businesses you understand.
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: jmces on Dec 10, 2013, 09:09 AM
parang weather report ng PAGASA minsan tama minsan mali :D
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Dec 10, 2013, 10:06 AM
parang weather report ng PAGASA minsan tama minsan mali :D

Tapos pagnagkamali sila ng forecast ang sasabihin NAMISS daw maHIT ng company yung ESTIMATES! LOL! :rofl:
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: jmces on Dec 10, 2013, 10:21 AM
Tapos pagnagkamali sila ng forecast ang sasabihin NAMISS daw maHIT ng company yung ESTIMATES! LOL! :rofl:

kaya kelngan palaging may proteksyon, kapote! este payong :D
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: TSO on Dec 11, 2013, 04:46 AM
How can "projection" do harm than good? When we do DCF method to evaluate, we use projection...

Sometimes, it's genuine business unpredictability and human innovation at work. Most of the time, it's shitty assumptions, analysts' laziness, and herd mentality. :)
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: jmces on Dec 11, 2013, 09:31 AM
Sometimes, it's genuine business unpredictability and human innovation at work. Most of the time, it's shitty assumptions, analysts' laziness, and herd mentality. :)

 :rakenrol:
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Dec 11, 2013, 11:42 AM
BRK Annual Meeting yr. 2008


If you can’t talk with management, and can’t read the annual report, and didn’t know the price, but could only look at the financial statements, what metric would you look at?


Buffett: Investing is laying out money now to get more money later on. Let’s leave the market price out. If you were buying a farm, you would think about bushels per acre — you are looking to the asset itself. Ask yourself: do I understand enough about the business so that the financials will be able to tell me meaningful things that will help me to foresee the statements in the future? I have bought stocks the way you describe. They were in businesses I understood, and if I could buy at 40% of X, I’d be okay with the margin of safety. If you don’t tell me the nature of the business, financial statements won’t tell me much. We’ve bought many securities, and with most, we’ve never met management. We use our general understanding of business and look to specifics from financial statements.

Munger: One metric catches people. We prefer businesses that drown in cash. An example of a different business is construction equipment. You work hard all year and there is your profit sitting in the yard. We avoid businesses like that. We prefer those that can write us a check at the end of the year.

Buffett: We could value an apartment if we knew where the apartment is, and we know the monthly checks. I have bought a lot of things off the financials. There is a lot I wouldn’t buy even if it had the best management in the world, as it doesn’t make much difference in a bad business.

---------------------------------------------

" There is a lot I wouldn’t buy even if it had the best management in the world, as it doesn’t make much difference in a bad business."- Buffett

"I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will." - Buffett
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Dec 13, 2013, 11:01 AM
BRK Annual Meeting yr. 2004


How do you think about growth rates when you value businesses?


Buffett: When the [long-term] growth rate is higher than the discount rate, then [mathematically] the value is infinity. This is the St. Petersburg Paradox, written about by Durand 30 years ago.

Some managements think this [that the value of their company is infinite]. It gets very dangerous to assume high growth rates to infinity – that’s where people get into a lot of trouble. The idea of projecting extremely high growth rates for a long period of time has cost investors an awful lot of money. Go look at top companies 50 years ago: how many have grown at 10% for a long time? And [those that have grown] 15% is very rarified.

Charlie and I are rarely willing to project high growth rates. Maybe we’re wrong sometimes and that costs us, but we like to be conservative.

Munger: If your growth rate is so high that you conclude the business has an infinite valuation, you have to use more realistic numbers. What else could anyone do?
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: TSO on Dec 13, 2013, 03:24 PM
Interesting thought experiment to add here.

I've recently run a little simulation where you have a stock with $1.00 in book value, generates X% a year in ROE, and the market price is set in terms of P/E multiples, and the "trade" here is an initial purchase at time 0 and whatever the starting P/E is at the time followed by liquidation after 7 years at the ending P/E, which deflates/inflates to 15x (average P/E for US market across all time)

My observation is that, if you are pursuing a minimum annual return, the P/E ratio you can buy the company without compromising excess returns increases dramatically as ROE goes up. For example, if a company is consistently making 24% ROE a year and can be expected to produce more or less the same amount over the next 7 years, you can buy the stock up until the P/E ratio is 30x and still generate 12% returns over that period despite the deflation of market sentiment. But if you buy the SAME company for, say, 12 P/E, you earn 24% a year through the next seven years. 

But wait. To earn 12% a year at a company that generates ROE's of 9%, you need to get it at 10x P/E or lower or the stated hurdle will not be met. Compare that to 30x and lower for the company that generates ROE's of 24%.

What's the point of all this crap?

Remember that common Warby quote? "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

Well, guess what. Both strategies are equally valid (if "wonderful price" means "bargain basement prices c/o Mr. Market") and can generate excess returns. I think the reason why Warren thinks it's better to pursue the premium-priced corporations is because their economic moat ensures strong probability in maintaining high returns on invested capital going forward, and it doesn't matter if the market sentiment reprices the P/E ratios down so long as the ROI's don't fall below a minimum, because he will still get excess returns. In contrast, if you get yourself into a shitty company, you can't afford overpaying for it as it has market sentiments have a much stronger chance of ruining you over the long run. The margin of safety is thus weaker.

The lesson here is that we should adjust our P/E multiple rules to reflect average returns on investment that exhibit little to moderate variation. However, the reason why some value investors require a magic P/E ceiling -- including myself, as I don't look at companies with anything higher than a 16x normalized P/E ratio -- is because it represents the number at which I pay absolutely nothing for the future growth of the underlying business. (And to demonstrate, paying 16x P/E for the "wonderful company" that generates 24% ROE a year and can be expected to maintain its competitive advantages over the long run will result in 23% per annum even if the actual P/E deflates to 15x at the point of liquidation, which is nearly double the returns made given a purchase at the P/E of 30x. If ROE somehow falls, the low P/E is in itself another margin of safety, as ROE must decline permanently to 13% from 24% to give me the stated 12% hurdle rate.)

Interesting, isn't it? As for applying this lesson... well, I'll leave you to your thoughts. :)
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: bauer on Dec 13, 2013, 04:03 PM
^ What do you think is the MINIMUM acceptable IRR (internal rate of return) for a 'wonderful' company to make in order to adjust the P/E ratios accordingly?
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Dec 14, 2013, 01:33 PM
Interesting thought experiment to add here.

I've recently run a little simulation where you have a stock with $1.00 in book value, generates X% a year in ROE, and the market price is set in terms of P/E multiples, and the "trade" here is an initial purchase at time 0 and whatever the starting P/E is at the time followed by liquidation after 7 years at the ending P/E, which deflates/inflates to 15x (average P/E for US market across all time)

My observation is that, if you are pursuing a minimum annual return, the P/E ratio you can buy the company without compromising excess returns increases dramatically as ROE goes up. For example, if a company is consistently making 24% ROE a year and can be expected to produce more or less the same amount over the next 7 years, you can buy the stock up until the P/E ratio is 30x and still generate 12% returns over that period despite the deflation of market sentiment. But if you buy the SAME company for, say, 12 P/E, you earn 24% a year through the next seven years. 

But wait. To earn 12% a year at a company that generates ROE's of 9%, you need to get it at 10x P/E or lower or the stated hurdle will not be met. Compare that to 30x and lower for the company that generates ROE's of 24%.

What's the point of all this crap?

Remember that common Warby quote? "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

Well, guess what. Both strategies are equally valid (if "wonderful price" means "bargain basement prices c/o Mr. Market") and can generate excess returns. I think the reason why Warren thinks it's better to pursue the premium-priced corporations is because their economic moat ensures strong probability in maintaining high returns on invested capital going forward, and it doesn't matter if the market sentiment reprices the P/E ratios down so long as the ROI's don't fall below a minimum, because he will still get excess returns. In contrast, if you get yourself into a shitty company, you can't afford overpaying for it as it has market sentiments have a much stronger chance of ruining you over the long run. The margin of safety is thus weaker.

The lesson here is that we should adjust our P/E multiple rules to reflect average returns on investment that exhibit little to moderate variation. However, the reason why some value investors require a magic P/E ceiling -- including myself, as I don't look at companies with anything higher than a 16x normalized P/E ratio -- is because it represents the number at which I pay absolutely nothing for the future growth of the underlying business. (And to demonstrate, paying 16x P/E for the "wonderful company" that generates 24% ROE a year and can be expected to maintain its competitive advantages over the long run will result in 23% per annum even if the actual P/E deflates to 15x at the point of liquidation, which is nearly double the returns made given a purchase at the P/E of 30x. If ROE somehow falls, the low P/E is in itself another margin of safety, as ROE must decline permanently to 13% from 24% to give me the stated 12% hurdle rate.)

Interesting, isn't it? As for applying this lesson... well, I'll leave you to your thoughts. :)

:clap:

Nice! Thanks!
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Dec 15, 2013, 12:14 AM
This is how Buffett view a competitive company with short term bad results:


Buffett Praises IBM Profit Prospects After Share Slump
By Sarah Frier and Noah Buhayar  Oct 23, 2013 9:43

Warren Buffett, who invested more than $11 billion in International Business Machines Corp. (IBM), said he is confident in the computer-service provider’s prospects after the stock slumped last week.

“They will have record per-share earnings this year,” Buffett, 83, said in an interview on the “Charlie Rose” show, which aired late yesterday on PBS. “That can be disappointing if you expected more. But it is not a bad record, believe me.”

IBM is seeking to expand in more profitable markets like software and services to make up for the deterioration of its older hardware business. The company reported its sixth straight quarter of declining sales last week, sending the stock to its lowest price in more than two years. It is the worst-performing of Buffett’s top investments at Berkshire Hathaway Inc. (BRK/A), where he is chairman and chief executive officer.

Berkshire began accumulating a stake in Armonk, New York-based IBM in early 2011 after the stock rallied 74 percent from the end of 2008 to the end of 2010. Buffett’s company had 68.1 million shares as of June 30, meaning it paid about $171 apiece to build its stake.

IBM was little changed at $175.01 at 9:38 a.m. in New York. The shares had dropped 8.7 percent this year through yesterday, compared with a 23 percent gain for the Standard & Poor’s 500 Index.

Buffett said he doesn’t focus on results of an individual quarter and that all businesses have struggles.

“Every company, including Berkshire,” faces tough periods, Buffett told Rose. “We’ve had a fair number of blips over time.”

Software, Taxes

Even as IBM’s revenue slips, earnings continue to climb. The company last week reiterated a forecast for profit of $20 a share in 2015, up from $11.52 in 2010. IBM has sold less profitable businesses, acquired high-margin software companies, lowered its tax rate and bought back shares to help meet the target.

Berkshire built a stock portfolio valued at more than $100 billion by investing in companies that Buffett believes have a durable competitive advantage and sticking with those picks for years. Wells Fargo & Co. (WFC), the largest holding, had surged 26 percent this year through yesterday.

Buffett wrote last year in a letter to shareholders that long-term investors like Omaha, Nebraska-based Berkshire should cheer for IBM shares to languish in the short term. A lower price means IBM can repurchase more of its stock, increasing Berkshire’s ownership stake in the company.

Investors comforted by short-term share increases “resemble a commuter who rejoices after the price of gas increases, simply because his tank contains a day’s supply,” Buffett wrote.

-----------------------------------------------------------------------------------------------

Investors comforted by short-term share increases “resemble a commuter who rejoices after the price of gas increases, simply because his tank contains a day’s supply,” Buffett wrote.

WOW!
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: TSO on Dec 15, 2013, 02:53 AM
^ What do you think is the MINIMUM acceptable IRR (internal rate of return) for a 'wonderful' company to make in order to adjust the P/E ratios accordingly?

Depends on the market you're in and the risks you're taking, or it can depend on your goal.

Historically, my discount rates ranged from 9% to 12%, but all the cash flow projections are already risk-adjusted for redundancy. In the Phil, I typically get a number between 12% and 20% when I run my math and assessment.
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: TSO on Dec 15, 2013, 02:55 AM
Honestly though, I always target no less than 12% a year on the portfolio level, at least in the US
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Dec 15, 2013, 10:54 AM
Stock market doesn't know what you feel - Warren Buffett


I got no idea where the market is gonna go, I prefer its going down but my preferences have nothing to do with it, the market knows nothing about my feelings(laughter), that's one of the first things you have to learn with the stocks... you buy 100 shares of general motors now all of a sudden you have the feelings for general motors I mean... if it goes down you maybe get mad at it, you may say if it just goes up to what I paid for my world would be wonderful again or if it goes up you may say how smart you were and you say how you and general motors had this love affair.

You got all this feelings and stock doesn't know you own it, stocks just sits there he doesn't care what you paid, he doesn't care whether you owned it or anything, you know...  So any feeling I have about the market is not reciprocated. (laughter) It is very cold shoulder we're talking about here (laughter) and anybody here in this room that is going to be a net buyer of stocks over the next 10 years and there are a net sellers so everyone of you should prefer a lower prices, if you're gonna be a buyer of coca cola drink and you don't own coke stock you hope for coke's stock price go down I mean you are looking for it to go sale on this weekend, if you're in the super market you want it down not up in the weekend. Stock exchange is a big super market of companies and you're gonna be buying stocks what do you want to have happened? you want those stocks to go DOWN way DOWN and you know you will make better buys then.

We want things(stocks) to go down but I have no idea what the stock markets gonna do I never do I never will... that's how I think when it goes down I look harder of what I might buy that day.
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: jmces on Dec 16, 2013, 08:49 AM
Stock market doesn't know what you feel - Warren Buffett


I got no idea where the market is gonna go, I prefer its going down but my preferences have nothing to do with it, the market knows nothing about my feelings(laughter), that's one of the first things you have to learn with the stocks... you buy 100 shares of general motors now all of a sudden you have the feelings for general motors I mean... if it goes down you maybe get mad at it, you may say if it just goes up to what I paid for my world would be wonderful again or if it goes up you may say how smart you were and you say how you and general motors had this love affair.

You got all this feelings and stock doesn't know you own it, stocks just sits there he doesn't care what you paid, he doesn't care whether you owned it or anything, you know...  So any feeling I have about the market is not reciprocated. (laughter) It is very cold shoulder we're talking about here (laughter) and anybody here in this room that is going to be a net buyer of stocks over the next 10 years and there are a net sellers so everyone of you should prefer a lower prices, if you're gonna be a buyer of coca cola drink and you don't own coke stock you hope for coke's stock price go down I mean you are looking for it to go sale on this weekend, if you're in the super market you want it down not up in the weekend. Stock exchange is a big super market of companies and you're gonna be buying stocks what do you want to have happened? you want those stocks to go DOWN way DOWN and you know you will make better buys then.

We want things(stocks) to go down but I have no idea what the stock markets gonna do I never do I never will... that's how I think when it goes down I look harder of what I might buy that day.

This is how Buffett view a competitive company with short term bad results:


Buffett Praises IBM Profit Prospects After Share Slump
By Sarah Frier and Noah Buhayar  Oct 23, 2013 9:43

Warren Buffett, who invested more than $11 billion in International Business Machines Corp. (IBM), said he is confident in the computer-service provider’s prospects after the stock slumped last week.

“They will have record per-share earnings this year,” Buffett, 83, said in an interview on the “Charlie Rose” show, which aired late yesterday on PBS. “That can be disappointing if you expected more. But it is not a bad record, believe me.”

IBM is seeking to expand in more profitable markets like software and services to make up for the deterioration of its older hardware business. The company reported its sixth straight quarter of declining sales last week, sending the stock to its lowest price in more than two years. It is the worst-performing of Buffett’s top investments at Berkshire Hathaway Inc. (BRK/A), where he is chairman and chief executive officer.

Berkshire began accumulating a stake in Armonk, New York-based IBM in early 2011 after the stock rallied 74 percent from the end of 2008 to the end of 2010. Buffett’s company had 68.1 million shares as of June 30, meaning it paid about $171 apiece to build its stake.

IBM was little changed at $175.01 at 9:38 a.m. in New York. The shares had dropped 8.7 percent this year through yesterday, compared with a 23 percent gain for the Standard & Poor’s 500 Index.

Buffett said he doesn’t focus on results of an individual quarter and that all businesses have struggles.

“Every company, including Berkshire,” faces tough periods, Buffett told Rose. “We’ve had a fair number of blips over time.”

Software, Taxes

Even as IBM’s revenue slips, earnings continue to climb. The company last week reiterated a forecast for profit of $20 a share in 2015, up from $11.52 in 2010. IBM has sold less profitable businesses, acquired high-margin software companies, lowered its tax rate and bought back shares to help meet the target.

Berkshire built a stock portfolio valued at more than $100 billion by investing in companies that Buffett believes have a durable competitive advantage and sticking with those picks for years. Wells Fargo & Co. (WFC), the largest holding, had surged 26 percent this year through yesterday.

Buffett wrote last year in a letter to shareholders that long-term investors like Omaha, Nebraska-based Berkshire should cheer for IBM shares to languish in the short term. A lower price means IBM can repurchase more of its stock, increasing Berkshire’s ownership stake in the company.

Investors comforted by short-term share increases “resemble a commuter who rejoices after the price of gas increases, simply because his tank contains a day’s supply,” Buffett wrote.

-----------------------------------------------------------------------------------------------

Investors comforted by short-term share increases “resemble a commuter who rejoices after the price of gas increases, simply because his tank contains a day’s supply,” Buffett wrote.

WOW!

 :cool2:
Title: Re: Valuation and Intrinsic Value in Buffett's view
Post by: Wills on Dec 18, 2013, 02:32 PM
Stock market doesn't know what you feel - Warren Buffett


I got no idea where the market is gonna go, I prefer its going down but my preferences have nothing to do with it, the market knows nothing about my feelings(laughter), that's one of the first things you have to learn with the stocks... you buy 100 shares of general motors now all of a sudden you have the feelings for general motors I mean... if it goes down you maybe get mad at it, you may say if it just goes up to what I paid for my world would be wonderful again or if it goes up you may say how smart you were and you say how you and general motors had this love affair.

You got all this feelings and stock doesn't know you own it, stocks just sits there he doesn't care what you paid, he doesn't care whether you owned it or anything, you know...  So any feeling I have about the market is not reciprocated. (laughter) It is very cold shoulder we're talking about here (laughter) and anybody here in this room that is going to be a net buyer of stocks over the next 10 years and there are a net sellers so everyone of you should prefer a lower prices, if you're gonna be a buyer of coca cola drink and you don't own coke stock you hope for coke's stock price go down I mean you are looking for it to go sale on this weekend, if you're in the super market you want it down not up in the weekend. Stock exchange is a big super market of companies and you're gonna be buying stocks what do you want to have happened? you want those stocks to go DOWN way DOWN and you know you will make better buys then.

We want things(stocks) to go down but I have no idea what the stock markets gonna do I never do I never will... that's how I think when it goes down I look harder of what I might buy that day.


Also stock doesn't know you are earning from him hahah! :rofl:

I don't know if you guys get the psychology behind that!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Dec 19, 2013, 07:07 AM
BRK Annual Meeting yr. 1997


What's your philosophy in buying businesses?


It's a question of being able to IDENTIFY BUSINESSES that you UNDERSTAND and you are VERY CERTAIN about. If you understand those businesses, and many people do, but Charlie and I don't, then you have the opportunity to evaluate them. If you decide they're fairly priced and they have marvellous prospects, you're going to do very well. But there's a whole group of companies--a very large group of companies--that Charlie and I just don't know how to value. And that doesn't bother us.

I mean, we don't know how to figure out what cocoa beans are going to do, or the Russian ruble--there's all kinds of financial instruments that we just don't feel we have the knowledge to evaluate. It might be a bit too much to expect somebody would understand every business in the world. We find some that are much harder for us to understand.

When I say understand--my definition of understand is that you have to have a pretty good idea of where it's going to be in ten years. I just can't get that conviction with a lot of businesses, whereas I can get them with relatively few. But I only need a few--six or eight, as you pointed out, or something like that. It would be better for you--it certainly would have been better for you if we had the insights about what we regard as the more complicated businesses you describe--because there was and may still be a chance to make a whole lot more money if those growth rates that you describe are maintained.

I don't think you'll find better managers than Andy Grove at Intel or Bill Gates at Microsoft and they certainly seem to have fantastic positions in the businesses they're in, but I don't know enough about those businesses to be sure that those businesses are fantastic as I am about being sure that Gillette and Coca-Cola's businesses are fantastic. You may understand those businesses better than you understand Coke and Gillette because of your background or just the way your mind is wired. But I don't, and therefore I have to stick with what I really think I can understand.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Dec 23, 2013, 11:45 AM
-The correct way to view business using Value Investing strategy-


BRK Annual Meeting yr. 2003


What is the ideal business?


Buffett: The ideal business is one that generates very high returns on capital and can invest that capital back into the business at equally high rates. Imagine a $100 million business that earns 20% in one year, reinvests the $20 million profit and in the next year earns 20% of $120 million and so forth. But there are very very few businesses like this. Coke has high returns on capital, but incremental capital doesn't earn anything like its current returns. We love businesses that can earn high rates on even more capital than it earns. Most of our businesses generate lots of money, but can't generate high returns on incremental capital -- for example, See's and Buffalo News. We look for them [areas to wisely reinvest capital], but they don't exist.

So, what we do is take money and move it around into other businesses. The newspaper business earned great returns but not on incremental capital. But the people in the industry only knew how to reinvest it [so they squandered a lot of capital]. But our structure allows us to take excess capital and invest it elsewhere, wherever it makes the most sense. It's an enormous advantage.

See's has produced $1 billion pre-tax for us over time. If we'd deployed that in the candy business, the returns would have been terrible, but instead we took the money out of the business and redeployed it elsewhere. Look at the results!

Munger: There are two kinds of businesses: The first earns 12%, and you can take it out at the end of the year. The second earns 12%, but all the excess cash must be reinvested -- there's never any cash. It reminds me of the guy who looks at all of his equipment and says, "There's all of my profit." We hate that kind of business.

Buffett: We like to be able to move cash around and find it's best use. We'd love to have our companies redeploy cash, but they can't. Gillette has a great business, but can't sensibly reinvest all of the profit.

We don't think the batting average of American industry redeploying capital has been very great. We knock other people doing what has made us so successful.

Munger: I'm uncomfortable with that, which is why we say negative things [to discourage others from trying to do what we do]].




Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: GIG on Dec 23, 2013, 08:43 PM
Interesting thought experiment to add here.

I've recently run a little simulation where you have a stock with $1.00 in book value, generates X% a year in ROE, and the market price is set in terms of P/E multiples, and the "trade" here is an initial purchase at time 0 and whatever the starting P/E is at the time followed by liquidation after 7 years at the ending P/E, which deflates/inflates to 15x (average P/E for US market across all time)

My observation is that, if you are pursuing a minimum annual return, the P/E ratio you can buy the company without compromising excess returns increases dramatically as ROE goes up. For example, if a company is consistently making 24% ROE a year and can be expected to produce more or less the same amount over the next 7 years, you can buy the stock up until the P/E ratio is 30x and still generate 12% returns over that period despite the deflation of market sentiment. But if you buy the SAME company for, say, 12 P/E, you earn 24% a year through the next seven years. 

But wait. To earn 12% a year at a company that generates ROE's of 9%, you need to get it at 10x P/E or lower or the stated hurdle will not be met. Compare that to 30x and lower for the company that generates ROE's of 24%.

What's the point of all this crap?

Remember that common Warby quote? "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

Well, guess what. Both strategies are equally valid (if "wonderful price" means "bargain basement prices c/o Mr. Market") and can generate excess returns. I think the reason why Warren thinks it's better to pursue the premium-priced corporations is because their economic moat ensures strong probability in maintaining high returns on invested capital going forward, and it doesn't matter if the market sentiment reprices the P/E ratios down so long as the ROI's don't fall below a minimum, because he will still get excess returns. In contrast, if you get yourself into a shitty company, you can't afford overpaying for it as it has market sentiments have a much stronger chance of ruining you over the long run. The margin of safety is thus weaker.

The lesson here is that we should adjust our P/E multiple rules to reflect average returns on investment that exhibit little to moderate variation. However, the reason why some value investors require a magic P/E ceiling -- including myself, as I don't look at companies with anything higher than a 16x normalized P/E ratio -- is because it represents the number at which I pay absolutely nothing for the future growth of the underlying business. (And to demonstrate, paying 16x P/E for the "wonderful company" that generates 24% ROE a year and can be expected to maintain its competitive advantages over the long run will result in 23% per annum even if the actual P/E deflates to 15x at the point of liquidation, which is nearly double the returns made given a purchase at the P/E of 30x. If ROE somehow falls, the low P/E is in itself another margin of safety, as ROE must decline permanently to 13% from 24% to give me the stated 12% hurdle rate.)

Interesting, isn't it? As for applying this lesson... well, I'll leave you to your thoughts. :)

Amen!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidacts)
Post by: patski on Dec 24, 2013, 08:29 AM
One of the best!


With the popularity of "Fortune's Formula" and the Kelly Criterion, there seems to be a lot of debate in the value community regarding diversification vs. concentration. I know where you side in that discussion, but was curious if you could tell us more about your process for position sizing or averaging down.

Warren Buffett: I have 2 views on diversification. If you are a professional and have confidence, then I would advocate lots of concentration. For everyone else, if it’s not your game, participate in total diversification. The economy will do fine over time. Make sure you don’t buy at the wrong price or the wrong time. That’s what most people should do, buy a cheap index fund and slowly dollar cost average into it. If you try to be just a little bit smart, spending an hour a week investing, you’re liable to be really dumb.

If it’s your game, diversification doesn’t make sense. It’s crazy to put money into your 20th choice rather than your 1st choice. “Lebron James” analogy. If you have Lebron James on your team, don’t take him out of the game just to make room for someone else. If you have a harem of 40 women, you never really get to know any of them well.

Charlie and I operated mostly with 5 positions. If I were running 50, 100, 200 million, I would have 80% in 5 positions, with 25% for the largest. In 1964 I found a position I was willing to go heavier into, up to 40%. I told investors they could pull their money out. None did. The position was American Express after the Salad Oil Scandal. In 1951 I put the bulk of my net worth into GEICO. Later in 1998, LTCM was in trouble. With the spread between the on-the-run versus off-the-run 30 year Treasury bonds, I would have been willing to put 75% of my portfolio into it. There were various times I would have gone up to 75%, even in the past few years. If it’s your game and you really know your business, you can load up.

Over the past 50-60 years, Charlie and I have never permanently lost more than 2% of our personal worth on a position. We’ve suffered quotational loss, 50% movements. That’s why you should never borrow money. We don’t want to get into situations where anyone can pull the rug out from under our feet.

In stocks, it’s the only place where when things go on sale, people get unhappy. If I like a business, then it makes sense to buy more at 20 than at 30. If McDonalds reduces the price of hamburgers, I think it’s great.

I meant to finish this whole without making a post. However WB's comment (in bold) above really caught my attention

Sir Wills. Does this means WB, before buying a company he also considers companies stock price and the general stock market conditions (i.e. in a major bull or bear run)?

BTW: This particular post is my favorite as it provides an insight WB's investment strategy  :applause:.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Dec 26, 2013, 07:46 PM


Sir Wills. Does this means WB, before buying a company he also considers companies stock price



Yes, a great business with expensive price tag is useless for investors.... if the business is profitable and you bought it above fair price or sobrang mahal ng pagkabili mo... hindi ka rin kikita or maliit lang ang kikitain mo.... so stock's price is very important when it comes to buying.... stock's price if it's bargain is important if you have money ready to invest.




Does this means WB, before buying a company he also considers the general stock market conditions (i.e. in a major bull or bear run)?



Buffett (and Lynch) doesn't care about that.... when you say stock market condition that means we are talking about the whole market, Buffett has a concentrated portfolio and does not buy the whole index.....

In fact Buffett doesn't like if the market is UP because of lesser opportunity for buying.

Buffett tried the approach of technical analysis for 8 years so he knows what he's talking about when he said "I have no idea what the stock markets gonna do I never do I never will."

^Makes sense huh? Why worry/care on things that are unknowable?

ALL you should care is the business that you bought/own! Remember Stock's quotation in PSE has nothing to do with the earnings of the company.

So what you would want is to earn and grow from the business that you buy..... If you can find a very good business with excellent management and you believe in the company's growth story(by doing qualitative analysis) BUY it and sit on it...WHY? Because that company will compound their earnings for you and the dividend that you will get should be reinvested, your job is to compound the earnings that you get from the company.

Compound Definition from Investopedia:

"The ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings. "

A company with good growth potential who does not give dividend is great! Because they do the job of compounding for you!

So buy and hold makes sense because of that^ :)

LAST don't worry about the stock's price fluctuation or if its BULL or BEAR what you should worry is the future earnings of the company.

"Earnings will dictate the stock's price in the long run" Peter Lynch

^That is the norm of the stock market since day ONE!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Dec 27, 2013, 09:14 AM
BRK Annual Meeting yr. 2005


What makes a great business?

The best businesses can maintain their earnings without continued reinvestment, whereas in the worst you have to keep pouring money into a money-losing business.

The best business is being the best surgeon in town. You don’t have to do any reinvestment – the investment was the education. The surgeon will retain his earnings power, regardless of inflation.

------------------------------------------------------------------------------------------------------------------------------

[Untapped pricing power. The measure of a great business.]

We like buying businesses with some untapped pricing power. For example, when we bought See’s for $25 million, I asked myself, “If we raised prices by 10 cents per pound, would sales fall off a cliff?” The answer was obviously no. You can determine the strength of a business over time by the amount of agony they go through in raising prices.

A good example is newspapers. The local daily paper controlled the market and every year they raised the [advertising] rates and circulation prices – it was almost a big yawn. They didn’t worry about losing big advertisers like Sears, JC Penney or Wal-Mart, or losing subscribers. They increased prices whether the price of newsprint went up or down.

Now, they agonize over price increases because they worry about driving people to other mediums. That world has changed.

You can learn a lot about the durable economics of a business by watching price behaviour. The beer industry is able to raise prices, but it’s getting tougher.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: GIG on Dec 28, 2013, 10:52 PM
Happy Holidays Wills!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Dec 29, 2013, 10:09 AM
Hey GIG happy holidays!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 03, 2014, 08:07 AM
University of Nebraska Business Magazine yr. 2001


When you are looking at a business in which to invest, what are your priorities?

You have to really understand the economics of a business and the kind of people you are getting into business with. They have to love their business. They have to feel that they have been creative, that it is their painting, I am not going to disturb it, just give them more canvas and more brushes, but its their painting, from our standpoint any way. The whole place will reflect the attitude of the person at the top, if you have someone at the top who doesn’t care, the people down below won’t care. On the other hand, if you have someone at the top who cares a great deal, that will be evident across the organization. [The type of people managing the business is a very important criteria, then?] Yes, contracts don’t protect you; you have to have confidence in the people.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 08, 2014, 01:18 PM
Lecture at the University of Florida Business School yr. 1998


What makes a company something that you like?


Buffett: I like businesses that I can understand. Let’s start with that. That narrows it down by 90%. There are all types of things I don’t understand, but fortunately, there is enough I do understand. You have this big wide world out there and almost every company is publicly owned. So you have all American business practically available to you. So it makes sense to go with things you can understand.

I can understand this, anyone can understand this (Buffett holds up a bottle of Coca-Cola). Since 1886, it is a simple business, but it is not an easy business—I don’t want an easy business for competitors. I want a business with a moat around it. I want a very valuable castle in the middle and then I want the Duke who is in charge of that castle to be very honest and hard working and able. Then I want a moat around that castle. The moat can be various things: The moat around our auto insurance business, Geico, is low cost.

People have to buy auto insurance so everyone is going to have one auto insurance policy per car basically. I can’t sell them 20, but they have to buy one. I can sell them 1. What are they going to buy it on? (based on what criteria?) They (customers) will buy based on service and cost. Most people will assume the service is identical among companies or close enough. So they will do it on cost. So I have to be a low cost producer--that is my moat. To the extent that my costs are further below the other guy, I have thrown a couple of sharks into the moat. All the time you have this wonderful castle, there are people out there who are going to attack it and try to take it away from you. I want a castle I can understand, but I want a castle with a moat around it.

30 years ago, Eastman Kodak’s moat was just as wide as Coca-Cola’s moat. I mean if you were going to take a picture of your six-month old baby and you want to look at that picture 20 years from now or 50 years from now. And you are never going to get a chance—you are not a professional photographer—so you can evaluate what is going to look good 20 or 50 years ago. What is in your mind about that photography company (Share of Mind) is what counts. Because they are promising you that the picture you take today is going to be terrific 20 to 50 years from now about something that is very important to you. Well, Kodak had that in spades 30 years ago, they owned that. They had what I call share of mind. Forget about share of market, share of mind. They had something—that little yellow box—that said Kodak is the best. That is priceless. They have lost some of that. They haven’t lost it all.

It is not due to George Fisher. George is doing a great job, but they let that moat narrow. They let Fuji come and start narrowing the moat in various ways. They let them get into the Olympics and take away that special aspect that only Kodak was fit to photograph the Olympics. So Fuji gets there and immediately in people’s minds, Fuji becomes more into parity with Kodak.

You haven’t seen that with Coke; Coke’s moat is wider now than it was 30 years ago. You can’t see the moat day by day but every time the infrastructure that gets built in some country that isn’t yet profitable for Coke that will be 20 years from now. The moat is widening a little bit. Things are, all the time, changing a little in one direction or the other. Ten years from now, you will see the difference. Our managers of the businesses we run, I have one message to them, and we want to widen the moat. We want to throw crocs, sharks and gators—I guess—into the moat to keep away competitors. That comes about through service, through quality of product, it comes about through cost, some times through patents, and/or real estate location. So that is the business I am looking for.

Now what kind of businesses am I going to find like that? Well, I am going to find them in simple products because I am not going to be able to figure what the moat is going to look like for Oracle, Lotus or Microsoft, ten years from now. Gates is the best businessman I have ever run into and they have a hell of a position, but I really don’t know what that business is going to look like ten years from now. I certainly don’t know what his competitors will look like ten years from now. I know what the chewing business will look like ten years from now. The Internet is not going to change how we chew gum and nothing much else is going to change how we chew gum. There will lots of new products. Is Spearmint or Juicy Fruit going to evaporate? It isn’t going to happen. You give me a billion dollars and tell me to go into the chewing gum business and try to make a real dent in Wrigley’s. I can’t do it. That is how I think about businesses. I say to myself, give me a billion dollars and how much can I hurt the guy? Give me $10 billion dollars and how much can I hurt Coca-Cola around the world? I can’t do it. Those are good businesses.

Now give me some money and tell me to hurt somebody in some other fields, and I can figure out how to do it.

So I want a simple business, easy to understand, great economics now, honest and able management, and then I can see about in a general way where they will be ten (10) years from now. If I can’t see where they will be ten years from now, I don’t want to buy it.

Basically, I don’t want to buy any stock where if they close the NYSE tomorrow for five years, I won’t be happy owning it. I buy a farm and I don’t get a quote on it for five years and I am happy if the farm does OK. I buy an apartment house and don’t get a quote on it for five years, I am happy if the apartment house produces the returns that I expect.

People buy a stock and they look at the price next morning and they decide to see if they are doing well or not doing well. It is crazy. They are buying a piece of the business. That is what Graham—the MOST FUNDAMENTAL PART of what he taught me.

You are not buying a stock, you are buying part ownership in a business. You will do well if the business does well, if you didn’t pay a totally silly price. That is what it is all about. You ought to buy businesses you understand. Just like if you buy farms, you ought to buy farms you understand. It is not complicated.


Incidentally, by the way, in calling this Graham-Buffett, this is pure Graham. I was very fortunate. I picked up his book (The Intelligent Investor) when I was nineteen; I got interested in stocks when I was 6 or 7.   I bought my first stock when I was eleven. But I was playing around with all this stuff—I had charts and volume and I was making all types of technical calculations and everything. Then I picked up a little book that said you are not just buying some little ticker symbol, that bounces around every day, you are buying part of a business. Soon as I started thinking about it that way, everything else followed. It is very simple. So we buy businesses we think we can understand. There is no one here who can’t understand Coke.

If I was teaching a class at business school, on the final exam I would pass out the information on an Internet company and ask each student to value it. Anybody that gave me an answer, I’d flunk (Laughter). I don’t know how to do it. But people do it all the time; it is more exciting.

If you look at it like you are going to the races--that is a different thing--but if you are investing.... Investing is putting out money to be sure of getting more back later at an appropriate rate. And to do that you have to understand what you are doing at any time. You have to understand the business. You can understand some businesses but not all businesses.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Jan 08, 2014, 01:32 PM
 :applause:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 09, 2014, 05:33 PM
BRK Annual Meeting yr. 2010


What types of businesses have the highest ROIC?

WB: You could run Coca-Cola with no capital. There are a number of businesses that operate on negative capital. Great magazines operate with negative capital. Subscriptions are paid upfront, they have limited fixed investments. There are certain businesses like this. Blue Chip Stamps - it got float ahead of time. There are a lot of great businesses. Apple doesn’t need very much capital. See’s needs little capital but it can’t get that large -- we can’t get people eating 10 lbs of boxed chocolate every day. Great consumer businesses need relatively little capital. Where people pay you in advance (magazines, insurance), you are using your customers’ capital. But the rest of the world knows this and they get expensive. It can be competitive to buy them. Business Wire – it doesn’t require capital. Many service businesses require little capital. When successful, they can be something.

CM: Nothing to add, the formula never changes.

WB: If you could own one business in the world, what would it be?

CM: You and I got in trouble many decades ago for this, naming the most fabulous business. High pricing power, a monopoly – we don’t want to name it publicly!


Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 10, 2014, 10:05 AM
BRK Annual Meeting yr. 2004


What businesses should we avoid?

Buffett: In the textile industry, we always had new machinery that held the promise of increasing our profit, but it never did because everyone else bought the same machinery. It was sort of like being in a crowd, and everyone stands on tip-toes – your view doesn’t improve, but your legs hurt.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 14, 2014, 02:49 AM
BRK Annual Meeting Yr. 2004


What have been your business mistakes?


Buffett: The main mistakes we’ve made – some of them big time – are: 1) Ones when we didn’t invest at all, even when we understood it was cheap; and 2) Starting in on an investment and not maximizing it.

Charlie is a big fan of doing things on a big scale. But when I bought something at X and it went up to X and 1/8th, I sometimes stopped buying, perhaps hoping it would come back down. We’ve missed billions when I’ve gotten anchored.

Munger: Do you have anything worse to confess than Wal-Mart?

Buffett: It cost us about $10 billion. I set out to buy 100 million shares, pre-split, at $23. We bought a little and it moved up a bit and I stopped buying. Perhaps I thought it might come back a bit – who knows? That thumb-sucking, the reluctance to pay a little more, cost us a lot. There are other examples.

On the other hand, it doesn’t bother us. If every shot you hit in golf was a hole-in-one, you’d lose interest. You gotta hit a few in the woods.

We probably won’t make the kind of mistake that costs us a lot – though we did with Dexter Shoes. We’re more likely to make mistakes of omission, not commission, in the future.

Munger: Since mistakes of omission don’t appear in the financial statements, most people don’t pay attention to them. We rub our noses in mistakes of omission – as we just did.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Jan 14, 2014, 01:56 PM
BRK Annual Meeting Yr. 2004


What have been your business mistakes?


Buffett: The main mistakes we’ve made – some of them big time – are: 1) Ones when we didn’t invest at all, even when we understood it was cheap; and 2) Starting in on an investment and not maximizing it.

Charlie is a big fan of doing things on a big scale. But when I bought something at X and it went up to X and 1/8th, I sometimes stopped buying, perhaps hoping it would come back down. We’ve missed billions when I’ve gotten anchored.

Munger: Do you have anything worse to confess than Wal-Mart?

Buffett: It cost us about $10 billion. I set out to buy 100 million shares, pre-split, at $23. We bought a little and it moved up a bit and I stopped buying. Perhaps I thought it might come back a bit – who knows? That thumb-sucking, the reluctance to pay a little more, cost us a lot. There are other examples.

On the other hand, it doesn’t bother us. If every shot you hit in golf was a hole-in-one, you’d lose interest. You gotta hit a few in the woods.

We probably won’t make the kind of mistake that costs us a lot – though we did with Dexter Shoes. We’re more likely to make mistakes of omission, not commission, in the future.

Munger: Since mistakes of omission don’t appear in the financial statements, most people don’t pay attention to them. We rub our noses in mistakes of omission – as we just did.

 :rakenrol:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 21, 2014, 11:43 AM
BRK Annual Meeting yr. 2003

What have been your business mistakes?


Buffett: If we start buying a stock, we want to go in heavy. I can't think of a stock where we wanted to quit.

We've made some big mistakes starting to buy something that was cheap and within our circle of competence, but trickled off because price went up a bit. Good ideas are too scarce to be parsimonious with.

Munger: After nearly making a terrible mistake not buying See's, we've made this mistake many times. We are apparently slow learners. These opportunity costs don't show up on financial statements, but have cost us many billions.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 21, 2014, 11:46 AM
BRK Annual Meeting yr. 2001


What do you do if business changes are recognised?

Buffett: If a good business is doing dumb things with your money, it is wise to get out. The option is always there to try to persuade the business to change its mind but this is difficult. Investment techniques must be simpatico with all.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Jan 21, 2014, 11:47 AM
BRK Annual Meeting yr. 2003

What have been your business mistakes?


Buffett: If we start buying a stock, we want to go in heavy. I can't think of a stock where we wanted to quit.

We've made some big mistakes starting to buy something that was cheap and within our circle of competence, but trickled off because price went up a bit. Good ideas are too scarce to be parsimonious with.

Munger: After nearly making a terrible mistake not buying See's, we've made this mistake many times. We are apparently slow learners. These opportunity costs don't show up on financial statements, but have cost us many billions.

 :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: GIG on Jan 22, 2014, 08:53 PM
"WB: If you could own one business in the world, what would it be?

CM: You and I got in trouble many decades ago for this, naming the most fabulous business. High pricing power, a monopoly – we don’t want to name it publicly!"

I just love to invite the two to dinner sometime hehehe!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Jan 23, 2014, 09:44 AM
"WB: If you could own one business in the world, what would it be?

CM: You and I got in trouble many decades ago for this, naming the most fabulous business. High pricing power, a monopoly – we don’t want to name it publicly!"

I just love to invite the two to dinner sometime hehehe!

sama ako kahit ako na ung waiter :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 23, 2014, 09:55 AM
LOL!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 23, 2014, 04:36 PM
In this Q&A you will witness how Buffett use qualitative and quantitative of a stock in his analysis. This is by far the best Q&A of Buffett IMO because in here you can see clearly how he think before buying a stock. You can draw a LOT of lesson and wisdom in this Q&A.

Lecture at the University of Florida Business School  yr. 1998

How do you determine what is the proper price to pay for the business?


Warren E. Buffett: It is a tough thing to decide but I don’t want to buy into any business I am not terribly sure of. So if I am terribly sure of it, it probably won’t offer incredible returns. Why should something that is essentially a cinch to do well, offer you 40% a year? We don’t have huge returns in mind, but we do have in mind not losing anything. We bought See’s Candy in 1972, See’s Candy was then selling 16 m. pounds of candy at a $1.95 a pound and it was making 2 bits a pound or $4 million pre-tax. We paid $25 million for it—6.25 x pretax or about 10x after tax. It took no capital to speak of. When we looked at that business—basically, my partner, Charlie, and I—we needed to decide if there was some untapped pricing power there. Where that $1.95 box of candy could sell for $2 to $2.25. If it could sell for $2.25 or another $0.30 per pound that was $4.8 on 16 million pounds. Which on a $25 million purchase price was fine. We never hired a consultant in our lives; our idea of consulting was to go out and buy a box of candy and eat it.

What we did know was that they had share of mind in California. There was something special. Every person in Ca. has something in mind about See’s Candy and overwhelmingly it was favorable. They had taken a box on Valentine’s Day to some girl and she had kissed him. If she slapped him, we would have no business. As long as she kisses him, that is what we want in their minds. See’s Candy means getting kissed. If we can get that in the minds of people, we can raise prices. I bought it in 1972, and every year I have raised prices on Dec. 26th, the day after Christmas, because we sell a lot on Christmas. In fact, we will make $60 million this year. We will make $2 per pound on 30 million pounds. Same business, same formulas, same everything--$60 million bucks and it still doesn’t take any capital.

And we make more money 10 years from now. But of that $60 million, we make $55 million in the three weeks before Christmas. And our company song is: “What a friend we have in Jesus.” (Laughter). It is a good business. Think about it a little. Most people do not buy boxed chocolate to consume themselves, they buy them as gifts— somebody’s birthday or more likely it is a holiday. Valentine’s Day is the single biggest day of the year. Christmas is the biggest season by far. Women buy for Christmas and they plan ahead and buy over a two or three week period. Men buy on Valentine’s Day. They are driving home; we run ads on the Radio. Guilt, guilt, guilt—guys are veering off the highway right and left. They won’t dare go home without a box of Chocolates by the time we get through with them on our radio ads. So that Valentine’s Day is the biggest day.

Can you imagine going home on Valentine’s Day—our See’s Candy is now $11 a pound thanks to my brilliance. And let’s say there is candy available at $6 a pound. Do you really want to walk in on Valentine’s Day and hand—she has all these positive images of See’s Candy over the years—and say, “Honey, this year I took the low bid.” And hand her a box of candy. It just isn’t going to work. So in a sense, there is untapped pricing power—it is not price dependent.

Think of Disney. Disney is selling Home Videos for $16.95 or $18.95 or whatever. All over the world—people, and we will speak particularly about Mothers in this case, have something in their mind about Disney. Everyone in this room, when you say Disney, has something in their mind about Disney. When I say Universal Pictures, if I say 20th Century Fox, you don’t have anything special in your mind. Now if I say Disney, you have something special in your mind. That is true around the world.

Now picture yourself with a couple of young kids, whom you want to put away for a couple of hours every day and get some peace of mind. You know if you get one video, they will watch it twenty times. So you go to the video store or wherever to buy the video. Are you going to sit there and premier 10 different videos and watch them each for an hour and a half to decide which one your kid should watch? No. Let’s say there is one there for $16.95 and the Disney one for $17.95—you know if you take the Disney video that you are going to be OK. So you buy it. You don’t have to make a quality decision on something you don’t want to spend the time to do. So you can get a little bit more money if you are Disney and you will sell a lot more videos. It makes it a wonderful business. It makes it very tough for the other guy.

How would you try to create a brand—Dreamworks is trying—that competes with Disney around the world and replaces the concept that people have in their minds about Disney with something that says, Universal Pictures? So a mother is going to walk in and pick out a Universal Pictures video in preference to a Disney. It is not going to happen.

Coca-Cola is associated with people being happy around the world. Everyplace – Disneyland, the World Cup, the Olympics—where people are happy. Happiness and Coke go together. Now you give me—I don’t care how much money—and tell me that I am going to do that with RC Cola around the world and have five billion people have a favorable image in their mind about RC Cola. You can’t get it done. You can fool around, you can do what you want to do. You can have price discounts on weekends. But you are not going to touch it. That is what you want to have in a business. That is the moat. You want that moat to widen.

If you are See’s Candy, you want to do everything in the world to make sure that the experience basically of giving that gift leads to a favorable reaction. It means what is in the box, it means the person who sells it to you, because all of our business is done when we are terribly busy. People come in during theose weeks before Chirstmas, Valentine’s Day and there are long lines. So at five o’clock in the afternoon some woman is selling someone the last box candy and that person has been waiting in line for maybe 20 or 30 customers. And if the salesperson smiles at that last customer, our moat has widened and if she snarls at ‘em, our moat has narrowed. We can’t see it, but it is going on everyday. But it is the key to it. It is the total part of the product delivery. It is having everything associated with it say, See’s Candy and something pleasant happening. That is what business is all about.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 27, 2014, 10:25 AM
BRK Annual Meeting yr. 2010


Please talk about the shift to investing in capital intensive business and the ultimate impact on intrinsic value. Help us understand the time value of the necessary capital expenditures.

Buffett: It’s clear you understand the question well, and it as important a question as you can ask. We are putting big money in big businesses with good economics, but not as good as when we were dealing with smaller amounts. $40m of capital required in See’s and it earns much more than that. If we could put in more we would. But wonderful businesses don’t soak up capital – we had $2.2b operating earnings in Q1. We have to put it out as intelligently as we can. When we find them, we’ll buy them. Can we put it to work intelligently? We think capital intensive businesses we have bought are good, working well. But it can’t work brilliantly, we can’t spend all that money and still get high returns. But does that mean we should pay out excess capital instead? No, because we think they can earn a good return even with the need to make capital investments in certain businesses. We are better paying it out only if we can’t translate it into more than $1 of present value. In our judgment with BNSF we did it, but scorecard will only come in 10 to 20 yrs. In MidAmerican, we have done it. But it won’t be a Coca-Cola – which doesn’t need as much capital. I hope we don’t disappoint you. If anyone expects brilliant returns from this base at Berkshire, we don’t know how to do it.

Munger: I’m just as good at not knowing as you are.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Jan 27, 2014, 11:04 AM
BRK Annual Meeting yr. 2010


Please talk about the shift to investing in capital intensive business and the ultimate impact on intrinsic value. Help us understand the time value of the necessary capital expenditures.

Buffett: It’s clear you understand the question well, and it as important a question as you can ask. We are putting big money in big businesses with good economics, but not as good as when we were dealing with smaller amounts. $40m of capital required in See’s and it earns much more than that. If we could put in more we would. But wonderful businesses don’t soak up capital – we had $2.2b operating earnings in Q1. We have to put it out as intelligently as we can. When we find them, we’ll buy them. Can we put it to work intelligently? We think capital intensive businesses we have bought are good, working well. But it can’t work brilliantly, we can’t spend all that money and still get high returns. But does that mean we should pay out excess capital instead? No, because we think they can earn a good return even with the need to make capital investments in certain businesses. We are better paying it out only if we can’t translate it into more than $1 of present value. In our judgment with BNSF we did it, but scorecard will only come in 10 to 20 yrs. In MidAmerican, we have done it. But it won’t be a Coca-Cola – which doesn’t need as much capital. I hope we don’t disappoint you. If anyone expects brilliant returns from this base at Berkshire, we don’t know how to do it.

Munger: I’m just as good at not knowing as you are.

 :rakenrol:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Jan 27, 2014, 08:21 PM
1998 Coke is King, as mentioned by WB.

2010 CocaCola is again referenced...

I will make a prediction that unless CocaCola shift its strategy, it'll be a long way down. Soft drink is a sunset product.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 28, 2014, 10:43 AM
1998 Coke is King, as mentioned by WB.

2010 CocaCola is again referenced...

I will make a prediction that unless CocaCola shift its strategy, it'll be a long way down. Soft drink is a sunset product.

Good luck with that.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 28, 2014, 10:44 AM
Secret Millionaires Club yr. 2010


What do you think the best quality is in a business or a person?

There are many important qualities to have in a business and many important qualities in a person. In a business always look for a great product at a fair price, and with honest reliable management. In a person, I think that honesty, brains, and hard work are very important qualities. People who demonstrate these consistently, will usually be successful in whatever they do.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Jan 28, 2014, 12:32 PM
1998 Coke is King, as mentioned by WB.

2010 CocaCola is again referenced...

I will make a prediction that unless CocaCola shift its strategy, it'll be a long way down. Soft drink is a sunset product.

Good luck with that.

Used to be
   during sports activity - softdrinks
   during meals & snacks - softdrinks
   TV & movie times - softdrinks
   Walang lang hangout - softdrinks

Now
   during sports activity - energy drinks or water
   during meals & snacks - iced/hot tea, iced/hot coffee, bottled water, juices, softdrinks
   TV & movie times - milk tea, iced tea/coffee, bottled water, juices, softdrinks
   Walang lang hangout - energy drinks,hot or iced tea/coffee, bottled water, juices, softdrinks

Do you see the moat drying up?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: lemreyes on Jan 28, 2014, 12:57 PM
Coca-cola is no longer a softdrinks company.  Its a beverage company.
A list of brands owned by Coca-cola.  it includes bottled water, juices, and energy drinks.

http://www.coca-colacompany.com/brands/all/#TCCC
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: panitanfc on Jan 28, 2014, 06:57 PM
Used to be
   during sports activity - softdrinks
   during meals & snacks - softdrinks
   TV & movie times - softdrinks
   Walang lang hangout - softdrinks

Now
   during sports activity - energy drinks or water
   during meals & snacks - iced/hot tea, iced/hot coffee, bottled water, juices, softdrinks
   TV & movie times - milk tea, iced tea/coffee, bottled water, juices, softdrinks
   Walang lang hangout - energy drinks,hot or iced tea/coffee, bottled water, juices, softdrinks

Do you see the moat drying up?

The true moat of Coke is...there is no TASTE RECOGNITION...which means di ka magsawa sa kakainom ng coke. Sa tanghali sa Hapon o sa Gabi.. and this is the test factor for coke...every little kid could recognise the black colour.  And the moment they taste it. they will surely ask and cry for more.   Investing is simple but not easy..try to investigate using your senses..its not rocket science.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 28, 2014, 08:40 PM
Used to be
   during sports activity - softdrinks
   during meals & snacks - softdrinks
   TV & movie times - softdrinks
   Walang lang hangout - softdrinks

Now
   during sports activity - energy drinks or water
   during meals & snacks - iced/hot tea, iced/hot coffee, bottled water, juices, softdrinks
   TV & movie times - milk tea, iced tea/coffee, bottled water, juices, softdrinks
   Walang lang hangout - energy drinks,hot or iced tea/coffee, bottled water, juices, softdrinks

Do you see the moat drying up?

That's according to your world.

According to my world I can't eat liempo, grilled fish, parilla chicken,Parilla grilled squid and countryside restaurant grilled squid without coke light in can. All those food that I mention doesn't feel complete without super cold coke light in can on my side.

Agree with lemreyes and panitanfc :cool2: 7eleven, mini stop, jollibee, mcdonalds other restaurants could not operate 100% without coke. Jollibee will be alright running without yum burger for a week but they cannot do that on coke And that's a fact jack!

Hey Try niyo dito!!! Parilla Bacolod grille at Quezon City and Countryside restaurant at katipunan!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 29, 2014, 02:48 PM
BRK Annual Meeting yr. 2004


Opinion of forecasts?

Munger: People have always had this craving to have someone tell them the future. Long ago, kings would hire people to read sheep guts. There’s always been a market for people who pretend to know the future. Listening to today’s forecasters is just as crazy as when the king hired the guy to look at the sheep guts. It happens over and over and over.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Jan 29, 2014, 02:58 PM
BRK Annual Meeting yr. 2004


Opinion of forecasts?

Munger: People have always had this craving to have someone tell them the future. Long ago, kings would hire people to read sheep guts. There’s always been a market for people who pretend to know the future. Listening to today’s forecasters is just as crazy as when the king hired the guy to look at the sheep guts. It happens over and over and over.

madam auring :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 29, 2014, 05:13 PM
^jm Maganda takbo ng mga stocks mo.. Nice! :clap:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Jan 29, 2014, 05:16 PM
^jm Maganda takbo ng mga stocks mo.. Nice! :clap:

kaso di pa naman ako magbebenta :( hindi padin nahihit mga bids ko lol
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 29, 2014, 11:02 PM
Georgetown University yr. 2013 <----- Fresh!


Do you have any stock tips for students here? (asked by a student)


Warren Buffett: It's very important to have the right framework, you need to have an approach to investing that's sound. Graham's approach is simple, some people adapt to it which I did immediately and most people don't but if you have the right philosophy you will find opportunities as you go through the next 20,30,40 or 50 years.

Stocks sell at silly prices from time to time and it doesn't take a high IQ to figure out their cheap but it does take a temperament thus willing to step up and actually act. I tell people if their going in to investment business if you got a 160 IQ sell 30 points to somebody else because you won't need it.(laughter)

You do need to have the right temperament you have to be able to ignore what other people are saying and simply look at the facts and decide "is this stock which is selling at X worth two X?" and occasionally you'll find things like that and when you don't find it you don't do anything, that's my generalise stock tip no names.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Jan 30, 2014, 08:40 AM
Georgetown University yr. 2013 <----- Fresh!


Do you have any stock tips for students here? (asked by a student)


Warren Buffett: It's very important to have the right framework, you need to have an approach to investing that's sound. Graham's approach is simple, some people adapt to it which I did immediately and most people don't but if you have the right philosophy you will find opportunities as you go through the next 20,30,40 or 50 years.

Stocks sell at silly prices from time to time and it doesn't take a high IQ to figure out their cheap but it does take a temperament thus willing to step up and actually act. I tell people if their going in to investment business if you got a 160 IQ sell 30 points to somebody else because you won't need it.(laughter)

You do need to have the right temperament you have to be able to ignore what other people are saying and simply look at the facts and decide "is this stock which is selling at X worth two X?" and occasionally you'll find things like that and when you don't find it you don't do anything, that's my generalise stock tip no names.

dapat magspeech din sya sa pinas o kaya sa sg :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Jan 30, 2014, 03:33 PM
Since he never invested here, that means he never found any worthy stock here?
So why do we invest in the PSE, Tara na sa NYSE!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Jan 30, 2014, 03:37 PM
Coca-cola is no longer a softdrinks company.  Its a beverage company.
A list of brands owned by Coca-cola.  it includes bottled water, juices, and energy drinks.

http://www.coca-colacompany.com/brands/all/#TCCC

Madami nga, but which one is a home run among its field? Coke na ang sikat dyan pero palaos na rin.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Jan 30, 2014, 06:46 PM
Peter Lynch's Investing Principles


1. When the operas outnumber the football games three to zero, you know there is something wrong with your life.

2. Gentlemen who prefer bonds don't know what they are missing.

3. Never invest in any idea you can't illustrate with a crayon.

4. You can't see the future through a rearview mirror.

5. There's no point paying Yo-Yo Ma to play a radio.

6. As long as you're picking a fund, you might as well pick a good one.

7. The extravagance of any corporate office is directly proportional to management's reluctance to reward shareholders.

8. When yields on long-term government bonds exceed the dividend yield of the S&P 500 by 6 percent or more, sell your stocks and buy bonds.

9. Not all common stocks are equally common.

10. Never look back when you're driving on the autobahn.

11. The best stock to buy may be the one you already own.

12. A sure cure for taking a stock for granted is a big drop in the price.

13. Never bet on comeback while they're playing "Taps".

14. If you like the store, chances are you'll love the stock.

15. When insiders are buying, it's a good sign - unless they happen to be New England bankers.

16. In business, competition is never as healthy as total domination.

17. All else being equal, invest in the company with the fewest color photographs in the annual report.

18. When even the analysts are bored, it's time to start buying.

19. Unless you're a short seller or a poet looking for a wealthy spouse, it never pays to be pessimistic.

20. Corporations, like people, change their names for one of two reasons: either they've gotten married, or they've been involved in some fiasco that they hope the public will forget.

21. Whatever the Queen is selling, buy it.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 03, 2014, 02:07 PM
BRK Annual Meeting yr. 2008


What are the key traits needed to correct the crowd mentality?

CM: He wants to know how to become less like a lemming.

WB: I started investing when I was 11. I believe in reading everything in sight. I wandered around for 8 years with technical analysis. I read The Intelligent Investor, chapters 8 and 20 I recommend the most, and if you absorb it you won’t be a lemming. I read it early in 1950, and I think it’s as good a book now as then. You can’t get a bad result if you follow it. The Intelligent Investor has three big lessons:

think of a stock as a part owner- ship of a business;
the market is there to serve you, not instruct you; and
always require a margin of safety. Berkshire shareholders are better than most at understanding that they own a part of a business.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 03, 2014, 03:23 PM
This is the equation that I completely missed out on when I was just 26 years old, I thought business was about making money and it's not... business is about giving value and monetizing on that value, that's what business is about.

You start a business because you have something great or that is worth something... If there's no value underneath the business, the sh*t is built on sand the foundation won't last.

~Jordan Belfort "the Wolf of Wallstreet"
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 04, 2014, 08:47 AM
huhum huhum, yihaa  :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 04, 2014, 09:47 AM
huhum huhum, yihaa  :D

haha that's one of the best part!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 04, 2014, 09:56 AM
haha that's one of the best part!

hahaha ni hindi ko namalayan na tatlong oras pala yon :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 04, 2014, 10:05 AM
hahaha ni hindi ko namalayan na tatlong oras pala yon :D

ang tindi ng acting ni Dicarpio dun, panonoorin ko uli
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 04, 2014, 10:09 AM
ang tindi ng acting ni Dicarpio dun, panonoorin ko uli

ang tindi din ni margot robbie  :chickenjoy:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 04, 2014, 10:21 AM
ang tindi din ni margot robbie  :chickenjoy:

:D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: GIG on Feb 04, 2014, 08:01 PM
This is the equation that I completely missed out on when I was just 26 years old, I thought business was about making money and it's not... business is about giving value and monetizing on that value, that's what business is about.

You start a business because you have something great or that is worth something... If there's no value underneath the business, the sh*t is built on sand the foundation won't last.

~Jordan Belfort "the Wolf of Wallstreet"

Beware quoting JB . . . he is the shady part of the stock market business. I hope you guys would see through the extravagance and the fun and take home good lessons on buying IPO shares and listening to your brokers for stock advice. Having said that . . . I had fun watching the movie . . . watched it twice hehehe!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 05, 2014, 08:58 AM
Mark Hanna: The name of the game, moving the money from the client's pocket to your pocket.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 05, 2014, 09:10 AM
hehe don't worry GIG :)
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 05, 2014, 10:44 AM
Mark Hanna: The name of the game, moving the money from the client's pocket to your pocket.

And that game leads to short term success.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 05, 2014, 10:54 AM
And that game leads to short term success.

and a lot of headaches :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 05, 2014, 11:08 AM
BRK Annual Meeting yr. 2008


How do you grow a small business into a big business?

Buffett: Berkshire was a small business at one time. It just takes time. It is the nature of compound interest. You can’t build it in one day, or one week. Charlie and I never tried to do a masterstroke to convert Berkshire into something four times bigger. We just consistently kept doing what we understood and, if you have fun doing it, then it’ll be something quite large at some point. Nothing magical. It would be nice to multiply money in a few weeks. In a general way, we have done the same things for years. We will have more businesses in a few years - some will do worse, but most will do better. It is an automatic formula for getting ahead, but not galloping. We are happy not doing anything at all. As Gypsy Rose Lee said, ‘I have everything I had before, just two inches lower.’ [laughter] We want everything in two years to be higher.

Munger: It’s the nature of things that most small businesses will never be big businesses. It is the nature of things that most big businesses fall into mediocrity or worse. Most players have to die. We have only made   one new business, and that is the reinsurance business run by Ajit. We only created from scratch one small business into a big one. We’ve only done it once. We are a one-trick pony.

Buffett: Without Ajit, we wouldn’t have done it all.

Munger: The best investment we ever made was the fee we paid to an executive recruiter to find Ajit Jain.

Buffett: We went into the muni bond [insurance] business. Ajit got the company up, licensed and running. In Q1’08, our premium volume was $400 million. Our volume was bigger than anyone else, and I wouldn’t be surprised if it was bigger than all the rest combined. They did 278 transactions. All done in an office with 29 or 30 people. One of the interesting things about it was that almost all the business was from people who already had insurance from others who are rated AAA. So we pay out only if the muni defaulted AND the bond insurer didn’t pay. We wrote for 2.25% when the original guy charged 1%. This tells you something about AAA in bond insurance in 2008. Ajit has done a remarkable job. We wrote a couple policies for Detroit sewers, and people have found these bonds trading at a better price than others only insured by other bond in- surers. I congratulate Ajit for it.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Feb 05, 2014, 11:16 AM
Wow!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 07, 2014, 07:13 AM
"With few exceptions, when a manager with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact."

~ Warren E. Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 07, 2014, 08:49 AM
"With few exceptions, when a manager with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact."

~ Warren E. Buffett

 :coffee: :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Feb 08, 2014, 09:23 AM
"With few exceptions, when a manager with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact."

~ Warren E. Buffett

Food for Thoughts! I'm sure many are challenged by this.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 08, 2014, 02:36 PM
(http://i1297.photobucket.com/albums/ag38/wills110108/image_zpsbecc9943.jpg) (http://s1297.photobucket.com/user/wills110108/media/image_zpsbecc9943.jpg.html)
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 08, 2014, 02:55 PM
So you can't predict future earnings, but you can find out how company plans to increase earnings. Then you can check periodically to see if how the plans are working out.

There are five basic ways a company can increase its earnings. They are:

1. Reduce cost
2. Raise prices
3. Expanding their market
4. Sell more of its product in the old markets
5. Revitalize, close and dispose of losing operations


~ Peter Lynch
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 10, 2014, 09:39 AM
Charlie Munger

On the merits of buying and holding onto investments for the long haul:

"There are huge advantages for an individual to get into a position where you make a few great investments and just sit back and wait: You’re paying less to brokers. You’re listening to less nonsense. And if it works, the governmental tax system gives you an extra 1, 2 or 3 percentage points per annum compounded.

And you think that most of you are going to get that much advantage by hiring investment counselors and paying them 1% to run around, incurring a lot of taxes on your behalf? Lots of luck."
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 10, 2014, 09:42 AM
mga hinayupak na fund managers :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 10, 2014, 09:43 AM
^hehe
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 11, 2014, 10:48 AM
Charlie Munger

On learning business skills from playing poker:

“Playing poker in the Army and as a young lawyer honed my business skills. What you have to learn is to fold early when the odds are against you, or if you have a big edge, back it heavily because you don’t get a big edge often. Opportunity comes, but it doesn’t come often, so seize it when it does come.”
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 11, 2014, 11:21 AM
BRK Annual Meeting yr. 2006


Investing in Brazil?

Our problem with many markets is that we have to put out a lot of money because we’re so big. We have to invest hundreds of millions of dollars, which really narrows the companies and countries we can look at. In the case of PetroChina, the biggest company in the world’s most populous country, we were only able to invest $400 million.

In Brazil, there’s a great beer company a friend ran and we should have invested in it. He’s a great manager. Brazil wouldn’t be off limits, but we would have to be able to invest a lot of money in a good business we can understand at a good price. And it would have to be cheaper than a comparable U.S. company, to compensate for the extra risk and our relative lack of knowledge about the market.

---------------------------------

As long as you are dealing with real businesses that has value and represented by a ticker symbol at any stock market(rich or poor country), Value Investing is applicable and buying a company and sitting(holding) on it is the way to go.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 11, 2014, 11:21 AM
 :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 11, 2014, 11:25 AM
Local investors have an edge against foreign investors because we live here, we know our market and we can conduct our own investigation(scuttlebutt) if we choose to do so.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: chinito77 on Feb 11, 2014, 05:44 PM
Local investors have an edge against foreign investors because we live here, we know our market and we can conduct our own investigation(scuttlebutt) if we choose to do so.

But foreign funds has the financial muscle..  :hihi:

If you are checking the stocks on daily basis and monitors transactions.. The recent rally? in January and Now.. Oh my.. if you see the volume of CLSA's transactions.. Buying like no tomorrow in Hundreds of millions per stock.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 11, 2014, 10:17 PM
But foreign funds has the financial muscle..  :hihi:

If you are checking the stocks on daily basis and monitors transactions.. The recent rally? in January and Now.. Oh my.. if you see the volume of CLSA's transactions.. Buying like no tomorrow in Hundreds of millions per stock.

Read again your post.. Maybe you'll realize that you focus too much on end product.

Try asking this "what is the motivation behind foreign funds coming in?"

Foreign funds will come and go but that does not necessarily mean stock market will go down(maybe at short term).
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 11, 2014, 10:22 PM
Local investors have an edge against foreign investors because we live here, we know our market and we can conduct our own investigation(scuttlebutt) if we choose to do so.

I do not mean stock market. I'm talking about the market of businesses here in PH.
You could analyse properly the businesses here and their respective market because we live here in PH.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: chinito77 on Feb 12, 2014, 01:06 AM
I do not mean stock market. I'm talking about the market of businesses here in PH.
You could analyse properly the businesses here and their respective market because we live here in PH.

My apologies sir, I misunderstood your statement... I thought you are referring to the stock market.  :harhar:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 12, 2014, 09:40 AM
stock brokers can buy or sell any stock they want  anytime anyday as long as the market is open, it does not affect the value of the stock
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 12, 2014, 01:06 PM
"I view successful investing similar to being a successful brain surgeon or a successful fighter pilot, something where you can go to school, where you learn science for a while and you learn the basic skills. Then after that it becomes a experience base business.... so you need to have the art side of the equation gained through experience"

-Whitney Tilson - Interview by Forbes
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 12, 2014, 01:09 PM
Book: Damn Right! Biography of Charlie Munger


On being prepared for the volatility of stock investments:

"Munger tells investors to conduct their financial affairs so that no matter what crazy things happen in the markets, they can stay in the game. He cautioned that if you can’t afford for your Berkshire Hathaway stock (or any stock, for that matter) to drop 50%, you probably shouldn’t own it."
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 12, 2014, 01:46 PM
"I have been shaped tremendously by Charlie (munger)....Boy, if I had listened only to Ben (Graham), would I ever be a lot poorer"

~Warren Buffett, Book: Tap dancing to work

------------------------------------------


Munger introduced Buffett into looking more on the qualitative side of the business rather than quantitative.

If you rely mostly on quantitative side of the stock(business), you are doing cigar-butt investing.

Google this: cigar-butt investing, Benjamin Graham

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 12, 2014, 04:00 PM
 :rakenrol:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 13, 2014, 08:31 AM
Secret Millionaires Club 2010


How do you know when you are going to lose money and when you aren't? Since the stock market changes every minute.

Buffett: That is a very good question. The answer is you don’t know when you are going to make money or lose money. You are right, the stock market changes every minute. Because of that, you should never buy a stock expecting to make money in the short term. When you buy a stock, you are actually buying a share of that company. If it is a good company then you will make money over time as its value goes up. When you buy a stock, you need to imagine that the stock market will be closed for 20 years and you will not be able to look at its price. That way, you wont be distracted by the short term ups and downs. A company will be successful if it offers good products and services at a fair price while being run by honest, capable managers. Over the long run, such companies tend to appreciate and go up in value.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 13, 2014, 08:57 AM
BRK Annual Meeting 2002


Your thoughts on EBITDA?

Buffett: It amazes me how widespread the use of EBITDA has become. People try to dress up financial statements with it.

We won't buy into companies where someone's talking about EBITDA. If you look at all companies, and split them into companies that use EBITDA as a metric and those that don't, I suspect you'll find a lot more fraud in the former group. Look at companies like Wal-Mart, GE and Microsoft -- they'll never use EBITDA in their annual report.

People who use EBITDA are either trying to con you or they're conning themselves. :eek: Telecoms, for example, spend every dime that's coming in. Interest and taxes are real costs."
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 13, 2014, 09:46 AM
Wow! saan na ba ito si thrifyPinoy? He clearly understand value investing :)

From Value investors thread (2010-2012)

reply# 261by triftyPinoy

Some thoughts on value investing...

A rational businessman is most likely to be the long-term investor in the realm of stock markets. The long-term investor is interested in the financial performance of the listed firm he's holding in much the same way as a businessman/entrepreneur is interested in the financial performance of his private business (say, the entrepreneur is a McDonald's or Jollibee branch owner). When you're a branch owner, laying out cash is a business reality you accept, and along with that is committing for the long-term in recovering these initial outlays. In the course of business operations, what concerns you is profits and cash flow; ultimately, you're interested in the eventual return on your investment. This sort of mentality--that's what I try to apply in stocks.

The challenge is being able to read, interpret, and translate conventional, corporate financial statements into simple, common-sensible business information relevant to a typical "business-minded" mentality, amidst the distracting (and emotionally swaying) noise of stock price fluctuations.

It's more rewarding, I guess. Say, you are able to recover your initial outlay in the resto franchise, what's ahead of you is pure passive profits. In parallel, if you're a shareholder of a listed firm, after breaking even, you're just in it indefinitely for the long haul--as long as the company produces profits and free cash flow (and you understand well why and how), then you've got nothing to worry about despite all the "financial turmoil" noise you see in the news. Your holding just keeps making you richer, so why would you sell? This business sort of financial standing--that's what I try to aim for in stock investing.


reply# 266 by triftyPinoy

I've always admired businessmen who has not a clue or idea about the stock market, but when they speak about their businesses, you can visualize the excellent fundamentals, and cash-generating power of their business models; they always look at the THINGS THAT MATTER. They are very mindful of large expenditures and always expect return benefits from cash outlays (such as an investment on this equipment or that and what would be the effective resulting savings, or rate of return, etc). They hardly talk about accounting profits; instead, they focus on cash flow and return on investment. The typical pinoy idea of "magkano ba kikitain ko jan?" When you hear him ask that, he's concerned about how much cash will he get in the end.



---------------------------------------------------------

One of the best explanation of value investing! And he is Pinoy!  :applause: :applause:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 13, 2014, 09:47 AM
hanep sa back read :D
baka nagpapasarap na sya ngayon sir
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 13, 2014, 10:18 AM
Hehe di ko sinasadya yan, naghahanap lang ako ng discussion dito sa pmt about EBITDA :)

Mahirap intindihin yang mga sinabi ni thriftyPinoy kapag nagmamadaling yumaman at kapag hindi real businesses ang trato sa stocks.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: GIG on Feb 13, 2014, 08:31 PM
congrats wills for being the lover boy of the month! este member of the month hehee! Well deserve me thinks!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 13, 2014, 09:49 PM
congrats wills for being the lover boy of the month! este member of the month hehee! Well deserve me thinks!

:rofl:

Maraming salamat GIG :)
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 17, 2014, 04:39 PM
reply# 266 by triftyPinoy from Value Investors Thread (2010 - 2012)


I've always admired businessmen who has not a clue or idea about the stock market, but when they speak about their businesses, you can visualize the excellent fundamentals, and cash-generating power of their business models; they always look at the THINGS THAT MATTER. They are very mindful of large expenditures and always expect return benefits from cash outlays (such as an investment on this equipment or that and what would be the effective resulting savings, or rate of return, etc). They hardly talk about accounting profits; instead, they focus on cash flow and return on investment. The typical pinoy idea of "magkano ba kikitain ko jan?" When you hear him ask that, he's concerned about how much cash will he get in the end.

Ito sakto para sa sinabi ni triftyPinoy:


Book: Damn Right! Biography of Charlie Munger

On how being smart doesn’t mean you’re always right:

"…the hedge fund known as ‘Long-Term Capital Management’ recently collapsed, through overconfidence in its highly leveraged methods, despite I.Q’s of its principals that must have averaged 160. Smart, hard-working people aren’t exempted from professional disasters from overconfidence. Often, they just go aground in the more difficult voyages they choose, relying on their self-appraisals that they have superior talents and methods."


----------------------------------------------------------------

Focus on things that matter!

Got the lesson?! Hope so!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 18, 2014, 10:36 AM
Student Visit yr. 2007


Early on in your career you bought some land and then rented this out to some local farmers? Why didn’t you pursue this type of investment in real estate?

Buffett: I made an initial investment farm real estate when I was 14. Someone else handled the whole transaction; I just bought 40 acres. A guy would farm the land and harvest X number bushels of soybean and sell if for $X per bushel at the market and say here is your check. I did virtually nothing for this investment. I had no idea if he actually harvested what he said he did, or if he sold the bushels he said he sold, or for that matter what price he sold it at. It’s kind of like the guys who kept all his cows in with a big herd. As they are taking them to market, the owner of the big herd says, sorry but all of your cows died. How would you know which cows were yours?

In 1980 with the S&L crisis, land was selling for $2,000 an acre. Well, an acre produced 120 bushels of corn or 45 bushels of soybeans. At a couple dollars a bushel, this was basically $80 an acre in revenue. At the time with the interest rates, you would pay $150 per acre in interest. So you were taking in $80 and paying out $150, it just did not make sense. The bankers went crazy lending money at $2,000 an acre prices for farms at 10% interest rates to produce $80 an acre in crops. Well after a bunch of people lost big time, the FDIC took control of the farms and ended up selling them at $600 an acre, which at the time was a good deal. The FDIC took over hundreds of farms because people went crazy and lost their shirts.

The S&L’s lost their fundamentals and the Government owned $100 million worth of properties they needed to dump at a low cost. This was an opportunity to make some money, however I still don’t like farms because they are too passive.

I still don’t like farming. My son likes farming, I don’t.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 18, 2014, 03:24 PM
BRK Annual Meeting 2007


Are corporate profit levels sustainable?

Buffett: Corporate profits as a percentage of GDP are at a record. I’ve been amazed. After being in a range for decades, it’s jumped up. I’d have to look at a chart, but other than maybe a year after World War II, I think there have only been two or three years in the past 75 where corporate profits have been as high [as they are today]. I would not think it would be sustainable. When they get up to 8% or more of GDP, that’s high, but so far there’s been no reaction like higher taxes.

You have lots of businesses earning 20% on tangible equity in a world where corporate bonds are yielding 4-5%. That’s astonishing. If you read a book, it would say it’s not possible. This is high, which means someone else’s share is going down, namely labor’s. Does it become a political issue? Congress has power to change this very quickly. Corporate tax rates used to be 35%, but now many companies are paying only 20%.

Corporate America is living in a great time. History shows this is not sustainable. I would imagine that it will not be.

Munger: A lot of profits are not in manufacturing or retailing, but in financial sectors. There’s been a huge flow of profits to banks and investment banks. That has no precedent. I don’t think it’s ever been as extreme as it is now.

Buffett: We’ve invested in and owned banks. If 20 years ago you’d asked me whether it was possible, in a world of 4.75% bonds, that countless banks would earn 20%+ returns on tangible equity, I’d have said no. In part this is due to leverage. A 1.5% return on assets leveraged 15 times is a 22.5% return on equity. But even so, you’d think once everyone was doing it, return on assets would drop to 1%, but it hasn’t happened yet.

Munger: Some of this is due to consumer credit, which has been pushed to extremes. Other countries that have done this have suffered bad consequences – South Korea, for example, really suffered for two or three years. I don’t think this is a time to swing for the fences.

Buffett: In South Korea, it produced some of the cheapest stock prices I’ve ever seen.


-----------------------------------

I really like this Q&A. In here we learned that Buffett is also looking at other countries like South Korea and take note this is year 2007!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 18, 2014, 03:27 PM
BRK Annual Meeting 2007


Are corporate profit levels sustainable?

Buffett: Corporate profits as a percentage of GDP are at a record. I’ve been amazed. After being in a range for decades, it’s jumped up. I’d have to look at a chart, but other than maybe a year after World War II, I think there have only been two or three years in the past 75 where corporate profits have been as high [as they are today]. I would not think it would be sustainable. When they get up to 8% or more of GDP, that’s high, but so far there’s been no reaction like higher taxes.

You have lots of businesses earning 20% on tangible equity in a world where corporate bonds are yielding 4-5%. That’s astonishing. If you read a book, it would say it’s not possible. This is high, which means someone else’s share is going down, namely labor’s. Does it become a political issue? Congress has power to change this very quickly. Corporate tax rates used to be 35%, but now many companies are paying only 20%.

Corporate America is living in a great time. History shows this is not sustainable. I would imagine that it will not be.

Munger: A lot of profits are not in manufacturing or retailing, but in financial sectors. There’s been a huge flow of profits to banks and investment banks. That has no precedent. I don’t think it’s ever been as extreme as it is now.

Buffett: We’ve invested in and owned banks. If 20 years ago you’d asked me whether it was possible, in a world of 4.75% bonds, that countless banks would earn 20%+ returns on tangible equity, I’d have said no. In part this is due to leverage. A 1.5% return on assets leveraged 15 times is a 22.5% return on equity. But even so, you’d think once everyone was doing it, return on assets would drop to 1%, but it hasn’t happened yet.

Munger: Some of this is due to consumer credit, which has been pushed to extremes. Other countries that have done this have suffered bad consequences – South Korea, for example, really suffered for two or three years. I don’t think this is a time to swing for the fences.

Buffett: In South Korea, it produced some of the cheapest stock prices I’ve ever seen.


-----------------------------------

I really like this Q&A. In here we learned that Buffett is also looking at other countries like South Korea and take note this is year 2007!

 :cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 19, 2014, 03:31 AM
BRK Annual Meeting 2008


Would you use stock options to enter a position in a public company?

Buffett: If you want to buy or sell a stock, you should buy or sell a stock. We sold puts on Coca-Cola once, but usually it is best to just buy stock. Using option technique is an idea where you get to buy a stock cheap. Four out of five times you may get it right and one time you may miss the opportunity to buy. We virtually have never used options to enter or exit a position. We have sold long-term equity put options described in our press release. We don’t get involved in fancy techniques.

Munger: If I remember right, a public authority was wondering if they should set up an option exchange mar- ket. Warren was alone in the opinion of opposing it. You wrote a letter saying it wouldn’t do any good to throw out margin rules in this fashion. It doesn’t serve the country. I always thought Warren was totally right. Turning financial markets into gambling markets to enrich the croupiers doesn’t make sense.

Buffett: A University of Chicago Graduate student asked me once, what are we being taught that is wrong? In business school the amount of time spent teaching option pricing is total nonsense. You only need two courses, (1) how to value a business, and (2) how to think about stock market fluctuations. The thing is that instructors know the formulas and you don’t, so they have something to fill the time. It has nothing to do with investment success—what matters is buying businesses at the right price. If you were teaching Biblical studies and you could read the Bible forward, backward, and in four different languages, you would find it hard to tell everyone that it comes down to the Ten Commandments. The priests want to spend a lot of time preaching. You must have an attitude where you aren’t influenced by the market. You need a mind- set, and you need to have the attitude to divorce your- self from letting the market influence you.

----------------------------------------------

"The thing is that instructors know the formulas and you don’t, so they have something to fill the time. It has nothing to do with investment success"

Lynch and Buffett share the same view. There are so many distractions on how to value stocks, people invent formula and methods to determine the intrinsic value but the truth is you cannot calculate the value of stock using numbers alone. What I discover from Lynch and Buffett is they try to convert qualitative facts into number and also compare qualitative facts to recent ratios, they try to guess the future of stock(their plans, growth story etc) and compare it to stock's updated ratios.

How can you do all of that? It depends on your circle of competence. Instead of focusing your energy on formulas and methods, you should focus your energy and attention on widening your circle of competence. we might ask how can we widen our circle of competence? answer is by having a vicarious experience through reading relevant books.

Indeed valuing a stock is an art.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 19, 2014, 08:49 AM
BRK Annual Meeting 2008


Would you use stock options to enter a position in a public company?

Buffett: If you want to buy or sell a stock, you should buy or sell a stock. We sold puts on Coca-Cola once, but usually it is best to just buy stock. Using option technique is an idea where you get to buy a stock cheap. Four out of five times you may get it right and one time you may miss the opportunity to buy. We virtually have never used options to enter or exit a position. We have sold long-term equity put options described in our press release. We don’t get involved in fancy techniques.

Munger: If I remember right, a public authority was wondering if they should set up an option exchange mar- ket. Warren was alone in the opinion of opposing it. You wrote a letter saying it wouldn’t do any good to throw out margin rules in this fashion. It doesn’t serve the country. I always thought Warren was totally right. Turning financial markets into gambling markets to enrich the croupiers doesn’t make sense.

Buffett: A University of Chicago Graduate student asked me once, what are we being taught that is wrong? In business school the amount of time spent teaching option pricing is total nonsense. You only need two courses, (1) how to value a business, and (2) how to think about stock market fluctuations. The thing is that instructors know the formulas and you don’t, so they have something to fill the time. It has nothing to do with investment success—what matters is buying businesses at the right price. If you were teaching Biblical studies and you could read the Bible forward, backward, and in four different languages, you would find it hard to tell everyone that it comes down to the Ten Commandments. The priests want to spend a lot of time preaching. You must have an attitude where you aren’t influenced by the market. You need a mind- set, and you need to have the attitude to divorce your- self from letting the market influence you.

----------------------------------------------

"The thing is that instructors know the formulas and you don’t, so they have something to fill the time. It has nothing to do with investment success"

Lynch and Buffett share the same view. There are so many distractions on how to value stocks, people invent formula and methods to determine the intrinsic value but the truth is you cannot calculate the value of stock using numbers alone. What I discover from Lynch and Buffett is they try to convert qualitative facts into number and also compare qualitative facts to recent ratios, they try to guess the future of stock(their plans, growth story etc) and compare it to stock's updated ratios.

How can you do all of that? It depends on your circle of competence. Instead of focusing your energy on formulas and methods, you should focus your energy and attention on widening your circle of competence. we might ask how can we widen our circle of competence? answer is by having a vicarious experience through reading relevant books.

Indeed valuing a stock is an art.

i studied several math subjects but until now i only use algebra in investing :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 19, 2014, 09:28 AM
i studied several math subjects but until now i only use algebra in investing :D

Buffett said before that if investing involves calculus he would not get rich heheh
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 19, 2014, 09:34 AM
Buffett said before that if investing involves calculus he would not get rich heheh

hahahah
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 19, 2014, 10:24 AM
BRK Annual Meeting yr. 2005


What's your opinion of gold as an investment?

Buffett: We’re not enthused about gold. People say it’s a hedge against inflation, but that’s also true of oil, land, Coca-Cola, See’s Candies, etc. I’d much prefer to own land in Nebraska or an apartment house or an index fund as a store of value. We’d rather own an asset that will be useful even if the currency drops to 10 cents on the dollar. People will always need to drink and eat [referring to Coke and See’s]. We wouldn’t trade ownership of businesses for a hunk of yellow metal.

Munger: If you have the opportunities of Berkshire, an investment in gold is dumb.

Buffett: Gold would be way down my list as a store of value. I’d much rather own 100 acres of land in Nebraska or an apartment house or an index fund.

The Dow went from 66 to 11,000 or 12,000 during the last century, and you got paid a lot of dividends along the way. Gold went from $20 in 1900 to $400 in 2000, plus you’d have to pay insurance and storage costs, so it’s not a good store of value.

I’m not advocating paper money – it’s good to worry about this. But I’d rather sell one pound of candy. That will retain its value even if the currency is seashells.

Gold has done very badly [as an investment] in the past and I see no reason why it will work well in the future. All that happens is that it is taken out of the ground in South Africa and put back in the ground in Fort Knox. (Laughter) :rofl:

Munger: Gold was good to have if you were a well-to-do Jewish family in Vienna in 1935 because of the situation [just before the Nazis took over]. But if you’re in our position, gold has no interest.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 21, 2014, 06:11 AM
BRK Annual Meeting yr. 2005


What's your opinion of gold as an investment?


The Dow went from 66 to 11,000 or 12,000 during the last century, and you got paid a lot of dividends along the way. Gold went from $20 in 1900 to $400 in 2000, plus you’d have to pay insurance and storage costs, so it’s not a good store of value.

I’m not advocating paper money – it’s good to worry about this. But I’d rather sell one pound of candy. That will retain its value even if the currency is seashells.



How important is this for us? WOW!

Wisdom!!

-------------------------------------------------------

On buy and hold

When you buy a stock and hold, you are always ahead of the good news!

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Feb 22, 2014, 11:35 AM
Buffett said before that if investing involves calculus he would not get rich heheh

Sayang, mataas pa naman grade ko sa Calculus, sama mo na Differential Equations!! :D

i studied several math subjects but until now i only use algebra in investing :D

Don't forget statistics, probabilities, financial math (amortization, future value, etc) Hehe
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 24, 2014, 09:02 AM
Sayang, mataas pa naman grade ko sa Calculus, sama mo na Differential Equations!! :D

Don't forget statistics, probabilities, financial math (amortization, future value, etc) Hehe

hahahaha badtrip nga sir eh dko man lang nagamit paglabas ko ng iskwelahan :D
sana nagaccountancy nlng ako o kaya finance  :watchuthink:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: alacrity on Feb 24, 2014, 02:53 PM
Something for local investing, which reminds me of what Peter Lynch said about investments not only being about valuations but also something that involves a lot of research and legwork. The analysts reports can only tell you so much but nothing comes close to sampling the product and seeing if it has the potential to make money.

I just wanted to share this article because somehow, even with the myriad of analysts under his command, and with the money at his disposal, or with the technology in this day and age, nothing still beats the old research and legwork.

Undercover Zobel brothers

Caveat emptor—Latin for “let the buyer beware”—is a well-known principle in the world of business. And it is a principle that the Ayala group takes very seriously, apparently.
The group takes it so seriously, in fact, that no less than Jaime Augusto Zobel de Ayala decided to descend from the heights of his Tower One office and take a rush hour ride on the Light Rail Transit with the rest of Metro Manila’s mortal commuting population.
Biz Buzz learned—somewhat belatedly, we admit—that Jaza (as he is known to mortals, “Jaime” if you’re close) took a team of Ayala officials with him and decided to ride the LRT’s Baclaran to Monumento route in preparation for the conglomerate’s bid for the LRT-1 extension project, which was then being bid out under the government’s slow-moving public-private partnership program.
Biz Buzz caught up with Jaza recently and he confirmed that he indeed rode the metropolis’ oldest light rail line because he wanted to understand the system better in preparation for making a bid.
“We started at around 5:30 a.m. and queued up at the turnstiles along with everyone else,” he said, describing the experience as “interesting.”
Jaza—along with his younger brother, Fernando—rode the LRT end to end, with minimal fuss, we hear, and without the benefit of heavy security that other VIP businessmen are known to take around.
The head of the Ayala conglomerate said he was dressed casually “in jeans” during the ride, although a review of social media posts at that time revealed that there were some people on the train and at the station platforms who recognized him and/or his brother, and were quite surprised that he was mixing with the masses.
While the LRT trip was a first for him locally, Jaza says he makes it a point to try the metro or subway systems of other countries—a different experience altogether when it comes to volume of rush hour passengers.
As it turned out, the Ayala group decided to pull out of the LRT-1 extension bidding (along with everyone else, save for the Metro Pacific group), resulting in a failed bid.
“But that (decision) was because of the financial aspect,” Jaza stressed.
So next time Ayala bids for a project, keep your eyes open for the Zobel brothers trying to mix with the crowd incognito.  Daxim L. Lucas


Read more: http://business.inquirer.net/145531/undercover-zobel-brothers#ixzz2uDfEQyet
Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 25, 2014, 01:30 PM

I just wanted to share this article because somehow, even with the myriad of analysts under his command, and with the money at his disposal, or with the technology in this day and age, nothing still beats the old research and legwork.


True.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 25, 2014, 02:26 PM

Is the individual investor even capable of assessing the riskiness of securities given the large number of institutions/hedge funds in the market?


Warren Buffett: I don’t think there is much being overlooked now, but I’m forced to look at big things. That’s the advantage you have over me. A few years ago a friend of mine mentioned that I should look at Korea. We bought Posco for 3-4 times post-tax earnings. I found 20 other companies selling at 2-3 times earnings and strong balance sheets. I diversified because I didn’t know the Korean market as well. We are looking for the very unusual. Occasionally things will happen in a securities market that are extraordinary. I like shooting fish in a barrel, but I like to make sure the water’s drained out.



So if they’re walking through the mall and they see a store they like, or if they happen to like Nike shoes for example, these would be great places to start? Instead of doing a computer screen and narrowing it down?

Warren Buffett: A computer screen doesn’t tell you anything. It might tell you about P/Es or something like that, but in the end you have to understand the business. If there are certain businesses in that mall they think they understand and they’re public companies, and they can learn more and more about them…. We used to talk to competitors. To understand Coca-Cola, I have to understand Pepsi, RC, Dr. Pepper.

The place to look when you’re young is the INEFFICIENT MARKETS.

Ano ba talaga pwede ba ang Value Investing Buffett style approach sa Pinas o hindi?

Efficient Market = US Market
Inefficient Market = Emerging Market

Kayo na bahala sa sarili niyo matatanda na kayo!  :bahalaka:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 25, 2014, 02:55 PM
Don't get set into one form, adapt it and build your own, and let it grow, be like water. Empty your mind, be formless, shapeless — like water. Now you put water in a cup, it becomes the cup; You put water into a bottle it becomes the bottle; You put it in a teapot it becomes the teapot. Now water can flow or it can crash. Be water, my friend. - bruce lee


basta sakin effective ang VI :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Feb 25, 2014, 06:22 PM
IMO VI has two great allies in the RP setting - inflation and currency depreciation.

The first is still with us while the second may be wavering but still can't make up its mind.
Business is the ultimate inflation fighter so if you're not in business, the next best thing is in stocks. Same situation with currency depreciation.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 26, 2014, 09:01 AM
IMO VI has two great allies in the RP setting - inflation and currency depreciation.

The first is still with us while the second may be wavering but still can't make up its mind.
Business is the ultimate inflation fighter so if you're not in business, the next best thing is in stocks. Same situation with currency depreciation.

i also want to have my own business, but since i cant think of any at the moment i will let the tycoons run them for me :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 26, 2014, 10:26 AM
i also want to have my own business, but since i cant think of any at the moment i will let the tycoons run them for me :D

Very good answer!

From my experience I could tell that being an entrepreneur is harder than being an investor! Believe me ilang business na pinasok ko, you have to deal with different kinds of people at marami pang iba.  The reward is high but the most pressing question here is can you endure the job of running the business for a long period of time?

Sa stocks if ayaw mo na ng management at tingin mo wala ng kwenta ang product pwede ka na agad umalis ngayon na mismo! Sa stocks pagmaymagandang business yung katabi mo pwede rin sila ipartner ngayon na agad!

Lets say you have 15 to 20 million pesos ready to invest in stock you will have no problem in growing and expanding your wealth. Ang daming business partners na nagbebenta ng share nila araw araw.

Bottom line is both ways are not easy but without a doubt I would say that being an entrepreneur is harder!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 26, 2014, 12:59 PM
(http://i1297.photobucket.com/albums/ag38/wills110108/image_zps11c706f6.jpg) (http://s1297.photobucket.com/user/wills110108/media/image_zps11c706f6.jpg.html)

~ The Art of Value Investing
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 27, 2014, 07:38 AM
Student Visit January 2007

In respect to Africa how would you find above average stocks given the information costs and limitations in Africa? What is your best advice about obtaining acceptable information?

Warren Buffett: There aren’t too many companies in Africa that are big enough for Berkshire to look at, except for maybe DeBeers, Anglo-American, or SAB Miller. Also, there isn’t a lot of information on these companies. I know South Africa has stock information available. The key is to get good information.

In comparison, Korea has plenty of information available. There is Kissline online. Within seconds I can get Korean Stock Exchange Information, Annual and even quarterly information. I’m not sure if the same is available online for South Africa. This is OK because I don’t need to win every game, just the ones I play.

I have three mailboxes in my office – IN, OUT, and TOO HARD. I was joking with the MIT students that I should have a TOO HARD bin and they made me one, so now I have it and I use it. I will only swing at pitches that I really like. If you do it 10 times in your life, you’ll be rich. You should approach investing like you have a punch card with 20 punch-outs, one for each trade in your life. I think people would be better off if they only had 10 opportunities to buy stocks throughout their lifetime. You know what would happen? They would make sure that each buy was a good one. They would do lots and lots of research before they made the buy. You don’t have to have many 4X growth opportunities to get rich. You don’t need to do too much, but the environment makes you feel like you need to do something all the time.


--------------------------------------------

Find a company with good growth prospect, has great product and an excellent management that can reinvest company's earnings wisely.

Sit on it and let them do the work for you.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 27, 2014, 08:52 AM
Student Visit January 2007

In respect to Africa how would you find above average stocks given the information costs and limitations in Africa? What is your best advice about obtaining acceptable information?

Warren Buffett: There aren’t too many companies in Africa that are big enough for Berkshire to look at, except for maybe DeBeers, Anglo-American, or SAB Miller. Also, there isn’t a lot of information on these companies. I know South Africa has stock information available. The key is to get good information.

In comparison, Korea has plenty of information available. There is Kissline online. Within seconds I can get Korean Stock Exchange Information, Annual and even quarterly information. I’m not sure if the same is available online for South Africa. This is OK because I don’t need to win every game, just the ones I play.

I have three mailboxes in my office – IN, OUT, and TOO HARD. I was joking with the MIT students that I should have a TOO HARD bin and they made me one, so now I have it and I use it. I will only swing at pitches that I really like. If you do it 10 times in your life, you’ll be rich. You should approach investing like you have a punch card with 20 punch-outs, one for each trade in your life. I think people would be better off if they only had 10 opportunities to buy stocks throughout their lifetime. You know what would happen? They would make sure that each buy was a good one. They would do lots and lots of research before they made the buy. You don’t have to have many 4X growth opportunities to get rich. You don’t need to do too much, but the environment makes you feel like you need to do something all the time.


--------------------------------------------

Find a company with good growth prospect, has great product and an excellent management that can reinvest company's earnings wisely.

Sit on it and let them do the work for you.

 :coffee: :thanks:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Feb 28, 2014, 05:28 AM
If you have the right philosophy you will not sell your stock just because of 30% or 40% gain.

If you base your decision to sell solely on paper gains, you will surely experience an opportunity cost.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Feb 28, 2014, 08:54 AM
If you have the right philosophy you will not sell your stock just because of 30% or 40% gain.

If you base your decision to sell solely on paper gains, you will surely experience an opportunity cost.

 :cool2:

if i sell at 40% or 30%
i will not experience 100%, 1000% or 10000% :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Mar 02, 2014, 08:07 AM
Berkshire Hathaway announced 18% gain in book value for 2013, with interesting message from the man himself. From USA Today:

"Buffett has long urged an investing philosophy of taking large stakes in well-established companies for the long term, but in this year's shareholder letter, he also advocated the benefits of investing in a low-cost S&P index fund."
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 02, 2014, 09:30 AM
"Buffett has long urged an investing philosophy of taking large stakes in well-established companies for the long term, "

^Definitely not from mr. Buffett. I haven't read "taking large stakes" as a philosophy.


 "this year's shareholder letter, he also advocated the benefits of investing in a low-cost S&P index fund."

Yup he advocates Index fund and he even mention John Bogle and Vanguard Index fund a few times.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Mar 02, 2014, 04:04 PM
So I guess it's your word vs USA Today. See their article, link below:

http://www.usatoday.com/story/money/business/2014/03/01/berkshire-hathaway-earnings-warren-buffett/5910049/
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 02, 2014, 05:48 PM
Taking large stakes as a philosophy? What?
----------------------------------

"When Charlie Munger and I buy stocks -- which we think portions of as small of businesses -- our analysis is very similar to that which we use in buying entire businesses."

If you buy AGI at 30 pesos per share it means you bought the company for 300billion pesos. Wether its 10 shares or 10 million shares the rate of return is the same.

----------------------------


Mamayang gabi paguwi ko post ko yung sinabi ni Buffett regarding member of the board influencing the CEO that it is baloney.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 04, 2014, 09:02 AM
Snowball: Warren Buffett and the business of life by Alice Schroeder


Warren Buffett as a board member and Roberto Goizueta as a CEO of Coca Cola


Warren Buffett: Roberto did a lot of things operationally that were terrific and I love the guy but Roberto got tangled up in promising numbers that eventually couldn’t be delivered. He talked about high teens growth 18%, big companies are not going to increase their earnings in a high teens over a long periods of time, for a while you can do it but it just isn’t in their cards to keeping up forever.

I remember when he came in and talk to us about how he is going to add a third leg to earnings which was profits made on buying and selling bottlers, he tried to sell finance committee that this was the way of the future.

The prices they paid for these bottlers company was just nuts. I asked the chief financial officer all this questions but Roberto started this meetings at 10 o’clock and finish at noon. The atmosphere was such that it didn’t lend itself to questioning, you just had the feeling that when it got to be noon that it would not be all polite to keep raising subjects or talk about things that would caused a meeting to last until 1 o’clock.

He was just not a guy you questioned. Some people have that bearing about them and when the bearing is backed up with a very good record the combination of the two is pretty overpowering.

As a director you can’t remotely tell management what to do, all the stuff you read in the press about the board setting strategy is baloney, as a board member you can do practically nothing. If the CEO thinks the director is smart and on his side he’ll listen to some degree but 98% of the time he’ll do what he wants to anyway. Listen that’s the way I run berkshire, I think Roberto liked me but he was not looking for a lot of ideas from me.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 06, 2014, 11:05 PM
BRK Annual Meeting 1999


Does the Japanese economy affect your outlook?

We don’t really concern ourselves with the macro issues. We can’t rely on the macro to bail us out of a wrong decision on a [specific] business.

Look at See’’s Candies. We bought it in 1972 and look what happened right afterwards. In 1973, the Arab oil embargo happened. Then inflation, followed by political turmoil. If we would have had a road map of 1972 to 1982, we’’d have seen more inflation, a 20% prime rate, worldwide dissension. But knowing all those macro issues wouldn’t have helped us make a better decision to buy See’s Candies. It’s just more important to recognize a great business when you see it than it is to predict macro issues.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: GIG on Mar 07, 2014, 10:45 AM
keep it coming wills!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 07, 2014, 12:35 PM
GIG may PM ako sayo
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 07, 2014, 01:15 PM
BRK Annual Meeting yr. 2010


What is the most important thing you learn from China?

Buffett: China is an amazing economy. Growth on a per capita basis is amazing. There were 290M people in 1790 (and only 4M in the US) in China but for some reason for 170 yrs very little progress was made. The potential of the Chinese is now being realized. It is a sight to behold. However, they haven’t taught me to eat Chinese food.

Munger: China has some very rare people in BYD. No other lesson is as important as that one.

Buffett: Sprite outsells Coke 2:1 in China. Amazing economy, growth will last a long time. In 1790, there were 4mil people in the US, and 290m in China. And there was very little growth in quality of living in China over those 200 years through 1990. They have major resources of land and minerals. Potential of Chinese is huge. Charlie and I are going over there at the end of September. They haven’t taught me how to eat Chinese food.

Munger: I always knew Chinese people had potential for huge and rapid progress. I could see in Chinese Americans. They came to America as coolies or slaves, and they rose so fast. I underrated how fast it could happen – they are setting record for advancement of human civilization.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 07, 2014, 02:42 PM
BRK Annual Meeting 1999


Does the Japanese economy affect your outlook?

We don’t really concern ourselves with the macro issues. We can’t rely on the macro to bail us out of a wrong decision on a [specific] business.

Look at See’’s Candies. We bought it in 1972 and look what happened right afterwards. In 1973, the Arab oil embargo happened. Then inflation, followed by political turmoil. If we would have had a road map of 1972 to 1982, we’’d have seen more inflation, a 20% prime rate, worldwide dissension. But knowing all those macro issues wouldn’t have helped us make a better decision to buy See’s Candies. It’s just more important to recognize a great business when you see it than it is to predict macro issues.

I really like this Q&A.

Lesson we could learn here is a business with good value like SMB (beer company) and EMP (brandy company) will suffer short term losses in earnings and sales volume will decline if the macro condition is not favourable. The value is still there like the share of mind, taste, good price etc. but the price of the stock will fall in that environment, the investors with the money will have opportunity for a good investment and for the investors who already have the stock will just need to hold and should never sell. Extraordinary events will not last forever.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 07, 2014, 03:23 PM
Snowball: Warren Buffett and the business of life by Alice Schroeder

Alice Schroeder quoting W. Buffett

“never!” he said when asked if it bothered him when people called him a has-been “nothing bothers me like that, you can’t do well in investing unless you think independently and the truth is you are neither right nor wrong because people agree with you, you’re right because your facts and reasoning are right in the end that’s what counts."
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 11, 2014, 12:09 PM
BRK Annual Meeting yr. 2009


Could you comment on the state of financial literacy? Is there anything that could be added to educational curricula to improve it? What should future generations know?

Buffett: I think there’s a problem with the current generation. ABC has a new TV program coming out [on the subject]. Financial literacy is a tough sell in a world of credit cards and calculators. But we’re making progress over time. We recommend working with students to make them literate, and they’ll have a terrific advantage. We hope our annual reports contribute. But people do silly things. On my honeymoon in 1952, I was 21, my wife was 19, and we stopped at the Flamingo in Las Vegas and saw well-dressed people who traveled thousands of miles to do something very dumb. [That tells you] it’s a world of opportunity. I started teaching at the University of Nebraska at age 21.

Munger: [We live in a] world of legalized gambling, in the form of lotteries, and high-cost credit card debt. We’ve been going in the wrong direction. I don’t think you can teach people high finance who can’t use a credit card.

Buffett: If you’re willing to pay 18% on a credit card, you will not come out well. It’s probably good for our business. They’ll go their way, we’ll go our way. We’re looking for things that are mispriced.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 11, 2014, 12:10 PM
"Speculation is most dangerous when it looks easiest" - Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 13, 2014, 03:58 PM
BRK Annual Meeting yr. 2008


From the partnership letters in 1964, you had a strategy called ‘generals relatively undervalued.’ We have recently begun to implement a technique where we buy something at 12x, when comps sell at 20x. Comps go to 10x. Is this pair trading?

Buffett: Yes, we didn’t know we started so early. Ben Graham did it in 1920. He did pair trading. He was right 4 out of 5, but the last one would kill him. We shorted the market to some degree. We would borrow stocks from universities. We were early in this. We wouldn’t short a stock because it was unattractive but as a general market short [hedge]. I would borrow from the Treasurer of Columbia [University], “which ones do you want”, “just give me all of them”. It provoked some odd looks when I told the universities I wanted to short all of their stocks. It was not a big deal. We might have made a little money on it in the 1960s, but it is not something we do these days. If you have good long ideas on businesses that are undervalued, it is not necessary to short. 130/30 [simultaneously holding a 130% exposure to a long portfolio; and a 30% exposure to a short portfolio] is being marketed today. Many will sell you the IDEA(Stock) OF THE DAY. No great statistical merit.

Munger: We made our money by being long on wonderful businesses, not by using a long-short strategy.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: GIG on Mar 13, 2014, 07:07 PM
another feather in our caps . . .
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 13, 2014, 08:21 PM
another feather in our caps . . .

Napa-Google ako dun! haha
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 14, 2014, 06:03 AM
Sa mga takot kay GOLIATH :hihi:


Can the LITTLE GUY play with the BIG GUY in the stock market?


Peter Lynch: There's always been this position that the small investor has no chance against the big institutions. And I always wonder whether that's the person under four-foot-eight. I mean they always said the small investor doesn't have a chance. And there's two issues there. First of all, I think that he or she can do it, but, number two, the question is, people do it anyway. They invest anyway. And if they so believe this theory that the small investor has no chance, they invest in a different format. They said, "This is a CASINO. I'll buy stock this month. I'll sell it a month later," same kind of performance that they do everywhere. When they look at a house, they're very careful. They look at the school system. They look at the street. They look at the plumbing. When they buy a refrigerator, they do homework.

If they're so convinced that the small investor has no chance, the stock market's a big game and they act accordingly, they hear a stock and they buy it before sunset, they're going to get the kind of results that prove the small investor can do poorly. Now if you buy a -- you make a mistake on a car, you make a mistake on a house, you don't blame the professional investors. But now if you do STUPID RESEARCH, you buy some company that has NO sales, NO earnings, a TERRIBLE financial position and it goes down, you say, "Well, it because of the programmed trading of those professionals," that's because YOU DIDN'T DO YOUR HOMEWORK. So I -- I've tried to convince people they can do a job, they can do very well, BUT they have to do certain things.



Good MORNING!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: INDO on Mar 14, 2014, 09:05 AM
:cool2:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 18, 2014, 10:19 PM
BRK Annual Meeting yr. 2003



What adjustments to reported earnings do you make?

Warren Buffett: [When goodwill was required to be amortized,] we ignored amortization of goodwill and told our owners to ignore it, even though it was in GAAP [Generally Accepted Accounting Principles]. We felt that it was arbitrary.

We thought crazy pension assumptions caused people to record phantom earnings. So, we're willing to tell you when we think there's data that is more useful than GAAP earnings.

Not thinking of depreciation as an expense is crazy. I can think of a few businesses where one could ignore depreciation charges, but not many. Even with our gas pipelines, depreciation is real -- you have to maintain them and eventually they become worthless (though this may be 100 years).

It [depreciation] is reverse float -- you lay out money before you get cash. Any management that doesn't regards depreciation as an expense is living in a dream world, but they're encouraged to do so by bankers. Many times, this comes close to a flim flam game.

People want to send me books with EBITDA and I say fine, as long as you pay cap ex. There are very few businesses that can spend a lot less than depreciation and maintain the health of the business.

This is nonsense. It couldn't be worse. But a whole generation of investors have been taught this. It's not a non-cash expense -- it's a cash expense but you spend it first. It's a delayed recording of a cash expense.

We at Berkshire are going to spend more this year on cap ex than we depreciate.

Munger: I think that, every time you saw the word EBITDA [earnings], you should substitute the word "bullsh*t" earnings.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 18, 2014, 11:29 PM
Para sa mga naguumpisa pa lang sa buhay. . .


BRK Annual Meeting yr. 2006


On inflation

Buffett: [PIMCO’s] Bill Gross has written about whether inflation is being captured correctly. If you go out to the Nebraska Furniture Mart, you’ll see that prices haven’t moved up much over time. And in some areas, like DVD players, prices are down 75%, so there’s been deflation.

But when I see that “core” inflation excludes food and energy, I can’t think of anything more core than food and energy. Also, the CPI [consumer price index, the official measure of inflation] uses a computed rental price, but this does not reflect new housing prices. The rental factor has significantly lagged the rise in housing.

But if you own your own house and drink Coke, you’re less affected – my CPI, for example, hasn’t changed very much. But if you’re buying a house and drive 40 miles to work every day, your CPI has gone up a lot.

Munger: I see almost no change in the price of the composite product that flows through Costco [Munger is a Director of Costco]. I don’t feel sorry for the people who pay $27 million for an 8,000-square-foot condo in Manhattan. So inflation comes in places.

Buffett: Costco’s and Wal-Mart’s LIFO adjustments are almost nothing – it’s inconsequential. [LIFO stands for “last-in, first-out”, and means that when a product is sold from inventory, its cost is based on the price paid for the latest such items purchased by the company. If the cost of the product is rising rapidly, this can cause the old inventory to become valued at less than the current market cost, necessitating a LIFO adjustment. In contrast, if there’s no inflation, the LIFO adjustment is nil.] You’re dealing with $200 some billion in sales at Wal-Mart and the LIFO adjustment would pick up any inflation [but it’s not there].

In our jewellery stores, there have been big LIFO adjustments recently. It’s the same with our steel operations. Carpet prices went nowhere for 20 years, but because it’s petroleum based, it’s moved up a lot recently and now we have $100 million or so in LIFO adjustments.

Overall, for a typical young family, the CPI probably understates inflation in terms of their living situation.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 20, 2014, 07:45 AM
BRK Annual Meeting yr. 2008


What can be done to improve the accuracy of financial statements of financial institutions? What can be done to improve the integrity of financial statements?

Buffett: It is a very tough thing. I still lean strongly towards fair value accounting—it is hard to use, but should we use cost? I think there are more troubles when you start openly valuing things at prices that don’t matter instead of best estimates, even if inaccurate. I would stick with financials reporting assets at fair value. When you get into CDO-squared [Collateralized Debt Obligation-Squared], the documentation is enormous. If you read a standard residential security prospectus it consists of thousands of mortgages, then different tranches. Then, you take a CDO and you take junior tranches on a whole bunch of juniors— put them together, and diversified in theory—a big error to start with. That was nuttiness squared. You had to read 15,000 pages to understand a CDO and 750,000 pages to evaluate one single security in a CDO-squared. To let people use the 100 cents they paid as the stated value versus the 10 cents it trades at in the market is an abomination. Fair value discipline, mild as it may be, may keep managements from doing some stupid things. I lean toward the market value approach. When you get towards complex instruments, I don’t know how you value it. Charlie, back at Salomon, I think you found one mismarked by $20 million, right?

Munger: A lot goes on in the bowels of American industry which is not pretty. A lot of people got overdosed on Ayn Rand. They would hold that even an axe murderer in a free market is a wise development. I think Alan Greenspan did a good job on average, but he overdosed on Ayn Rand, in that whatever happens in a free market is going to be all right. We should prohibit some things. If we had banned the phrase, “this is a financial innovation which will diversify risk,” we would have been far better off.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: ferrariEverest on Mar 20, 2014, 04:37 PM
Bro, gamit ang qualitative o pati quantitative POV mo, how would you compare si vll at meg (pwede ring kumpara sa iba pang property firms gaya ni ALI, FLI, etc.)? Ano ang positive at negative na masasabi mo sa kanila?

Gusto ko marinig panig mo. Salamat :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 21, 2014, 01:52 AM
Kapatid naAdmit sa hospital ang aking anak kagabi.... Bigyan mo ko ng 2 weeks sasagutin ko yan
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Mar 21, 2014, 08:50 AM
Kapatid naAdmit sa hospital ang aking anak kagabi.... Bigyan mo ko ng 2 weeks sasagutin ko yan

sana gumaling n sya kagad , dont worry boss we can wait :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 24, 2014, 09:33 AM
sana gumaling n sya kagad , dont worry boss we can wait :D

Salamat JM.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 24, 2014, 09:34 AM
"With enough inside information and a million dollars you could go broke in a year"


~Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 27, 2014, 10:56 PM
BRK Annual Meeting yr. 1999


Would you comment on companies you say use questionable accounting practices to make their operations look good?

Buffett: We follow a policy of ““criticize by practice, and praise by name.”” You could say we hate the sin, but love the sinner. So I can’’t really name names of companies that I think are doing this kind of thing; I’’ve found that if you go around criticizing others, pretty soon the criticism comes back on you.

Munger: I don’’t think they want names - I think she’’s asking about the practice in general.

Buffett: That’’s different, then. The practices relate to accounting charges, done to smooth out earnings and make future earnings look good. It has become totally fashionable among managements to play with the timing of expenses.

Options expense recording has become optional as well; I haven’’t seen tons of firms jumping on the chance to record stock compensation expense. And I think it’’s deceptive to see it presented in the footnotes, the way it’’s reported, because of the assumptions companies are using in valuing the options.

The thinking of these executives goes like this: ““ Why should I penalize my shareholders for not doing something that others will do to help theirs?”” And the bad practices become the norm.


---------------------------------------------------


BRK Annual Meeting yr. 2003


Munger: I certainly hope that we're better underwriters than Munich Re.

Buffett: Let's not name names. Munich Re is a fine company. Our policy is that we compliment by name and criticize anonymously. They [Munich Re] lost their AAA because they were too exposed on the asset side -- they would tell you this. They have an important position and we do a lot of business with them.

Some reinsurers we won't do business with. If there were a major financial or natural catastrophe, there are a number of reinsurers who wouldn't pay.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Mar 30, 2014, 09:51 AM
From the MOTLEY FOOL, USA Today:

"There are 56,956 personal finance books on Amazon.com. In aggregate, they contain more than 3 billion words. This seems absurd, because 99% of personal finance can be summarized in nine words: Work a lot, spend a little, invest the difference. Master that, and the other 2.999 billion words are filler.

The most important finance topics don't require details. Most can be, and should be, summarized in a sentence or two.

Here are some I've learned.

1. Dollar-cost average for your entire life and you'll beat almost everyone who doesn't.

2. Only invest in products and companies you can explain to a six-year old.

3. Every five to seven years, people forget that recessions occur every five to seven years.

4. You're twice as biased as you think you are (four times if you disagree with that statement).

5. Read more books and fewer articles.

6. Read more history and fewer forecasts.

7. It's strange that you go to the doctor once a year, but check your investments once a day.

8. Be careful when reading about how stupid investors can be and not realize you're reading about yourself.

9. Your circle of competence is probably 90% smaller than you think it is.

10. You're only diversified when some of your investments perform worse than others.

11. Big risks will always be disregarded; small risks always blown out of proportion.

12. Check your brokerage account as infrequently as it takes to prevent rash decisions.

13. When in doubt, choose the investment with the lowest fee.

14. Emotional intelligence is more important than book intelligence.

15. The more you learn about the economy, the more you realize you have no idea what's going on.

16. Start saving for college before your kid is born, and start saving for your retirement before you graduate college. You'll feel silly when you start and like a genius when you finish.

17. The most powerful way to grow your money is learning to live with less, since you have complete control over it.

18. Singer Rihanna nearly went broke and fired her financial advisor, who described her situation well: "Was it really necessary to tell her that if you spend money on things, you will end up with the things and not the money?"

19. You have no obligation to have an opinion about anything.

20. You have a strict obligation to not have an opinion about things you don't understand.

21. No one attending private school should be on student loans. Most should utilize community and state schools, which provide just as good an education for a fraction of the price.

22. You shouldn't feel strongly about any investment you haven't spent at least a week thinking about.

23. Holding 60% of your assets in stocks and 40% in bonds isn't perfect for everyone; but I can think of a thousand worse strategies.

24. Respect the role luck has played on some of your role models.

25. Don't take out $100,000 in student loans for anything other than medical school (if that).

26. Change your mind as often as the facts change.

27. Ignore people who refuse to change theirs when the facts change.

28. Read last year's market predictions and you'll never again take this year's predictions seriously.

29. Warren Buffett's folksy talk misleads people into thinking that what he's accomplished is easy. It's not.

30. Sleep on every investment decision for a week, then run it by a trusted friend before acting.

31. Two things you can do to make yourself a better investor are increase the amount of time you're investing for and the humility you put into your ideas.

32. Just as you should dress appropriately for your age, you should spend appropriately for your income, and not a penny more.

33. Warren Buffett has the best explanation of dumb risk-taking: "To make money they didn't have and didn't need, they risked what they did have and did need. And that's foolish. It is just plain foolish."

34. You can probably afford not to be a great investor -- you probably can't afford to be a bad one.

35. You're twice as gullible as you think you are.

36. Learn more from your bad investments than your good ones.

37. Judge investors by the quality of their arguments, not the performance of their last trade.

38. You can realistically afford probably half the home the mortgage broker approves you for.

39. Teach your kids about money before they're old enough to earn their own.

40. Admit when you are wrong.

41. Imagine how much stuff you'd have to make up if you were forced to talk 24/7. Remember this when watching financial news on TV.

42. There is, and always will be, more money to be made providing investment advice than receiving it.

43. Assume the worst, hope for the best, accept reality.

44. Save for your own retirement; assume Social Security and private pensions won't be around (even though they probably will).

45. Annuities: A product mixing the complexity of high finance with the sales tactics of used-car salesman has an entirely predictable outcome.

46. The correlation between confidence and future regret is incredibly high.

47. During the last 100 years, there have been more 10% market pullbacks than Christmases. Everyone knows Christmas will come; think of volatility the same way.

48. Don't attempt to keep up with the Joneses without realizing the Joneses aren't any happier than you are.

49. Predictions, opinions, and forecasts should be discounted by the number of times the person making them is on TV each week.

50. Not taking advantage of an employer match on your 401(k) is no different than declining a raise.

51. Don't let Washington sway your investment decisions. Congress has been a dysfunctional swamp of disappointment since 1789, and stocks have done well ever since.

52. To quote Larry Summers: "A good rule of thumb for many things in life holds that things take longer to happen than you think they will, and then happen faster than you thought they could."

53. Another Larry Summers gem: "THERE ARE IDIOTS. Look around."

54. "Invest in what you know" is dangerously simplified.

55. Quit day trading, and donate your money to charity instead. Same financial result for you, and a better outcome for society.

56. Most people's biggest expense is interest, which comes from living beyond your means, and buying things they think will impress others, which comes from insecurity. Avoid these two and you'll grow richer than most of your peers.

57. Reaching for yield to increase your income is often like sticking your hands in a fire to warm them up -- good in theory, disastrous in practice.

58. Your devotion to a political party or economic philosophy is directly proportional to your tendency to think irrationally about how politics affects your investments.

59. Most people need a financial advisor, but everyone needs a financial counselor, or someone to talk them off the ledge before making a dumb decision.

60. There's a strong negative correlation between flaunting money and being rich.

61. Investors were probably better informed 20 years ago when there was 90% less financial news."
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 30, 2014, 10:19 AM
Nice post wilch
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: bauer on Mar 30, 2014, 01:42 PM
^ I do not agree with many of the posts from motley fool.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: mreducator on Mar 30, 2014, 03:58 PM
I wonder, may business ba na inistart si Warren Buffett from scratch? I am reading his bio and what I see is that he just kept on buying good businesses (although occasionally aminado syang may errors in assessment sya). So Warren is technically an investor, not an entrepreneur right?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 31, 2014, 08:06 AM
@bauer

Yup, you're right. I like no. 26 and 27! We deal with facts and use our own reasoning.

@mreducator

When ha was young he had a car wash and pinball machines, I forgot his other ventures.

The only business that he and Munger started from scratch is their reinsurance business run by Ajit Jain.

You've got to have an entrepreneurs POV to be an effective investor.

"Investment is most intelligent when it is most businesslike" - B. Graham

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 31, 2014, 08:21 AM
In our own stock-market experience and observation, extending over 50 years, we have not known a single person who has consistently or lastingly made money by thus following the market. We do not hesitate to declare that this approach is as fallacious as it is popular.

An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.
To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.

The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate.

Obvious prospects for physical growth in a business do not translate into obvious profits for investors.
Individuals who cannot master their emotions are ill-suited to profit from the investment process.
If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume.
Investment is most intelligent when it is most businesslike.
Operations for profit should be based not on optimism but on arithmetic.

You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.
In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand.

In the memorable words of the elder J. P. Morgan, “They will fluctuate.”
In the old legend the wise men finally boiled down the history of mortal affairs into the single phrase, "This too will pass". Confronted with a like challenge to distill the secret of sound investment into three words, we venture the motto, MARGIN OF SAFETY.


~Benjamin Graham
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: bauer on Mar 31, 2014, 01:17 PM
@bauer

Yup, you're right. I like no. 26 and 27! We deal with facts and use our own reasoning.


I agree also.  We needed an entrepreneurship mentality to capture the complexities of running a business.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Mar 31, 2014, 03:11 PM
Bauer how much ang toll fee per car na sisingilin ni SMC sa may NAIA expressway?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: GIG on Apr 01, 2014, 12:29 PM
ahh busog! thanks posters
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Apr 01, 2014, 02:31 PM
How about this?

"By Matt Krantz, USA TODAY
The time it takes to read this sentence is all it takes for nearly 2 million stock trades to flash through the stock market.

Most of those trades aren't coming from trigger-happy day traders and mutual fund managers with billions of dollars at their disposal. It's a flood of machine-gun speed fury coming from an army of computers programmed to obey complicated algorithms that are hyperactively buying and selling.

What does that mean to you, the individual investor? The next time you buy or sell a stock, forget the quaint idea that there is a living, breathing human being on the other side of the transaction. You're trading with a computer.

Not only are the markets completely computerized, more than half of the market's volume is churned by computers programmed to spot certain patterns in trading. These machines see stocks not as securities used by companies to raise money, but rather, symbols, numbers and bits that are traded, swapped and exchanged.

And now, traders say, humans are responding to machines rather than the other way around. Increasingly, too, the machines are reacting to each other, trying to second-guess what their next moves might be on how to take advantage of an edge that might be gone in milliseconds.

"There are no real buyers or sellers," says Joe Saluzzi, trader at Themis Trading. "It's all about the machines."

Never was that as clear as May 6, the day the Dow Jones industrials plunged nearly 1,000 points and then recovered in Wall Street's most volatile half-hour ever. Two months later regulators and stock-exchange officials haven't been able to explain what caused that panic-packed period — except to say that computers likely were to blame.

Given the level of computerization of our lives, from how we play to how we work, it's not surprising technology is how the stock market can handle, process and route the billions of trades that flow through it each day. And computerization is the reason individual investors can buy and sell stocks for less than $10, sometimes even free with some discount brokerages.

But following the May 6 "flash crash," investors are beginning to understand there's a serious and often hidden downside to letting the machines run the markets.

Perhaps most troubling is how computers are giving sophisticated investors with the best digital access to the markets a leg up over regular investors in ways modernization was supposed to do away with. Meanwhile, technological advances are making it nearly impossible for regulators, who play a critical role in maintaining a fair market, to monitor the system that by its very nature has no paper trail and buries transactions in mountains of data.

"It's a war of information," says Gibbons Burke of Morningstar's MarketHistory.com, which compiles statistics of market movements. "Lots of games are being played."

Increased computerization of the stock market is raising troubling problems that have the potential to harm individual investors in the form of:

•Digital "painting the tape." One of the ways traders misled investors in the past was by conducting sham trades with themselves. A trader might enter orders to buy and sell shares of a stock between two entities it controls, giving the false impression there's strong investor interest for the stock at certain prices. This is called painting the tape.

The intent is to fool other investors into thinking this false trading was real, and tempt them into trading based on that information. It's similar to how a crooked eBay seller might improperly use another username to bid on an item, misleading legitimate buyers about the true value of the item.

Painting the tape is illegal. However, modern technology allows traders to essentially perform the same trick in a way that's hard for regulators to detect, says Eric Hunsader, founder of market data feed provider Nanex.

Rapid-fire computer systems allow sophisticated traders, including the giant Wall Street firms, to post bid (buy) and offer (sell) prices they have no intention of actually following through on, he says. For instance, a firm might post a bid for a stock showing they want to buy at a certain price. But by the time investors interested in selling at that price get their order to the market, the false buyer yanks the electronic bid literally faster than a blink of the eye, Hunsader says. This interplay happens in milliseconds, making it difficult to detect.

The computerized trickery is enabled by physics. Since trades move over computer networks at roughly the speed of light, the firms that are physically located nearest the market centers in New York and pay market-access fees get a leg up.

The reason? Each 186 miles a trader is physically located away from the New York trading center, about a millisecond is added to the time to execute a trade, Hunsader says, because that's the speed of light; data can't travel over fiber-optic networks faster than the speed of light.

A millisecond might not sound like much, but it's an eternity for traders who can put up bids or offers for stocks and yank them before other investors located away from New York or with slower connections to the markets can respond. "Trading has gotten to the point where the speed of light is now the major source of latency," Hunsader says.

•Swamping the market with trades. If your e-mail box is filling up with spam, you've already experienced another distortion technology is bringing to the stock markets.

Thanks to low-cost and automated trading, trading firms can swamp markets with a deluge of buy and sell orders in a way that gives them an advantage, Hunsader says.

As other firms must parse through the extraneous trades, slowing them down, the firms behind the pseudo bids and offers can ignore them, saving them milliseconds of analysis time. This gives their computers valuable extra milliseconds to parse true trends in the market and gain an advantage, Hunsader says.

Think of it this way: Imagine that a winning lottery number is e-mailed to two people at the same time, and whoever reads the message first wins the prize. Quickly, one of the people cleverly e-mails millions of spam messages to the other person who also received the e-mail. The spam recipient will need to sort through those e-mails to find the one with the winning lottery number, giving the spam sender time to claim the prize.

The sheer volume of trades is staggering. During the day of the May market meltdown, for instance, more than 19 billion transactions moved, according to regulators. It would take a person more than 100 years to simply count to 1 billion, he says, so anyone who knows some of those trades can be ignored gets a huge advantage.

•Derivatives overwhelming the cash market. Trading firms with the best systems already get a leg up on other investors. But savvy firms can push the market around even more, thanks to other electronic markets that connect with the stock market.

Over on futures exchanges, instead of buying stocks, traders can buy bets on where they think stocks will be in the future. For instance, a trader who thinks the S&P 500 will rise can just buy the so-called e-mini S&P 500 futures contract, rather than buying all 500 stocks in the S&P 500 index.

What makes these contracts so powerful is that they allow traders to make enormous bets with little upfront money: Just $500 in cash can control $50,000 of stock. So a small risk can give traders tremendous sway in the market.

Trading in e-mini contracts has swelled to the point that this speculative market, under the right circumstances, can drive the market for the actual stocks, says Fane Lozman founder of ScanShift.com, a trading firm.

It works like this. Several computer-based trading systems, simultaneously, might load up on large positions betting the S&P 500 will fall. Computers do this by selling e-mini contracts in the futures market at the same time.

But a flood of these robotic sells can have a disastrous effect on stocks on days when the market is already weak. These large e-mini orders will spook the stock market, causing traders and their computers to pull orders to buy the actual stocks on the New York Stock Exchange and Nasdaq. As the market goes lower, selling begets selling. The result is a flash flood of selling and no buying.

"As all these orders from all over the country pile up, no buyer is going to stand in front of that freight train," Lozman says.

Leo Melamed, chairman of CME Group, says market distortions caused by futures are rare and that computer systems offer many more advantages than disadvantages. The explosion of trading makes it easier and cheaper for individual investors to buy and sell stocks.

Technology was supposed to even the field between professional traders and individuals. In reality, though, the rise of the machine on Wall Street shows individual investors are even more outgunned than before due to factors many will never see or perhaps understand, Hunsader says.

But rather than giving up, individual investors need to adjust to a world where computers run stocks, says Larry Harris, professor at the University of Southern California. At the very least, he says, investors should stop using market orders, which is the way most investors buy and sell stocks at the current market price. Instead, he says, investors must use limit orders, which specify a price to buy or sell and can protect them from computers going haywire during high volatility.

It's time now for human investors to adapt to computers, instead of the other way around. Problems do arise from a highly electronic market, but it's here to stay, Harris says.

"The world is a different place because of computers, but there's no hope of returning to manual trading, and you wouldn't want to," he says."
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 01, 2014, 11:07 PM
^To focused on volatility of the market, that's a waste of time!

Volatility is your friend you do not have to worry about it. It has nothing to do with the business.

"Stock market victimises the unconvinced!" - Lynch
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 01, 2014, 11:10 PM
Secret Millionaires Club yr. 2010


Where can you buy stock with the cheapest commissions?


Warren Buffett: There are many places to buy stocks, and the commissions all vary. It is important in life to look not for what is cheapest, but where the most value is delivered. I suggest that you ask your parents if they can check some of them out with you. Maybe you can make a chart where you can compare the costs on one side, with the services offered on the other. It will be a good exercise, and whether you buy stocks or not, you will learn from the process.



------------------------------------------------------------

Secret Millionaires Club yr/2010


How do you know when you are going to lose money and when you aren't? Since the stock market changes every minute.

Warren Buffett: That is a very good question. The answer is you don’t know when you are going to make money or lose money. You are right, the stock market changes every minute. Because of that, you should never buy a stock expecting to make money in the short term. When you buy a stock, you are actually buying a share of that company. If it is a good company then you will make money over time as its value goes up. When you buy a stock, you need to imagine that the stock market will be closed for 20 years and you will not be able to look at its price. That way, you wont be distracted by the short term ups and downs. A company will be successful if it offers good products and services at a fair price while being run by honest, capable managers. Over the long run, such companies tend to appreciate and go up in value.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 02, 2014, 12:04 PM
Compilation. . .


Our favorite holding period is forever.
Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
Time is the friend of the wonderful company, the enemy of the mediocre.
In the business world, the rearview mirror is always clearer than the windshield.
There seems to be some perverse human characteristic that likes to make easy things difficult.
The rich invest in time, the poor invest in money.
Beware of geeks bearing formulas.
Without passion, you don't have energy. Without energy, you have nothing.
I get to do what I like to do every single day of the year.
I never attempt to make money on the stock market. I buy on assumption they could close the market the next day and not re-open it for five years.
Never invest in a business you can’t understand.
Only when you combine sound intellect with emotional discipline do you get rational behavior.
The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.

Wide diversification is only required when investors do not understand what they are doing.
Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.
Risk can be greatly reduced by concentrating on only a few holdings.
Stop trying to predict the direction of the stock market, the economy, interest rates, or elections.
Be fearful when others are greedy and greedy only when others are fearful.
As far as you are concerned, the stock market does not exist. Ignore it.
Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.
Lethargy, bordering on sloth should remain the cornerstone of an investment style.
As a group, lemmings have a rotten image, but no individual lemming has ever received bad press.
Do not take yearly results too seriously. Instead, focus on four or five-year averages.
Focus on return on equity, not earnings per share.
Remember that the stock market is manic-depressive.


~Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 02, 2014, 12:29 PM
In the old legend the wise men finally boiled down the history of mortal affairs into the single phrase, “This too will pass.” Confronted with a like challenge to distill the secret of sound investment into three words, we venture the motto - Margin of Safety.


Benjamin Graham - The Intelligent Investor


WOW!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Apr 02, 2014, 12:58 PM
Compilation. . .


Our favorite holding period is forever.
Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
Time is the friend of the wonderful company, the enemy of the mediocre.
In the business world, the rearview mirror is always clearer than the windshield.
There seems to be some perverse human characteristic that likes to make easy things difficult.
The rich invest in time, the poor invest in money.
Beware of geeks bearing formulas.
Without passion, you don't have energy. Without energy, you have nothing.
I get to do what I like to do every single day of the year.
I never attempt to make money on the stock market. I buy on assumption they could close the market the next day and not re-open it for five years.
Never invest in a business you can’t understand.
Only when you combine sound intellect with emotional discipline do you get rational behavior.
The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.

Wide diversification is only required when investors do not understand what they are doing.
Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.
Risk can be greatly reduced by concentrating on only a few holdings.
Stop trying to predict the direction of the stock market, the economy, interest rates, or elections.
Be fearful when others are greedy and greedy only when others are fearful.
As far as you are concerned, the stock market does not exist. Ignore it.
Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.
Lethargy, bordering on sloth should remain the cornerstone of an investment style.
As a group, lemmings have a rotten image, but no individual lemming has ever received bad press.
Do not take yearly results too seriously. Instead, focus on four or five-year averages.
Focus on return on equity, not earnings per share.
Remember that the stock market is manic-depressive.


~Warren Buffett

wow Buffett buffet :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 02, 2014, 01:03 PM
^hahahha ok sa arrangement ano?


Jmces ano bago mo pinagkakaabalahan?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: ferrariEverest on Apr 02, 2014, 01:36 PM
Kapatid naAdmit sa hospital ang aking anak kagabi.... Bigyan mo ko ng 2 weeks sasagutin ko yan
Ayos lang, nainitindihan ko. Una lagi ang pamilya. PM mo sa akin ano sakit. Sana gumaling agad anak mo.

Hindi pa kasi ako tapos mamili ng stocks.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Apr 02, 2014, 03:11 PM
^hahahha ok sa arrangement ano?


Jmces ano bago mo pinagkakaabalahan?

busy sa trabaho sir :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: bauer on Apr 02, 2014, 10:12 PM
Bauer how much ang toll fee per car na sisingilin ni SMC sa may NAIA expressway?

Una, hindi na ko sigurado na involve pa si SMC sa tollways (SLEX or NAIA I'm not sure due to lack of public disclosure).  I have explained it in another thread dedicated to SMC (exit all positions).

I could not recall it now but I have also made a rough calculation somewhere in pmt forum.  Bottomline, as early as now, they will not make any money in NAIA expressway for the next 15 years.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 03, 2014, 12:38 AM
^ I got curious because I saw an interview of RSA, he said they are right with their calculation of 150thousand vehicles per day.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 03, 2014, 12:57 AM
Ayos lang, nainitindihan ko. Una lagi ang pamilya. PM mo sa akin ano sakit. Sana gumaling agad anak mo.

Hindi pa kasi ako tapos mamili ng stocks.

ok na siya nagpareevaluate lang kami kala ko kasi angelman syndrome yun pala ostheogenesis imperfecta.

Wait you're in to stocks na?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: bauer on Apr 03, 2014, 02:48 PM
^ I got curious because I saw an interview of RSA, he said they are right with their calculation of 150thousand vehicles per day.

Kung totoo yan ang sinabi ni RSA sa interview, I'm sure f---ed up ang utak niya.  pardon my language.

Yung NLEX nga natin which has the highest vehicle passing through among all existing expressways averages 180,000 to 200,000 vehicles per day and its market reach is almost the whole central and northern Luzon population.

Ilan ba ang average passengers combine ng NAIA 1,2,3,4 per day?  Yan lang ang market ng NAIA expressway and you have to consider kung ilan din sa passengers ng NAIA will stay in the macapagal area (where casinos are located) kasi diyan ang exit ng expressway from NAIA.  My computation is about 5,000 vehicles per day (at current usage).  Remember congested na ang NAIA airports natin (no room for further expansion).  Mga BOBO ang mga tauhan ni RSA na nag bid sa NAIA!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 03, 2014, 03:09 PM
Bauer relax lang hehehe :rofl:

Very interesting ang mga bagay na sinabi mo at sinabi niya. . . His bid is 36 times of MVPs bid.

Aabangan ko ang mga susunod mangyayari
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 03, 2014, 03:14 PM
BRK Annual Meeting yr. 2007


What's the role of the board of directors?


Buffett: Most writers and shareholders probably have a little bit of a distorted view of how most large corporations have operated over the years. For a long time, most directors were sort of like potted plants. Management had its agenda and didn’t want input on major matters and Charlie and I can testify that we’ve had very little success in influencing big issues. If someone’s spent 20-30 years rising to become CEO, they don’t want a board telling them what to do. It’s changed a little bit today in terms of process.

Overwhelmingly, the most important job of the board is to pick the right CEO. If you were on the board of Cap Cities and you hired Tom Murphy, case closed.

The second most important job of a board is to prevent the CEO from overreaching. A board should bring independent judgment on acquisitions. There’s a natural tendency for CEOs to want to become bigger by spending other people’s money. The deal is already done by the time the board knows about it. The investment banker comes in and I’ve never seen a banker say, “This is a dumb idea.”

When a significant deal comes along, it’s a chance for the board to weigh in and discuss the economics of what’s going on. But the CEO doesn’t bring a deal unless he wants it done and so he stacks the deck.

Munger: I think big deals, on average in America, are contrary to shareholders’ interest.

Buffett: In most stock deals, the CEO thinks about what he’s getting, but not what he’s giving. You have to make sure you think about this. I can’t ever think of a discussion [when I was on a board] of weighing what you’re giving away vs. what you’re getting in a stock deal. If more value is being given away, then don’t do it! When I gave away 2% of Berkshire to buy Dexter shoes, it was one of the dumbest things ever. Not 2% of Berkshire then, but 2% of Berkshire today!

Munger: Fortunately, you’ve made some good decisions.

Buffett: Or half of you wouldn’t be here. It gets swept under the rug.

We owned a bank that went to acquire a smaller bank. The CEO of the smaller bank held out for a high price and various terms and conditions and, because he was taking stock, had one last condition for the acquiring bank: “Promise never to do a deal this dumb in the future.” [Laughter]

I’ve been on some terrific boards. The best was probably a local business, Data Documents. Every board member had a significant percentage of his net worth in the company and every decision was made for business reasons.

In contrast, the standard now is when deal is possible, trot in the investment bankers. I know the answer: they always say, “This is a great deal.”

At Berkshire, almost everyone on the board has a lot of Berkshire stock. They’re in the same position as shareholders. They don’t have D&O [Directors and Officers] insurance and they bought the stock in the open market. It’s a real owners board.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Apr 03, 2014, 03:39 PM
salamat sa merienda boss  :D
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 03, 2014, 04:25 PM
^Its my pressure este its my pleasure pala hehehe
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: GIG on Apr 03, 2014, 08:55 PM
^Its my pressure este its my pleasure pala hehehe

getting to you na wills hehehe . . . its okay if u update this thread every week I dont mind. I tend to read this last . . . you now save the best for last hehehe!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 03, 2014, 09:41 PM
biro lang iyon GIG.. para sa inyo ang laban nato! hehehe
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: wilch23 on Apr 03, 2014, 10:22 PM
Baka SLEX ang sinabing 150,000 traffic daily? SMC also controls CAVITEX and TPLEX.
Roadways here are like trains in the USA with lower maintenance so probably will do good in the long run. Pero I agree taas ng bid ng SMC sa NAIA expressway. Does he know something we don't? This is the Philippines after all.
Unless biglang nagkaroon ng real train system here, then kaput!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 03, 2014, 10:26 PM
Ito link wilch.. ikaw na ang humusga!

http://www.youtube.com/watch?v=WrJjXkKvXUs
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 05, 2014, 12:58 PM
"If "investors" frenetically bought and sold farmland to one another, neither the yields nor the prices of their crops would be increased. The only consequence of such behavior would be decreases in the overall earnings realized by the farm-owning population because of the substantial costs it would incur as it sought advice and switched properties.

Nevertheless, both individuals and institutions will constantly be urged to be active by those who profit from giving advice or effecting transactions. The resulting frictional costs can be huge and, for investors in aggregate, devoid of benefit. So ignore the chatter, keep your costs minimal, and invest in stocks as you would in a farm."

~Warren Buffett



Sweet!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 05, 2014, 02:28 PM
“Doubt is not a pleasant condition, but certainty is absurd.” –Voltaire

"It is better to be roughly right than precisely wrong." - John Maynard Keynes

-------------------------------------------------------

To be precise in investing is like living in a fool's paradise.

Use your reasoning in dealing with the "right facts" of the company and don't be afraid to predict the company's future earnings.

You don't need to be precisely right.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 05, 2014, 03:53 PM
Message to "Investors"

If you see a paper gain in your portfolio, whether its fair or overheated, you remind yourself that it is a quote from other people in the market.

If you're emotion is moving up and down in the same direction with the market that means you do not understand investing :p
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: GIG on Apr 06, 2014, 06:33 PM
Message to "Investors"

If you see a paper gain in your portfolio, whether its fair or overheated, you remind yourself that it is a quote from other people in the market.

If you're emotion is moving up and down in the same direction with the market that means you do not understand investing :p

Hmmmm interesting!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: ferrariEverest on Apr 06, 2014, 07:27 PM
ok na siya nagpareevaluate lang kami kala ko kasi angelman syndrome yun pala ostheogenesis imperfecta.

Wait you're in to stocks na?
Bakit naman na-misdiagnose? Ang laki ng diperensiya ng Angelman sa o. imperfecta.

Matagal na ko "into stocks" (2005-2006), kaso nagfocus ako sa forex kasi mas bagay sa akin ang forex. Nilagay ko extra cash sa stocks para d mabulok sa bangko ang pera. Dagdag na project ko lang ito, para may balance - may fast (forex) and slow (stock) movers ako.

Sana makarecover agad anak mo! Pakainin mo lagi ng malunggay at saluyot! (powdered o juiced) Mayaman yan sa amino acids, antioxidants at bone-beneficial nutrients.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 07, 2014, 10:53 AM
“We believe that almost all really good investment records will involve relatively little diversification. The basic idea that it was hard to find good investments and that you wanted to be in good investments, and therefore, you’d just find a few of them that you knew a lot about and concentrate on those seemed to me such an obviously good idea. And indeed, it’s proven to be an obviously good idea. Yet 98% of the investing world doesn’t follow it. That’s been good for us.”


~ Charlie Munger
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 07, 2014, 11:02 AM
If you are going to ask for advice and pay for it, you must include that in your portfolio's expenses. It's on par with transactional cost.

Reminder:

Expenses also compound. The longer you stay in the stock market, whether for long or short strategy - aware or unaware, you are a victim of negative compounding.

Transactional cost is so0o underrated! :p
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 07, 2014, 01:12 PM
To value oriented guys, ponder on this. . .


Which is more important and has a long lasting effect for investors temperament, celebrate with the market or celebrate with the business?
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 07, 2014, 01:30 PM
"In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand." - B. Graham

You don't buy a very good stock because it went up in price. <---------- WTF! That's a lame excuse of a coward investor! BOOM!  :gun1:
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 11, 2014, 10:43 PM
"Berkshire increased its ownership interest last year in each of its “Big Four” investments – American Express, Coca-Cola, IBM and Wells Fargo. We purchased additional shares of Wells Fargo (increasing our ownership to 9.2% versus 8.7% at yearend 2012) and IBM (6.3% versus 6.0%). Meanwhile, stock repurchases at Coca-Cola and American Express raised our percentage ownership. Our equity in Coca- Cola grew from 8.9% to 9.1% and our interest in American Express from 13.7% to 14.2%. And, if you think tenths of a percent aren’t important, ponder this math: For the four companies in aggregate, each increase of one-tenth of a percent in our share of their equity raises Berkshire’s share of their annual earnings by $50 million.

The four companies possess excellent businesses and are run by managers who are both talented and shareholder-oriented. At Berkshire, we much prefer owning a non-controlling but substantial portion of a wonderful company to owning 100% of a so-so business; it’s better to have a partial interest in the Hope diamond than to own all of a rhinestone."

~Warren Buffett


----------------------------------


Sa mga takot maginvest sa stock market dahil partial owner at non-controlling position lang daw sila.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 12, 2014, 05:23 AM
"Our flexibility in capital allocation – our willingness to invest large sums passively in non-controlled businesses – gives us a significant advantage over companies that limit themselves to acquisitions they can operate. Woody Allen stated the general idea when he said: “The advantage of being bi-sexual is that it doubles your chances for a date on Saturday night.” Similarly, our appetite for either operating businesses or passive investments doubles our chances of finding sensible uses for our endless gusher of cash."

~ Warren Buffett



LOL!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 12, 2014, 11:32 AM
INTRINSIC VALUE by Warren Buffett

Now let’s focus on a term that I mentioned earlier and that you will encounter in future annual reports.

Intrinsic value is an all-important concept that offers the only logical approach to evaluating the relative attractiveness of investments and businesses. Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life.

The calculation of intrinsic value, though, is not so simple. As our definition suggests, intrinsic value is an estimate rather than a precise figure, and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows are revised.

Two people looking at the same set of facts, moreover – and this would apply even to Charlie and me – will almost inevitably come up with at least slightly different intrinsic value figures. That is one reason we never give you our estimates of intrinsic value. What our annual reports do supply, though, are the facts that we ourselves use to calculate this value.

Meanwhile, we regularly report our per-share book value, an easily calculable number, though one of limited use. The limitations do not arise from our holdings of marketable securities, which are carried on our books at their current prices. Rather the inadequacies of book value have to do with the companies we control, whose values as stated on our books may be far different from their intrinsic values.

The disparity can go in either direction. For example, in 1964 we could state with certitude that Berkshire’s per-share book value was $19.46. However, that figure considerably overstated the company’s intrinsic value, since all of the company’s resources were tied up in a sub-profitable textile business. Our textile assets had neither going-concern nor liquidation values equal to their carrying values. Today, however, Berkshire’s situation is reversed: Now, our book value far understates Berkshire’s intrinsic value, a point true because many of the businesses we control are worth much more than their carrying value.

Inadequate though they are in telling the story, we give you Berkshire’s book-value figures because they today serve as a rough, albeit significantly understated, tracking measure for Berkshire’s intrinsic value. In other words, the percentage change in book value in any given year is likely to be reasonably close to that year’s change in intrinsic value.

You can gain some insight into the differences between book value and intrinsic value by looking at one form of investment, a college education. Think of the education’s cost as its “book value.” If this cost is to be accurate, it should include the earnings that were foregone by the student because he chose college rather than a job.

For this exercise, we will ignore the important non-economic benefits of an education and focus strictly on its economic value. First, we must estimate the earnings that the graduate will receive over his lifetime and subtract from that figure an estimate of what he would have earned had he lacked his education. That gives us an excess earnings figure, which must then be discounted, at an appropriate interest rate, back to graduation day. The dollar result equals the intrinsic economic value of the education.

Some graduates will find that the book value of their education exceeds its intrinsic value, which means that whoever paid for the education didn’t get his money’s worth. In other cases, the intrinsic value of an education will far exceed its book value, a result that proves capital was wisely deployed. In all cases, what is clear is that book value is meaningless as an indicator of intrinsic value.

-----------------------------------------------------------------------


Now you know!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 12, 2014, 11:57 AM
Dito maraming nalilito at gulong gulo ang kaisipan. . . . .ito na ang sagot!


"This “what-will-they-do-with-the-money” factor must always be evaluated along with the “what-do-we-have-now” calculation in order for us, or anybody, to arrive at a sensible estimate of a company’s intrinsic value. That’s because an outside investor stands by helplessly as management reinvests his share of the company’s earnings.

If a CEO can be expected to do this job well, the reinvestment prospects add to the company’s current value; if the CEO’s talents or motives are suspect, today’s value must be discounted. The difference in outcome can be huge. A dollar of then-value in the hands of Sears Roebuck’s or Montgomery Ward’s CEOs in the late 1960s had a far different destiny than did a dollar entrusted to Sam Walton."


~ Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 12, 2014, 03:44 PM
"I never get the accountants in before I start up a business. It's done on gut feeling, especially if I can see that they are taking the mickey out of the consumer."

"One implication (being dyslesic) was that, right up until the age of 50 whilst running the largest private company in Europe, I still couldn’t grasp the difference between gross and net profit. It made board meetings quite bizarre. Eventually one of my directors drew me a picture – he drew an ocean showing a net with fish in it which we could take home, explaining that everything else, all the rest of the turnover, goes elsewhere."

~ Richard Branson


--------------------------------

Lesson:

Think like an entrepreneur and look more on qualitatives of the business.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 12, 2014, 03:52 PM
In wonderful business, you can figure out what will happen but you can't figure out when it will happen, you don't want to focus too much on when it will happen, you want to focus on what. If you're right about what you won't have to worry about when very much.

~ Warren Buffett
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 14, 2014, 10:11 AM
THE MAKING OF A TYCOON

Alliance Global Group Inc. chairman and chief executive officer Andrew L. Tan
October 20, 2013


STUDENTS AND CAMPUSES BULLETIN (SCB): Before you became the third richest man in the Philippines, you had your share of humble beginnings. Can you tell us that journey you took, starting from your childhood experiences in China to Hong Kong and later, in the Philippines?

 

ANDREW L. TAN (ALT): I was born in China. My mother and I migrated to Hong Kong when I was four years old.  At 16, we came to the Philippines to join my father who was then working in a transistor radio factory.

I lived with my parents in a cramped apartment in an old, medium-rise building in Sta. Cruz, Manila. I took up Bachelor of Science in Business Administration at the University of the East and graduated magna cum laude in 1974.

In 1977, I became a partner in a small home appliance business. In 1979, I set up Consolidated Distillers of the Far East, Inc., and became a liquor producer. For three years I lost money, but I never gave up until I turned the business around.

One of my greatest accomplishments as a liquor producer was Emperador Brandy. It took more than a decade—and tons of patience and hard work—to gain wide market acceptance for the brand. Many people would have thrown up their hands and abandoned the business, but I hung on until Emperador took off and became the leading alcoholic drink in the country, making Emperador Distillers the world’s No. 1 producer and exporter of brandy.

In 1989, I set up my own property firm, Megaworld. Through hard work and good fortune, Megaworld has emerged as the country’s foremost property developer. Today, it leads three of the industry’s brightest markets: mid-income residential condominiums, BPO offices, and integrated tourism.


‘I believe that it is my duty as a CEO to lead and inspire the workforce, to provide vision and direction, to guide and motivate my people.’
‘I believe that it is my duty as a CEO to lead and inspire the workforce, to provide vision and direction, to guide and motivate my people.’


SCB: When did you start to learn the value of perseverance and hard work?

ALT: About a week after arriving here, I happened to wake up one day at 7 o’clock in the morning.  My father got angry and he scolded me. As a newcomer in the country, he said, I had to work harder than the people here. “You cannot wake up at 7 o’clock. You must wake up at 5 o’clock.”

That incident opened my eyes to the importance of diligence and hard work, and I have taken my father’s advice to heart since then.

SCB: How was that experience in college when you had to work and walk daily to school, with only bananacue for lunch?

ALT: I am not among the lucky few born with silver spoons in their mouths. During my first two years as a BSBA student at UE, I supported myself by selling watches and tutoring grade school students in math on a part-time basis. Then I landed a job as an import assistant in a Filipino Chinese-owned company—a job I held until I graduated in 1974.

To save on jeepney fare, I walked every day from my 20-square-meter apartment in Sta. Cruz, Manila, to the UE campus on C.M. Recto. For lunch, I often ate “bananacue” (fried bananas) that I bought for 30 centavos per stick from vendors along Gastambide Street.


 

SCB: How did you juggle your time between work and school? What did you learn from it?

ALT: It was hard juggling a part-time job and going to college, but I never complained and I kept at it until I learned how to manage it. I learned that whether working or studying, doing it as best as I could brought me a sense of satisfaction and fulfillment. What’s more, it helped me become a better person.

SCB: What was your favorite subject in school?

ALT: Accounting subjects were my favorite.  I believe that the study of Accounting is one of the best ways to prepare one for an entrepreneurial career.

 

SCB: How did your work as a math tutor help in the development of your skills in business?

ALT: I believe a good salesman with a great math background can become an excellent entrepreneur.

 

A MILLIONAIRE AT 27

SCB: Did you always want to go into business, or were you considering other careers growing up?

ALT: Upon my father’s advice, I did entertain the idea of becoming a financial executive after graduation. Once, while walking down a street in Sta. Cruz with my father, we stopped for a while to admire the gentlemen dressed smartly in barong Tagalog inside the glass-paneled, air-conditioned offices of a bank. My dad thought their job was a good one, and he told me he wanted me to become like them someday.

Even in my youthful days, however, I was already obsessed with the idea of starting a business of my own.


SCB: When did you realize that business was something you definitely wanted to pursue as a career?

ALT: Most of my peers in college were better off than I since their families owned small businesses such as a grocery or hardware store. That started me dreaming of doing my own business to give my family a better life. I would tell myself that if I had P200,000—a lot of money back then—I would use it to open a grocery store.

My first try at doing business came when I was 25, and still a bachelor. Instead of grocery items, I sold home appliances such as imported coffeemakers and blenders to local appliance stores as a partner in a wholesale trading firm.

Two years later, I made my first million.

SCB: You’ve previously talked about some of your initial business ventures not becoming successes. Among those failures, which was the one that taught you the most about business?

ALT: After two years of selling home appliances, I decided to try my luck in the distillery business. In 1979, I acquired a liquor factory that I named Consolidated Distillers of the Far East, Inc. It was a major step forward for me as a budding entrepreneur.

But as I soon found out for myself, success does not come the easy way. My first attempts to produce gin and then rum both came to naught. I even lost money because I was on a head-on collision against liquor giants that had lorded it over the business for ages. Despite all these challenges, I never gave up.

Looking back, this first taste of failures early on in my career proved to be a blessing after all. They taught me that if I don’t make it the first time, I should try harder a second or even a third time. If things had turned out right in the first try, I might not have worked harder to get what I wanted. And I would have never risen higher!

 

SCB: What are the common mistakes businessmen, especially the young ones, make in their businesses and how can they avoid it?

ALT: Some of these common mistakes are: lack of a clear business vision, failure to adapt to change, inability to spot a crisis or an opportunity, and giving up too easily. These mistakes can be avoided only if the businessmen are willing to work hard at disciplining themselves and changing the way they do business.

 

SCB: How did earning your first million at the age of 27 affect the way you do business? Did you become more aggressive with your investments after?

ALT: Making my first million at 27 marked a turning point in my business career. It was then that I began to embrace a business philosophy that was the heart of simplicity itself: Just keep working and investing whatever profit you make in a new business. That way, you generate more jobs and help the country’s economy grow.

That, in a nutshell, is the story of my corporate life. It has been a continuous process of moving forward. Every time I see a certain room to grow, or a new opportunity to advance further, I go out and take it.

SCB: What would you consider your leadership/management style?

ALT: The management style in my organization is one that blends entrepreneurship and professional management. Entrepreneurship provides the vision for the company and looks at the big picture while the professional managers take care of the small details.

 

As a CEO, I see that the success of Megaworld rests on its ability to tap the individual skills of all employees and to efficiently harness these skills when employees work as a team.

Under Megaworld’s culture of innovation and excellence, I give my officers and employees free rein to think and perform innovatively.  I don’t just assign specific tasks to individuals; I challenge them to work outside their comfort zone in order to develop their creativity and resourcefulness.

I believe that it is my duty as a CEO to lead and inspire the workforce, to provide vision and direction, to guide and motivate my people so that Megaworld continues to maintain its competitive edge in the property market.


‘Success does not come the easy way. My first attempts to produce gin and rum came to naught. I even lost money because I was on a head-on collision against liquor giants. Despite these challenges, I never gave up.’
‘Success does not come the easy way. My first attempts to produce gin and rum came to naught. I even lost money because I was on a head-on collision against liquor giants. Despite these challenges, I never gave up.’

BUILDING COMMUNITIES

SCB: The Philippines’ real estate industry is still going strong especially with the country’s fast-rising economy. In a very competitive market, what is Megaworld’s offering that brings something new to the buyers?

We continue to be innovative in all our township developments. We have pioneered the “LIVE WORK PLAY LEARN” township developments such as Eastwood City, McKinley Hill, and Newport City, which bring a new lifestyle to people who buy and live in our developments. We believe that this is a superior product offering to our customers compared to single residential buildings being offered by other developers. Product innovation and design are always up-to-date with the latest trends and functionality/amenities that our customers would want to experience in the development.

It’s encouraging to see that the real estate sector grew faster than the GDP (Gross Domestic Product) in 2013 – 9.5 percent growth in the real estate industry versus GDP growth of 7.5 percent, in real terms. Just in and around Bonifacio Global City, Megaworld has the biggest landbank covering 104.9 hectares with four township offerings, so Megaworld indeed has a lot of potential for the home, office, and commercial sectors in the next few years.

 

SCB: Why this goal/purpose?

ALT: The goal is to give home buyers the opportunity to improve the quality of their life in an exciting environment at reasonably priced residential condominiums. They can just walk to the office, fetch their kids from a nearby school, shop for groceries at the supermarket, and have a fancy dinner at the corner restaurant – all in one integrated setting. This is the good quality of life that Megaworld townships offer discriminating home buyers.

SCB: How is Megaworld addressing the younger market, which is getting bigger?

ALT: Megaworld is developing residential projects that would cater to the needs of first-time homeowners whether young or old. Apart from the usual amenities such as swimming pool, meeting rooms and gym, we offer new amenities such as badminton courts, yoga and fitness centers, skygardens, etc. Add to this its retail mall development of the township development that will surely complement the needs of younger buyers.

Given that Megaworld pioneered flexible down-payment schemes in the local market, I strongly believe that Megaworld continues to address the residential needs of both young single buyers as well as young couples.

SCB: Megaworld was an early believer in the BPO industry. Where do you see the BPO industry headed in the coming years?

ALT: We have very good reason to believe that the Philippines will continue to strengthen its leadership position as the call center capital of the world. The neutral accent and strong service orientation of Filipinos help ensure this.

Also, we have a huge potential to go up the value chain when it comes to higher value-added services like finance, accounting, purchasing, HR shared services, etc.

We also can’t forget about our ability to get into the medical and legal transcription business as well as CAD engineering and architectural design.

The bottom line is that we have the talent in the Philippines and this puts us in a very good position to capture the expansion of BPO operations due to lower labor costs.

We see the BPO industry to continue to expand over the next two to three years with new players coming in and those that are already here continue to expand their operations.

Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 14, 2014, 10:12 AM
 

SHAPING THE FUTURE

SCB: Megaworld is one of the real estate companies that changed the landscape of Metro Manila and even Cebu. Where are you taking these lifestyle concepts next?

ALT: In line with Megaworld’s efforts to extend its reach to major provincial centers, we launched a major project in Western Visayas, particularly in Iloilo City, the region’s business and commercial center. The project is dubbed the Iloilo Business Park, a sprawling 72-hectare mixed-use development in Mandurriao, Iloilo City.

On a piece of prime property that used to be a major airport, Megaworld intends to put up first-class hotels, a commercial area, a modern lifestyle mall, BPO office buildings, and a convention center that can accommodate thousands of people.

One of the major attractions of the business park will be the Iloilo Convention Center, a joint venture between Megaworld and the local government. The planned edifice will be built on a 1.7-hectare lot and is designed to host big conventions, trade fairs, and major concerts of local and international artists. The convention center is slated to open in 2015.

The project’s master plan includes the construction of the Richmonde Hotel Iloilo which will also host several BPO offices. Megaworld will also construct several other BPO buildings in an allotted 8.15-hectare area. More than 17 hectares, in turn, will be devoted to a mixed-use development which includes retail shops that cater not only to the needs of tourists but to the lifestyle of the residents of Western Visayas as well. The Megaworld Center Mall will probably be the focal point of attention in the business park since it will become Iloilo’s first upscale mall. The Festive Walk, in turn, was patterned after American outlet shops and will feature a wide, open-air strolling area lined with shops of various signature brands.

This move to Iloilo City is part of the company’s plan to transform cities outside Metro Manila to become progressive and financially viable investment centers and even tourism hot spots.

 

SCB: It’s been five years since you first declared Alliance Global Group’s plans on venturing into the tourism industry. What has the group accomplished since then?

ALT: We have accomplished a lot in the past five years. Resorts World Manila in Newport City has made its mark in the Southeast Asian tourism sector. We have more than 1,200 hotel rooms from Marriott Hotel Manila, Maxims Hotel, and Remington Hotel that serve tourists. But there will still be more. We are set to double our hotel rooms in Resorts World Manila in five years with the addition of Hilton Hotel, Sheraton Hotel, and the expansion of Marriott and Maxims Hotel.

For Global-Estate Resorts Inc. or GERI, the newest member of AGI, we have launched two massive tourism-oriented projects in two of the country’s tourism hot spots, namely the 150-hectare Boracay Newcoast in Boracay Island and the 1,200-hectare Twin Lakes in Tagaytay City.

Boracay Newcoast comprises 14 percent of the island, with private beach coves, a boutique hotel district, rows of shop houses, international hotels, and an entertainment center – all for tourists to enjoy their holiday fabulously.

Meanwhile, Twin Lakes will host the country’s first vineyard community, with a championship-caliber golf course, a wellness center and a retirement village to cater to long-staying tourists as well.

 

SCB: Will your company be further involved in the development of venues for performing arts like the Newport Performing Arts Theater? How do you plan to further expand your presence here?

ALT: Buoyed by the success of the Newport Performing Arts Theater in Resorts World Manila in Newport City, we have firmed up plans for a Grand Opera House, a venue for the arts that will rival its predecessor in size and scale. It is set to rise in Resorts World Bayshore City in the Manila Bay area. This is the upcoming integrated tourism estate of Travellers International Hotel Group Inc., a member of Alliance Global Group Inc., in the Pagcor Entertainment City Manila. I personally visited landmark European opera houses for inspiration for the Grand Opera House, which is envisioned to seat 3,000 guests and showcase cutting-edge lighting and sound technology.  I believe this grand venue will be a big draw for similarly world-class Filipino talent.

 

GIVING BACK   

SCB: When did the Megaworld Foundation begin? What are its advocacies and priorities?

ALT: The Megaworld Foundation was founded in 1997. As the non-profit corporate-giving arm of the Megaworld Group, it supports various socio-economic development programs and projects that help empower the less privileged in Philippine society.

I firmly believe that education is the key to lead people out of poverty and that giving a person of humble birth the opportunity to be educated means giving him the chance to change his life for the better.  That is why college scholarship grants to poor but deserving young people are a No. 1 priority for the Megaworld Foundation.

The college scholarship program of the foundation was launched in 1999. Initially, the scholarships were granted to bright but needy students who wanted to become the architects, engineers and interior designers of tomorrow. In recognition of the growing role of information technology in the country, the grants were expanded in 2000 to include IT-related courses such as information technology, computer science, and computer engineering.

The foundation is currently supporting 327 scholars enrolled in various colleges and universities in Metro Manila.

In addition, the foundation donates to a variety of charitable causes focused on nation building, poverty alleviation, the environment, healthcare, good governance, literacy and care for women, the youth, the elderly, and the handicapped. For the past 14 years, the financial support and outreach efforts of the foundation have helped change society in many ways.

SCB: Does the Megaworld Foundation also plan to involve itself with charities supporting performance arts, in line with the company’s growing presence in building performance arts venues?

ALT: Yes.
Hand in hand with Megaworld’s interest in building more centers for the performing arts, the Megaworld Foundation, for its part, may likely consider lending a helping hand to worthwhile performing arts-oriented charities.

 

HELPING PEOPLE LEAD BETTER LIVES

SCB: What are the important life lessons that you teach your children?

ALT: A big influence and inspiration in my life was my father, who had little formal education but who did his best to put me through school even if it meant going through a lot of sacrifices. I have told each of my four children to follow their grandfather’s advice: “Finish your studies and always work hard.”

Another valuable nugget of wisdom that I always impress on my children is that they should be grateful for being born with all of the good things in life. I teach them to give back by helping other people and doing them a good turn.

SCB: Young aspiring businessmen are encouraged to put up their own businesses especially in this economy. What is the best advice you can give them?

ALT: Do not rush into a business just because you have the capital. You’ll lose your shirt if you jump into it recklessly. Do your homework first. Study the market and look for that golden opportunity. Whatever business you choose to go into, pursue it with a passion. In addition, be ready and willing to embrace hard work, discipline, frugality, and creativity if you aspire to become a successful entrepreneur.

 

SCB: What makes a truly successful man?

ALT: I believe a truly successful man is he who has devoted his life to serving society. As a businessman, I believe you can serve society best by creating jobs for as many people as you can and giving them a chance to lead better lives. This means you don’t stop at doing business well so that it will grow bigger. Instead, you keep going on by investing in a new business and, at the right time, investing in yet another new business. In this way, you get to employ more and more people and give them a chance to improve their lives.

 

SCB: What is the secret to your success?

ALT: Success, for me, comes from an innate ability to feel the pulse of the market, and of people in general. I think I am where I am now because of this knack for knowing and understanding the market and my customers, which has helped me to provide the products and services that people will buy again and again.

Knowing what the customers want is not enough, though. I have strived to know and understand as well my employees, suppliers, partners, associates, and even my bankers and underwriters. Armed with a good nose, and a good sixth sense, I have done my best to fit all of them into my grand vision of success.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: INDO on Apr 14, 2014, 10:38 AM
like :)
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: jmces on Apr 14, 2014, 11:43 AM
idol!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: GIG on Apr 15, 2014, 08:48 PM
busog na naman
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 16, 2014, 07:51 AM
Inflation problem you talked about in 2008 letter, but you didn’t mention inflation in 2009 letter. Why?

Buffett: I may be biased, as I have always worried about inflation. And there has been a lot of inflation. I was born in 1930 and the dollar is down 90% since then but we’ve done okay. I think prospects for inflation around world have increased.   Situations that governments have been forced into or allowed to embrace may cause it. Weaning ourselves from medicine may be harder than original illness, there is massive debt. I don’t see any way countries running high debt to GDP over time doesn’t have diminution of currency over time. I wrote OpEd in NYT last year. I would bet on higher inflation, and maybe a lot higher.

Munger: Again, I agree.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 16, 2014, 08:31 AM
BRK Annual Meeting yr. 2010

What are key metrics you look for on inflation, and catalysts for a future rise?


Buffett: You give me credit for more brainpower than I actually bring to the question. You can’t look at any metric. If it gets going, it creates its own dynamic and is very hard to stop. We saw it in 1970s until Volcker came in with a sledge hammer. Prime rate was at 21% and governments up to 15%. We had a demonstration project 30 yrs ago. If we continue today’s policies, something like that could be possible. Trend is not destiny. We have power to control our future. We do it through elected representatives If inflation gets into saddle, faith in institutions could break down.

Currencies are a poorer bet than they have been in a long time but I do not know what that means for the near future. Remember that your money can be inflated away but your talent cannot. As long as you are the best at what you do you will be entitled to your portion of profits.

Munger: Contribute the most to civilization and counter the effects of inflation. To outsmart others isn’t the best way to do it. If you are best painter or best brain surgeon, you will always command your share of the economy around you. Talent is terrific asset to deal with it. The best defense is to contribute to the world and to try to make yourself more talented.



Charlie Munger is very smart.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 16, 2014, 09:53 PM
Young aspiring businessmen are encouraged to put up their own businesses especially in this economy. What is the best advice you can give them?

Andrew L. Tan: Do not rush into a business just because you have the capital. You’ll lose your shirt if you jump into it recklessly. Do your homework first. Study the market and look for that golden opportunity. Whatever business you choose to go into, pursue it with a passion. In addition, be ready and willing to embrace hard work, discipline, frugality, and creativity if you aspire to become a successful entrepreneur.
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 17, 2014, 03:08 PM
What I realized from Andrew Tan's interview is how beautiful the game of stock investing.

You have the chance to partner these kind of people and also they are working for your money!!

Easy investing life that is achievable if you just choose to ignore the market's madness!
Title: Re: Exploiting the Wisdom of People Who've Been There (for autodidact)
Post by: Wills on Apr 21, 2014, 04:07 PM
BRK Annual Meeting  yr. 2007


What's your opinion of day trading?

Buffett: If you take the percentage of bonds and stocks held by people who could change their minds tomorrow based on what the Fed does, etc., it’s gone up a lot. I call it an electronic herd, who change what they do every day or minute. The turnover of stocks has gone from 40% to over 100%, and the turnover of bonds has gone up dramatically as well. There’s nothing evil about it, but it’s a different game and there are consequences. If you’re trying to beat the other fellow on a day-to-day basis and you’re watching the news or the other fellow, and you think he’s going to push the sell button, you’ll try to push it quicker.

When Charlie and I were at Salomon, they talked about 5- or 6-sigma events, but that doesn’t mean anything when you’re talking about real markets and human behavior. Look at what happened in 1998 and in 2002. You’ll see it when people try to beat the markets day by day.

When I set up my partnership [the Buffett Partnership], I told my partners they’d hear from me once a year.

Munger: When people talk about sigmas in terms of disaster probabilities in markets, they’re crazy. They think probabilities in markets are Gaussian distributions, because it’s easy to compute an