Some Thoughts On Investing From Various Authors

“Games are won by players who focus on the playing field –- not by those whose eyes are glued to the scoreboard.”

Warren Buffett

“It amazes me how people are often more willing to act based on little or no data than to use data that is a challenge to assemble.”

Robert J. Shiller

“If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.”

Warren Buffett

“The broker said the stock was “poised to move.” Silly me, I thought he meant up.”

Randy Thurman

“You can get in way more trouble with a good idea than a bad idea, because you forget that the good idea has limits.”

Ben Graham

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Some Thoughts On Various Subjects From Warren Buffett

“Success in investing doesn’t correlate with I.Q. Once you are above the level of 25; once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”

Warren Buffett

“Honesty is a very expensive gift, Don’t expect it from cheap people.”

Warren Buffett

“In investing, just as in baseball, to put runs on the scoreboard, one must watch the playing field, not the scoreboard.”

Warren Buffett

“Never give up searching for the job that you’re passionate about. Try to find the job you’d have if you were independently rich. Forget about the pay. When you’re associating with the people that you love, doing what you love, it doesn’t get any better than that.”

Warren Buffett

“Risk comes from not knowing what you’re doing.”

Warren Buffett

Currently Reading: Floating City By Sudhir Venkatesh

I started this book over the weekend and an only up to page 36 but so far it is very compelling in which the author gets himself in some compromising situations in his pursuit of the study of the urban poor and their uses of available resources to move themselves to a more comfortable lifestyle using rationalization in my opinion to the maximum. I will write more on this book later but thus far I have found it very enjoyable from the standpoint of the author really opening up and sharing his feelings as well as the sociological aspects of the relationships he has with his subjects.

Currently Reading February 25, 2013

Image representing New York Times as depicted ...

Image via CrunchBase

These articles from The New York Times I thought you might find of interest:

“How Mexico Got Back In The Game,”     Thomas Friedman     Link Here

Interesting facts and quotes from the article:

“Mexico has signed 44 free trade agreements more than any other country in the world, and according to The Financial Times is more than twice as many as China and four times more than Brazil.”

“The population of Mexico under the age of 29 is 50% of the total.”

“The U.S.A. does over $1.5 billion a day in trade with Mexico and we spend $1 billion a day in Afgahanistan.”

“Overcoming Obstacles to Better Healthcare,”     Richard H. Thaler     Link Here

Interesting Quote From The Article:

“Over the past five years, malpractice insurance companies have paid out to patients only 37% of the premiums they collect, according to the National Association of Insurance Commissioners, about 40% of that money goes to lawyers, meaning that patients end up with less than a quarter of the dollars that doctors and hospitals pay for insurance.”

 

Currently Reading January 23, 2013 Part Two

Michael Mauboussin

Michael Mauboussin (Photo credit: hukuzatuna)

Currently Reading: “Interview with Michael Mauboussin: Harnessing The Power of Intuition, ”  2009, Pages;1-20   Author: Miguel Barbosa

I have just gotten into this and will comment on it later in the week. Anything that Michael Mauboussin says, I pay attention.

Also reading: Spillover:Animal Infections and The Next Human Pandemic by David Quammen Link

Even though I have gotten to only page 70 this is an extremely enjoyable book and I have not gotten bogged down. I knew practically nothing about zoonosis, viruses and other related diseases, but I have found this truly fascinating. I recommend this book highly!!!

 

More On Decision Making Part One

Back on September 21, 2012  we had our initial post on some principles of decision making from Robert Rubin and his Harvard Commencement Address from 2001. This was found in the book More Than You Know: Finding Financial Wisdom in Unconventional Places by Michael J. Mauboussin Link

There are four principles here and we will explore the first two:

(1) The only certainty is that there is no certainty.

The psychological mental model of overconfidence brings out the suggestion that people are too confident in their abilities and prediction. We need to remember that right around the corner is a situation that will upset our applecart and the plans that we have made as well as our forecasting into the future.

(2) Decisions are a matter of weighing probabilities.

From Mauboussin’s book: “We’ll take the liberty of extending Rubin’s point to balancing the probability of an outcome (frequency) with outcome’s payoff (magnitude). Probabilities alone are insufficient when payoffs are skewed.”

Another psychological mental model to consider is loss aversion. Studies have shown that when a person has a loss that it has two and a half times the impact of a gain of the same size.

Daniel Kahneman

Daniel Kahneman (Photo credit: Wikipedia)

 

Nassim Nicholas Taleb Part 3

English: This is a photograph from the assortm...

English: This is a photograph from the assortment of freely available pictures at Nassim Nicholas Taleb’s web site. (Photo credit: Wikipedia)

From The Wall Street Journal:

Principle 2:   Favor businesses that benefit from their own mistakes, not those whose mistakes percolate into the system.

There are fragile businesses as well as antifragile businesses. Antifragile businesses include the airline industry as well as the food industry. A fragile business would be the financial industry.

Taleb does a great job at differentiating these. When a plane tragedy occurs, the tragedy leads to examining and correcting the problem. The same thing happens with the restaurant business, where the quality is assessed each time it is eaten. The failure rate of restaurants makes each restaurant stay on their toes to make them stronger. Failure in these industries make the remaining players stronger, which is similar to evolution in the natural world.

A fragile industry such as the banking system allows errors to grow and become ever threatening. Taleb comes up with this starting point which would be to reduce the amount of debt and leverage in the economy and turn to equity financing instead. Debt tends to make failures spread throughout the system as compared to equity financing which allows firms to survive the ups and downs of income swings. An excellent example of this is the technology bubble of 2000 in which the failure of technology firms because they were relying on equity financing instead of debt did not spread throughout the entire economy.