-from Ben Graham’s testimony to the US Senate Committee on Banking & Currency on March,1955
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Category: Excerpts
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Imitate at your own risk
Source:Samir Arora
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What game are you playing?
You can value an asset, based upon its fundamentals (cash flows, growth and risk) or price it, based upon what others are paying for similar assets, and the two can yield different numbers.
In public investing, I have argued that this plays out in whether you choose to play the value game (invest in assets where the price < value and hope that the market corrects) or the pricing game (where you trade assets, buying at a lower price and hoping to sell at a higher).
–wrote Aswath Damodaran
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SEBI goes on alert mode
The Securities Exchange Board of India (Sebi) went on an alert on Thursday after a major crash in domestic stocks and the currency amid rising hostilities across the border.
The market regulator has sought a report from domestic stock exchanges on their preparedness to deal with any eventuality in the wake of a sharp plunge in the benchmark equity indices following Indian Army’s surgical strikes on terror bases in Pakistan-occupied Kashmir (POK).
The benchmark Sensex lost 465 points while the Nifty50 crashed 154 points in knee-jerk response to the signs of rising hostilities between the two neighbours.
The rupee weakened to a one-week low of 66.91, marking the worst fall for the domestic currency since the Brexit vote in June. The domestic currency, though, recovered a bit to settle at 66.85, down 39 paise over previous day closing of 66.46.
According to reports, the market regulator has asked the stock exchanges to draft contingency plans and submit detailed reports to it by this evening.
The India VIX shot up by 33 percentage points to 18.45, which was the biggest rise in seven years.
The 10-year bond yield jumped to a one-year high. Fresh reports suggested that villages in Punjab, 10 km from international border with Pakistan, are being evacuated.
DGMO Lt Gen Ranbir Singh on Thursday said India carried out surgical strikes in Pakistan-occupied Kashmir, inflicting heavy casualties on terrorists and those protecting them.
Following the press briefing by DGMO, the domestic equity indices plunged up to 4 per cent amid concerns that foreign investors, who have pumped in about Rs 50,000 crore into domestic stocks so far this year, may run for the exit door should the tensions rise further.
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Are you a Warren Buffett phoney?
Buffett has often said, “I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches – representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all. Under those rules, you’d really think carefully about what you did, and you’d be forced to load up on what you’d really thought about. So you’d do so much better.”
There are plenty of people out there who call themselves Buffett acolytes – and as far as I can see they are all phoneys. Every last one of them.
Find any investor who models themselves off Warren Buffett and look at what they do.
And look at their investments against a twenty punch card test.
They fail. They don’t even come close. Several big-name so-called Buffett acolytes have made more than three to five large investments in the last three years and at prices that can’t possibly meet the twenty punch card test. Most phoney Buffett acolytes have been turning stock over faster than that.
Warren Buffett’s two juniors (Todd Combs and Ted Weschler) have turned over many stocks in the past few years too – and at prices that don’t reconcile with any twenty-punch-card philosophy. They are phoneys too. Just a little less egregious than many other so-called Buffett acolytes.
Many so-called Buffett acolytes (phoneys, all of them) have imbibed that a concentrated portfolio is a good idea. And so they present as having five to twelve stock portfolios and are prepared to take 30 percent positions.
But the stocks often don’t meet the twenty punch-card test. And so these investors wind up with large positions in second rate investments. When one goes wrong it is deeply painful. When three go wrong simultaneously it is devastating.
The lesson here is easily stated: “if you are going to fill your portfolio with crap, it better be diversified crap”.
Several of my favourite phoney Buffett acolytes have been posting catastrophic losses. It was due. The phoney Buffett acolytes still here are just waiting for their turn to have catastrophic losses. –wrote John Hempton