Saturday, May 2, 2009

Buffett and Munger... Shock value!

Berkshire Hathaway is having its annual meeting and the financial press is falling all over itself reporting what the sage from Omaha has to say about investing. Let me say at the outset that I have expressed my admiration for what Warren Buffet does well - the fact that he has a core philosophy that he does not deviate from and his instinct for going against the grain. Over time, he and Charlie Munger, who has operated at his right hand for decades, also say things for shock value to indicate how separated they are from both academics and other portfolio managers. Here is a listing of quotes and my responses to them.

Mr. Buffett: “There is so much that’s false and nutty in modern investing practice and modern investment banking, that if you just reduced the nonsense, that’s a goal you should reasonably hope for.”

I agree entirely. There is much that is done in portfolio management and corporate finance that does not pass the common sense test. Layering complexity on stupid ideas - that leverage always increases value, that securitization can make you a more valuable company - do not make them any less stupid.

Mr. Buffett said he was once asked by a student from the University of Chicago, a hub of modern portfolio theory, “What are we learning that’s most wrong?” To which Charlie Munger quipped, “How do you handle that in one session?”

My question to Mr. Buffett would be a simple one: What exactly is your understanding of Modern Portfolio Theory? I would wager that he would come back with Markowtiz portfolios and the CAPM. If you define modern as circa 1964, he would be right. If not, he has a lot of catching up to do.

Mr. Buffett on the efficient market hypothesis, the idea that all information is instantly priced into the market: “There’s this holy writ, the efficient market theory. How do you teach your students everything is priced properly? What do you do for the rest of the hour?”

Mr. Buffett probably does not realize this but the efficient market hypothesis is really a warning to those portfolio managers who try to trade on information - earnings announcements and acquisitions, for isntance - and day traders. To be honest, 99% of investors would be saved a lot of money, if they followed the suggestions of efficient market theorists. Let's face reality. If you define an efficient market as one where investors cannot easily take advantage of market imperfections, markets are efficient to most investors on most assets most of the time... One reason that Mr. Buffett continues to generate excess returns is that he is able to strike inside deals with managers... Do you think you or I would have been able to get the deal he got from Goldman?

Mr. Buffett on complex calculations used to value purchases: “If you need to use a computer or a calculator to make the calculation, you shouldn’t buy it.”

Spoken like a Luddite... How about an abacus, Mr. Buffett? Maybe a slide rule?

Mr. Buffett on the use of higher-order math in finance: “The more symbols they could work into their writing the more they were revered.”

Actually, I do share Mr. Buffett's concern that common sense is sometimes overwhelmed by mathematics. However, the people who are most revered in finance - Harry Markowtiz, Merton Miller and Gene Fama- are surprisingly down to earth in explaining their ideas.

Mr. Munger on the same theme: “Some of the worst business decisions I’ve ever seen are those with future projections and discounts back. It seems like the higher mathematics with more false precision should help you but it doesn’t. They teach that in business schools because, well, they’ve got to do something. ”

What would Mr. Munger do instead? Look backwards and discount forward? What part of forecasting does he think is pointless? And does he not agree with the proposition that a dollar today is worth than a dollar in year? If not, he should be sentenced to spend a year in a high inflation economy (say Zimbabwe)...

Mr. Buffett adds: “If you stand up in front of a business class and say a bird in the hand is worth two in the bush, you won’t get tenure…. Higher mathematics my be dangerous and lead you down pathways that are better left untrod.”

Depends upon your chances of getting the birds in the bush, right? If you feel that you have a 60% chance of getting the birds in the bush, is it not worth the trade off? No wait. Talking about probabilities probably is higher mathematics and I should not do it... My bad...

Mr. Buffett on the persistence of bad ideas in finance: “The famous physicist Max Planck was talking about the resistance of the human mind, even the bright human mind, to new ideas…. And he said science advances one funeral at a time, and I think there’s a lot of truth to that and it’s certainly been true in finance.”

It is true. In any discipline, for every three ideas you come up with, only one will move forward. But the solution to this is not to stop having new ideas but to churn out more...

36 comments:

Henry Bee said...

Shocking indeed! I think there is a cultural divide between academics and practitioners. Buffett's philosophy isn't that far off from much of finance theories at all. He's just not part of the culture.

Academics are merely condensing the intuitions of practitioners. These crystals of knowledge can then be disseminated and applied by a wider group of people. Crises are formed when the masses start memorizing the formula without truly understanding the new knowledge.

WesTW said...

"Depends upon your chances of getting the birds in the bush, right? If you feel that you have a 60% chance of getting the birds in the bush, is it not worth the trade off? No wait. Talking about probabilities probably is higher mathematics and I should not do it... My bad..."

- If I'm not mistaken, Mr. Buffett enjoys probabilities immensely; the idea of a margin of safety he champions and his love for insurance are surely examples of that. I think Buffett's point was that the way certain finance theories calculate probabilities (with or without symbols) do not make intuitive sense or is too complex. Perhaps there is a lack of comprehension (or even interest) in one another between both Buffett and modern finance theory?

Aswath Damodaran said...

That is my point. Berkshire Hathaway, as an insurance company, is built on probabilities and portfolio theory. All insurance is based on risk pooling. If he has a problem with estimating probabilities, then he should say so. He seems to be playing a role of "I am just a hick. I don't use numbers", and there are investors who then use what he says as an excuse for not looking at the numbers.

bhavin said...

Hi Guys! I think you are missing the point here. As per se my understanding of Mr. Buffett, Mr. Munger and Berkshire Hathaway, I think what they want to convey is quiet simple,

Mr. Buffett & Mr. Munger’s focus on,
Quantitative aspects : 10%
Qualitative aspects : 90%

Academics & Practioner’s focus on,
Quantitative aspects : 90%
Qualitative aspects : 10%

The ratios here are just assumptions, but the whole point is their focus on the qualitative aspects of the company. Also, if you have seen a few of Buffett videos, he has admitted that he reads a lot which must be helpful for him in evaluating the qualitative aspects of the investment quickly as I assume he must not be reading much on the quantitative subjects which he looks down to.

I think he just uses basic maths to do basic calculations but a lot of evaluation is on the qualitative grounds. And believe it or not, but if qualitative aspects are strong (like integrity of management, history of company, brand values etc.) coupled with a margin of safety, quantitative aspects will be taken care of.

What say, guys???

WesTW said...

I tend to agree with the Professor in that Buffett downplays his financial and mathematical acumen. By most accounts, Buffett is a math genius and has always shown a natural affinity towards numeric relationships. He's been said to calculate ratios and probabilities with ease in his head - he also memorizes and can name off the financial statistics of all of his companies at any instant. I think Professor Damodaran is right in saying that Buffett is misleading when he

That said, I think the true difference between Buffett as a practitioner and the academic realm is the quantification of variables. While Buffett uses the "common sense approach" and draws on his experience and education from Graham and Dodds (plus the advice of Munger) to estimate risk, the inherent objective of the academic realm is to quantify and standardize risk estimation. Again, I think it was the Professor that mentioned the use of risk proxy in place of CAPM or other "antiquated" risk models, and I believe this is indeed more similar to Buffett's practices than different.

Looks like you've opened Pandora's Box, Professor!

WesTW said...

^*I think Professor Damodaran is right in saying that Buffett is misleading when he says that anyone can emulate his investing style by simply understanding his investment philosophy

Gaurav Mehta said...

Anything to do with Buffet makes news ...I am follower of buffet and what he says makes financial sense to me most of the time. However i do think he does say a lot of stuff just for the effect!! Not understanding probabilities, derivatives and complex calculation being one.. i would say if he doesn't understand these then what is he doing investing in insurance, complex derivative bets that end in 2019 ? Second... i understand that he likes investing in good companies with solid history, excellent management, best products, out of favor stocks... but how the heck does he come up with a value for these stocks or his investments in private companies... if he isn't using any forecasting? Does he go up to the management and ask them what are u ready to sell at .. and lets say the management $500MM and he goes back and says no that is too steep i'll settle for $400MM without actually coming calculating a value ???????

One of the points that he did say in the stockholders meeting was regarding investment in WellsFargo and if he had to put all his money in a single stock he would have put it in Wells Fargo when it fell to $9.0... now i think to him $19 where it is present would not make the same sense ..same company , same history , same management but different price!!! so he does get the valuation somewhere...doesn't he ?

WesTW said...

Buffett does forecast AND valuate companies - although his methods of discounting is somewhat different from standard practices. From what I understand, Buffett uses a pretty standard 30-yr treasury bond as the discount rate; however, he is conservative and uncannily accurate in his forecast of cash flows, which plays to his thorough understanding of the businesses in which he invests.

Hence, Buffett believes that the risk is not estimated (primarily) from the average cost of capital, but rather the ability (or lack of) of the company to generate cash.

dharma said...

For all the glib tongued phrases we get to hear from the duo of buffett and munger on investing wisdom and philosophy, lay investors pretty much forget the fact that berkshire's Insurance business has been a cash cow thats enabled buffett to build up a war chest over the years that enables him to easily seek attractive special conditions from managements like goldman sachs.

As far as the efficient market hypothesis is concerned, i would like to add here that the theory did not work with respect to satyam computers. Though one may argue that satyam computers was always given a low discounting by Mr.Market in comparison to other IT majors, the scale of the accounting and management fraud was never factored into the price of the stock until the news came out. This was clearly a case in recent times where the market reacted post news flow.

Bojan Kunovar said...

Market efficiency is about incorporating into the price all the information which is available (and remember, we have different levels of market efficiency). Since market participants didn't know about the fraud at Satyam computers, we could hardly expect them to factor this into the price. And it has nothing to do with markets being efficient or not.

fahbah said...

I would agree with the professor. Its really difficult to comprehend a person making billions of dollars worth investment not using any valuation methodology (he could have different inputs like discount rate, slashing the 1 year projected cash flows, etc). However, the idea that "common sense investing" is how he and berkshire made money is hard to digest. Also, as someone else on this blog pointed out, since Bershire is in the insurance business which also writes derivatives, the use of mathematical models (however, you want to call it) becomes even more important.

dharma said...

The accounting and management fraud was happening in satyam for close to a decade and any person with basic accounting knowledge who had closely analysed their financial statements over the years would have seen through their designs to try covering up the fraud by disclosing huge cash balances in a "current account" that doesnt earn you any interest. Information was always available in an allusive manner. Its for market participants to separate the wheat from the chaff..In my opinion, the markets are clearly less than efficient

bhavin said...

I think you guys are grossly misunderstanding Buffett and his philosophy. But I don’t know exactly how to convince you all in a few words!!!

Let me just try.

I don’t know if you guys have ever experienced the power of solitude and extensive reading which Buffett practices.

Just think guys! There are long dry spells when he finds nothing exciting or worth buying and what he is doing at that time is just building up knowledge and understanding in solitude through extensive reading. And when something exciting comes up, he doesn’t even need to think much on it as he already has the required background to make that decision.

Let me explain you with an analogy. If you have seen Bruce Lee films, do you think he has to plan every move to blow out the opponent? I mean his reflexes are so quick. But that requires discipline and consistent practice which is what I believe Buffett does!

I am not saying he doesn’t use quantitative calculations at all. He definitely uses the basics to determine a fair price roughly but they are marginal as compared to the qualitative aspects that he considers. And on top of that, the background and understanding that he has through the common sense approach is what gives him the necessary edge in decision-making.

I am 99.99% sure that you guys are not going to buy or understand my idea. But that 0.01% hope made me write this.

Also, I would appreciate your comments, professor!!!

Aswath Damodaran said...

Warren Buffett is a very smart man. One of his strengths has been his capacity to stay above the fray of day-to-day investing and see the big picture. My point is not that the does not understand probabilities and accounting numbers. I think he understands them exceedingly well. My problem is that he is the Pied Piper to his flock of disciples, who take everything he says as gospel. Consequently, many of these fans of his will take what he said this weekend as license to do back-of-the-envelope assessments of companies and gut-feeling investments, and they will lose as a consequence.

Bernard said...

"My question to Mr. Buffett would be a simple one: What exactly is your understanding of Modern Portfolio Theory? I would wager that he would come back with Markowtiz portfolios and the CAPM. If you define modern as circa 1964, he would be right. If not, he has a lot of catching up to do."

You can't pose him a question, then answer it yourself on his behalf and then ridicule that answer. It's NOT an efficient world out there (in markets as well as outside them). You do not know what he'd say.

"One reason that Mr. Buffett continues to generate excess returns is that he is able to strike inside deals with managers... Do you think you or I would have been able to get the deal he got from Goldman?"

Have you seen his pre-Goldman deals? The guy didn't drop out of his mom and do the goldman deal. There were other public equity deals for 40 years that made him a lot of money before the Goldman deal every came along.

"Spoken like a Luddite... How about an abacus, Mr. Buffett? Maybe a slide rule?"

I think you missed the point of what he was saying. Just to make things less complex. This response is funny to read but if you were aiming for more, it's lacking.

"What would Mr. Munger do instead? Look backwards and discount forward? What part of forecasting does he think is pointless? And does he not agree with the proposition that a dollar today is worth than a dollar in year? If not, he should be sentenced to spend a year in a high inflation economy (say Zimbabwe)..."

You don't need Mr Munger to tell you what part of forecasting is wrong. We can do an experiment. Pick a company YOU like and you think you know. Then predict it's sales for next 5 years like most bankers do. Then post on your blog. We'll check the results in 5 years and settle this issue. And that's just sales. Most projections go much farther and project even such things as "expected benefits from expected tax changes in lithuania". Discount is legitimate. But discounting the wrong things will give you wrong valuation.

I hope you respond to this. This is not meant to offend you. I'm just putting forth my arguments. Obviously, I'm a huge fan of Buffett, Munger, Greenblatt, Walter Schloss, etc. But that's not the point here. This isn't meant to be partisan. Hope to hear from you.

Aswath Damodaran said...

In response to the last comment:
1. I do not have to put words in Buffett's mouth, since he seems to have made enough comments to fill a few books. I went back and looked the comments he has made about modern portfolio theory and they all seem to take issue with beta and Markowitz portfolios. Modern portfolio theory is an incredibly broad and diverse area,with people of different viewpoints. It is a mix of behavioral finance, chaos theory and empirical finance that actually agrees with Buffett more than he realizes.
2. I did not say that Buffett's successes over his entire lifetime have come from inside deals. In fact, his proverbial successes (Am Ex in the 1960s) came about when he was a small portfolio manager operating under the radar. If you take a look at his portfolio in the last 20 years, his longest-term investments, such as Disney, Coke and the Washington Post have not actually done that well. His successes in the last decade have come from his inside transactions.
3. You don't need to put my forecasts to the test. Of course, they will be wrong. In fact, if I had the right forecasts (if you define right as being on the spot), I would discount at the riskfree rate and be done. The essence of forecasting is that you make estimates that you know will never be matched by actuals and adjust for risk by demanding a higher rate of return. The problem with bankers is not that they make forecasts that are wrong, but that they are biased.

Gaurav Mehta said...

A lot has been written regarding already ... however Bernard: There is no denying the fact the Buffet is the greatest investor of our times.... actually of all time since equity markets didn't really exist much before him...

BUT you need to understand ... there is some way that he must be investing ... and the only thing that comes close to the way he invests and the returns that he generates is Long Term Value Investing which in any case would require some guidance of cash flow generation ability in the future and then discounting it at the right rate even if it is at the risk free rate ... in case of certainity equivalent cash flows.... the only thing is that he doesnt use terms like beta, portfolio theory ect... but actually he is precisely doing that else what would explain him investing in so many different business... why does he diversify... just for fun????? though he has often said... one need not diversify if one is sure about the company one is investing him.....HE was pretty sure about investing in Wells Fargo Company (i work for this company) at $9..why didn't he put all his money there then if he was so sure....

Give the guy credit for being the best investor dont give him credit because he thinks all other methods other than his are wrong when he is in a way knowingly or unknowingly using the same methods in some form or another.

dharma said...

yes gaurav
Buffet does diversify which might be a good thing but look at his "diworsification" examples of last year- Conoco phillips when oil prices were at their peak and two irish banks that are close to failure. These investments have caused shareholders of berkshire millions of Dollars but the sage can always take refuge under the shelter of "long term investing" for his unforced errors:)

piyush said...

once Einstein said
"Unthinking respect for authority is the greatest enemy of Truth"

i feel Mr. Damodaran wants to say exactly the same thing.

mtommasi1985 said...

I think the point your missing with how Buffett forecasts. I watched an interview and he spoke about Coke. He had no idea what their sales would be in the future all he said was that he knew they would be selling more Coke in the future than they do now because they will expand their distributions in new areas and also sell more in some areas than they currently do. He didn't think they would be selling more in teh U.S.
My point is that when he bought Coke, when the market crashed in 87, he did at deep discount to what it was worth. He is concerned with Cokes competitive advantages over other cola companies and feels they have such a huge advantage they can also increase price to some extent as tehy wish. His view was if they raised prices 1 cent it would be another 10 mil a day in revenues bc they sell 1 bill sodas a day.
From thsi example I think its pretty clear how he looks at forecasting. He has no idea what the stock will be priced in teh future he only knows the business can and most likely will grow and therefore the stock will eventually follow.

Immortal said...

i decode his investment strategy into 3 factors which he time and again recites to everyone in public...

1) Circle of competence...this is his starting point of investment...understanding the business he is investing into...this factor helps him understand n mke realistic n close to accurate projections abt cashflows to get into good investments....

2)Mgmt of the company....any lay man can relate to this aspect as we all know MGMT makes or break the company n the business they are into...

3)Selling price with Margin of safety...again an important aspect of his investment..clearly comin out of grahams view...buy good business at fair price rather than buying fair business at good price...

This is wat his instinctual investment strategy tht he shares with public...His discipline to this investing approach which is unshaken till today has helped him stay awy frm mkt follies n make consistent positive returns...

I agree with Aswath that he has gained much of his success from inside deals which is not within the reach of common man...n we must not follow him blindly...but we must not forget tht he was a common man when he began his journey into investment world..

Regards,
Amar

Abhishek Kumar....IIM KOZHIKODE said...

so many have said so much.....i am just a novice trying to study capm and the portfolio theory and stuff.....Mr buffet probably has a magic potion or so i'd like to believe........but whatever his ways of investing,,,he doesn't share them,,,,,,makes a lot of comments with intended pun,,,,,,but could do more and may be write a genuine auto-bio-graphy of his exploits.........not everything may not be right with the qwantitative methods,,,,as these are jst ..say..methodical guesstimates.....but to a mere mortal its the only toool at his disposal in the financial world,,,,,who doesn't have the intellect and intution of the genius.....may b his side of his true story would help........but comments that he comes up with only shows ......he tries to show its all very easy...... and thus hides all the real stuff.....like the info he has.. and his leveraging power....may be these comments are just to tell the world...'guys i can get things done in my way... bt i shall never tell what the way is'

loneanger said...

This is what I call the Eliot syndrome. Eliot criticized Shakespeare just so that he could attract attention.

I would rather believe and follow the world's richest investor than any academic, however great his IQ may be. The point is that most folks prefer becoming rich than jugglery with complex equations.

Before you even start criticizing Buffett,you should try managing (even if it is a virtual one) an asset portfolio of Berkshire Hathaway's size and generate 20% CAGR for 5 years.

If I go alone to an island to invest,I would carry 'The Intelligent Investor' not 'Damodaran on valuation'

piyush said...

I challenge thr’s no one who cn repeat warren buffet’s performance in market condition of present times , not evn warren buffet himself. when buffet strtd markets wer very inefficient, information flow ws very thin, a lots of credit of buffet’s success goes to that inefficiency.

Read the book 'Damodaran on valuation' first before saying anything abt it. Mr. buffet is an illusionist who drives out pleasure from his influence over his followings of speculators, in search of short-cuts to success, who thinks they r actually investors.

loneanger said...

Piyush,

There is nothing to be proved or disproved here. The numbers speak for themselves. You can keep your copy of "Damodaran on valuation". Read it carefully. At least, that is one out of the competition!

You say that markets were inefficient during Buffett's time. Are you implying that it is efficient now? I can't agree with you there. Not after what we have seen happen lately. If you think that followers of Buffett are taking short-cuts,well, are you telling that the academics is the way to wealth. Forgive me, I don't see too many academicians in the list of billionaires.

As an Indian myself, I can understand where the professor's cynicism comes from. We are all so used to disbelieving everything. That doesn't make him right about Buffett. After all, it is easy to give lectures to a bunch of students than make some real money in the real world. The professor taking on a true, blue American icon (Buffett) reminds me a bit of Arundhati Roy coming to the US on invitation to abuse Americans!

loneanger said...

My question to the professor and the efficient market enthusiasts is simple. Would you let Professor Malkiel's blind-folded monkey to select stocks if it were YOUR money? And do you think the monkey will really beat Buffett over a 10 year period?

piyush said...

Dear Lone & in anger,
Whn buffett strtd, black-boards & chalks wer used to mark prices of the stock(which wud generally lag 1-2 days behind) .Considering the abv fact are you trying to make us all believe that markets today are no btr n efficient thn those tyms. If yes thn m sure u also fight for romans angst today’s physicist on thr blogs , dat this earth dnt rotate n revolve at the same tym.

I dnt know at empirical studies you undertook to find the connection betwn being Indian & being cynic.

Also, try to be respectful towards sumone who is considerd authority whn it cums to this field, & having far greater knowledge thn u evr cn imagine(a conservative valuation of his knowledge ).

Gaurav Mehta said...

I think you guys seemed to have missed the Larger point what Prof Damodaran is trying to make. Firstly let me dissect a few things what you have said:

"If I go alone to an island to invest,I would carry 'The Intelligent Investor' not 'Damodaran on valuation'". Do you know who wrote the Intelligent Investor? - Benjamin Graham,the father of value investing - he was an investor who made a lot of money and was the one who taught Buffet what and how to Invest but the primary fact is he was an academician and taught value investing at Columbia Business School. Buffets strategy of investing is based on the teachings of Benjamin Graham and thus follows an academicians approch if thats what you mean.

"The professor taking on a true, blue American icon (Buffett) reminds me a bit of Arundhati Roy coming to the US on invitation to abuse Americans!" Just because you are invited to some place you can't be critical about the place and should change your thoughts about the same.

"You say that markets were inefficient during Buffett's time. Are you implying that it is efficient now? I can't agree with you there." This is true as if markets had been efficient, there would never have been a need to value companies, everything would be correctly valued.

Finally coming to the main point of discussion, Buffet is the most influential investor ever born, there is no doubt about that, what the Prof is trying to say is don't listen to Buffet when he says stuff like i don't value companies ect.... because he says stuff just for the heck of it or for affect at times.

To give you how Buffet decides to make decisions is (1) in his 20's he read all the books that were ever required to be read on Valaution i.e. Security Analysis and Intelligent Investor. (2) He went through the 10000 odd pages of Moody's Industry information to gain knowledge about different industries and businesses and how they work. (3)After reading this book he went on to study at Cambridge University Masters in Economics just because the two great authors on Security Analysis taught there i.e. David Todd and Benjamin Graham. (4) He then joined the firm formed by Benjamin Graham and worked for the firm till it was finally closed down by Benjamin for personal reasons. (5)If you heard the recent Q &A session with Buffet and Gates at the Columbia University, when a student asked a question can you make an investment decision in 5 minutes. Buffet's answer was "Yes at times it takes me close to a minute to take a decision just by looking at the share price but that's only because it's 1 minute of decision making and 50 years of knowledge and experience." That i think makes it clear that Buffet himself believes in Valuing stuff even though he might not be using the same names as beta for risk or using Risk Premiums.

loneanger said...

Let me make a few points here:

1. Let us not make a buffet of 'Buffett'

2. Buffett went to Columbia school after he was rejected by Harvard. So it was more an act of fate than an act of choice.

3. While it is true that he has read all the books on investment in the local library, he has explicitly stated that while he found all of them interesting but none of them were particularly useful. Buffett's intellectual odyssey starts and ends with Graham, Fisher, and Munger (later on).

4. While I admire the professor for his voluminous works, as Buffett would say in this field there are no extra marks for 'degree of difficulty'. To borrow another Buffettian analogy, the professor has chosen to be a priest while I will stick with ten commandments.

loneanger said...

And oh, I missed this glaring one:

5. Buffett has not attended Cambridge University and I don't think he is likely to attend now! It is Columbia University.

It seems the market is not really efficient. Some guys shoot from the hip while others have an informational edge!

loneanger said...

"Considering the abv fact are you trying to make us all believe that markets today are no btr n efficient thn those tyms.

Somehow I find it hard to believe that markets are much better off when rating agencies still stamp "AAA" on any crap instrument. Somehow I don't believe markets are efficient when even institutional investors still fall for Madoff's ponzi scheme. But I believe I am revealing too much here, I am actually quite busy making real money! It is better to let academics pontificate on perfectly useless theories. As Buffett said, it may work in practice, it will never work in theory!

Gaurav Mehta said...

hahahaha ....well just because i made a few mistakes like spelling Buffet as Buffett and by wrongly placing cambridge which i meant Columbia... doesn't really make you right and me wrong.

I thought you'd come up with a good set of reasoning to counter my points but you are just full of words, who's just stuck up with the idea that Buffett has made a lot of money and that money is MINE ("But I believe I am revealing too much here, I am actually quite busy making real money", if that's case dude what are u doing here????:)). Also because now that money seems to be yours already, its obvious everything that Buffet (oops i missed the t) says should be taken point blank.

I think i'd rather not speak more.. not because i would be revealing a lot but for the fact that your RELEVATIONS would come live!!! Go Make Your Money...give some to us well... we are so damn short of it!!!:)

I hope you do have a sense of humor and take this in Jest for i only ended what you started!

loneanger said...

No offense taken.

The difference between Buffett and me (and the rest of us) is that Buffett is a businessman first and then an investor. I can't claim to have anywhere near the insights that Buffett has developed of businesses within his circle of competence. No amount of classroom discussion is a substitute for real business experience. Period.

Gaurav Mehta said...

I do agree with you completely on that.. and thats why he and his investment methods are a case study.

loneanger said...

"Whn buffett strtd, black-boards & chalks wer used to mark prices of the stock"

Blackboards and Chalks? Ha, ha. Buffett's biggest successes have come after the 60s. If you want to gain a perspective on how much more sophisticated than you imagine the markets were in the 60s , try reading The Money Game by Adam Smith.

loneanger said...

"My problem is that he is the Pied Piper to his flock of disciples, who take everything he says as gospel. Consequently, many of these fans of his will take what he said this weekend as license to do back-of-the-envelope assessments of companies and gut-feeling investments, and they will lose as a consequence."

Is there a better "Pied Piper" than Warren Buffett? Do you have in mind Jim Cramer,by any chance? As for ill-informed novices burning their fingers, that can't be helped at all. In the field of investing, there is always a patsy. May I point out that these hapless fellows are as likely -if not more likely- to lose by trying to follow half-baked notions of complex valuation techniques.