Monday, October 26, 2015


Nassim Taleb on the success of Munger-Buffett (LINK)
So I figured out something about the success of Munger-Buffett. It is not in the strategies they run, but in their very, very, very strong filtering.  
Simply it is generalized flaneuring. Charlie Munger: "We have no system for estimating the correct value of all businesses. We put almost all in the "too hard" pile and sift through a few easy ones". "Warren (Buffett) talks about these discounted cash flows. I've never seen him do one".
Related previous posts to the above: 1) Filters; and 2) Memortation, or One Way to Put What You Learn to Practical Use

And Peter Bevelin also shared some wisdom in this regard in my interviews with him:
I found that I could increase my chance of making better judgments if I could learn what works and not, if I adapt what I do to my personal situation, and if I could establish some values and preferences. If I then could set up some avoid-rules and filters/tests to judge what make sense or is important or not, life could be improved (even if I still do some mistakes; but hopefully I am less of a fool now). Also remember that all decisions aren’t important. Some people spend more time making a judgment on what TV to buy or where to go on vacation than a life-changing decision like marriage. 
Generally, keep it simple and use some filters. Some questions I ask myself: Is it important? If yes, is it knowable? If yes, is this within my circle of competence? Which of course assumes that I know what I know and can do, and what I don’t know and can’t do. Otherwise I exclude and throw it in to too hard pile. If within, then, any testable argument should be tested – What is the evidence? Can I disprove it? Compared to what (including negative cases and non-events)? Randomness content? If I believe this, what would follow? What would I have to check out? What ideas can help me?
A Dozen Things Learned from Charlie Munger about Ethics (LINK)

Great investor videos from the team at BeyondProxy [H/T csinvesting] (LINK)

The Best Value Traps (LINK)

Valeant Case Study in Progress (LINK)

Hussman Weekly Market Comment: How Market Cycles Are Completed (LINK)
Even in periods where interest rates have been quite depressed, not a single market cycle in history failed to end with estimated prospective 10-year S&P 500 returns close to 10% annually, if not dramatically higher. Based on the most historically reliable valuation measures, the S&P 500 would have to lose literally half of its value for prospective returns to rise to that level. A 50% market loss isn’t a worst-case scenario. Given current valuations, it’s the standard, run-of-the-mill outcome that investors should expect over the completion of this cycle. 
The measures we find most strongly correlated with actual subsequent S&P 500 total returns now project zero total returns for the S&P 500 on a 10-year horizon, and about 1% annual nominal total returns for the index on a 12-year horizon.
Paul Graham: Write Like You Talk (LINK)

Laszlo Bock on Charlie Rose discussing his book, Work Rules! (video) (LINK)

Neil deGrasse Tyson talks to the WSJ [H/T Will] (video) (LINK)

9 Learnings from 9 Years of Brain Pickings (LINK)