Nassim Taleb: Soros versus Buffett

If given a choice between investing with Buffett and billionaire investor George Soros, Taleb also said he would probably pick the latter.

 “I am not saying Buffett isn’t as good as Soros,” he said. “I am saying that the probability Soros’s returns come from randomness is much smaller because he did almost everything: he bought currencies, he sold currencies, he did arbitrages. He made a lot more decisions. Buffett followed a strategy to buy companies that had a certain earnings profile, and it worked for him. There is a lot more luck involved in this strategy.”


 I have high respect for your intelligence and thinking, and I believe that “Fooled by Randomness” and “The Black Swan” are must-read books for everyone. However, I believe your observation on Warren Buffett is wrong.

 You justified your pick on Soros because you have observed his thousands if not millions of trades; therefore, giving you comfort that he is making decisions and his success, to quote what you said, is “2 million times more statistically evidence that his results are not by chance than Buffett does”.

 You are implying that Soros is making thousands more decisions that Buffett. It seems to me that your understanding of Buffett is superficial, leading to your flawed conclusion.

 During a meeting with MBA students from the University of Georgia in early 2007, Buffett told the group of students that “There were four Moody’s manuals at the time. I went through them all, page by page, over 10,000 pages twice. On page 1433, I found Western Insurance Securities. Its earnings per share were as follows: 1949 – $21.66, 1950 – $29.09. In 1951, the low-high share price was $3 – $13. Ten pages later, on page 1443, I found National American Fire Insurance….”

 Again, in 2004, Buffett searched through the entire Korean stock market by reading Citigroup Investment Guide to Korean Stocks (that is over 1,700 companies). In 4 hours he found 20 companies that he liked and put $100 million to work.

 These two examples illustrated that Buffett did make thousands of decisions of not to invest. Those who study Buffett intensely know that he works extreme hard and study all companies available from A to Z, leaving no stone unturned. Deciding not to buy is just as important as deciding to buy. However, inactivity is commonly misunderstood for not making any decision.

 To quote Albert Einstein, “Not everything that counts can be counted, and not everything that can be counted, counts.”

Have Lunch with Warren Buffett for $25,000

An eBay auction is currently running this week, which is offering the winning bidder lunch with famed billionaire and investor Warren Buffett, one of the top three wealthiest people in the world.

All proceeds of the auction will be donated to the Glide Foundation in San Francisco, which provides help for the homeless and poor.

The current bid on the auction is $25,000, and if no one else bids, it wall be a bargain, as last year, the Canadian firm Salida Capital Corp. paid $1,680,300 for the lunch, and two yours ago, Zhao Danyang paid $2,110,100. The auction ends Jun 11, 2010 at 7:30 pm PDT or 10:30 Eastern time.

Top 10 list from billionaires as to be successful

1. Figure out what you’re so passionate about that you’d be happy doing it for 10 years, even if you never made any money from it. That’s what you should be doing.
2. Always be true to yourself.
3. Figure out what your values are and live by them, in business and in life.
4. Rather than focus on work-life separation, focus on work-life integration.
5. Don’t network. Focus on building real relationships and friendships where the relationship itself is its own reward, instead of trying to get something out of the relationship to benefit your business or yourself.
6. Remember to maximize for happiness, not money or status.
7. Get ready for rejection.
8. Success unshared is failure. Give back — share your wealth.
10. Successful people do all the things unsuccessful people don’t want to do.

What would you add to the “Billionaire’s Secrets” List?

A profile of natural gas trader John Arnold -Must read

John Arnold

You could hear John Arnold trying to choose his words carefully. Seated at a conference table inside a drab government building in Washington, D.C., in August, Arnold hardly fit the stereotype of a swaggering, 35-year-old billionaire natural-gas trader.

He wrung his hands as he waited to speak and twisted his wedding band. He filled, and refilled, and re-refilled his water glass. Then he stuttered a bit before he gained momentum and politely advocated rules that would restrict others while allowing him to keep doing what he does.

It was a rare public appearance for one of the least-known billionaires in the U.S. But the stakes were high. Arnold was testifying at a hearing of the Commodity Futures Trading Commission (CFTC).

Click to read complete article

Julian Robertson: Obama Is Doing A Terrible Job

Former star hedge fund manager and billionaire Julian Robertson thinks that President Obama is doing a terrible job. Robertson said:

“I’ve made a pretty good living over the years by never hiring anyone that wasn’t a lot smarter than I am. So when I go in a room, I know I’m not the smartest person in the room, not even approaching it. Now Obama, from all I read, thinks that on every occasion that he is the smartest person in the room. And I think he often probably is, but you can’t run the biggest business in the world having never run even a country store. And he’s running into that and he’s just doing an awful job and people see it. He’s enough of a politician to see it – although he’s so cocky maybe he doesn’t see it”

Great Reply from Warren Buffett

This week is the annual shareholder meeting for Berkshire Hathaway, the gigantic conglomerate run by billionaire Warren Buffett.

 Buffett has a way of explaining complicated finance topics so that they’re fun and understandable.

Carleton English of Belus Capital Advisors points us to this gem of a quote from 2008 where he takes a jab at private equity.

Someone had asked the Oracle of Omaha why people sell their companies to him instead of private equity firms.  This is the type of question that you might hear later this week.  Here’s Buffett’s response:

“You can sell it to Berkshire, and we’ll put it in the Metropolitan Museum; it’ll have a wing all by itself; it’ll be there forever. Or you can sell it to some porn shop operator, and he’ll take the painting and he’ll make the boobs a little bigger and he’ll stick it up in the window, and some other guy will come along in a raincoat, and he’ll buy it.” (more…)

Tip from a billionaire: going to the bathroom wastes too much time

Michael Bloomberg has handed out some tips on his formula for success:

  • You make your own luck
  • The harder you work, the luckier you get
  • Try to be the first one in in the morning and the last one to leave at night
  • Take the fewest vacations
  • Take the least time away from the desk to go to the bathroom or have lunch

Warren Buffett on Chocolate and Candy

The following video of Berkshire Hathaway’s (BRK-A) Warren Buffett, gives great insight into how he thinks before making an investment, how he created value added for the company, and increased sales substantially. No wonder why he is a billionaire and top trader and investor.

In the video, he discusses his purchase of See’s Candies, which operates over 200 retail shops in the western United States. You will also see Buffett’s sense of humor. If you have never had See’s Candies, you need to try some at your first opportunity. You will love the peanut brittle, my favorite.


If you think there are investment opportunities with other candy companies, here are a couple worth looking at.

Hershey (HSY), founded in 1894, is the largest manufacturer of chocolate in North America and one of the largest chocolate and candy companies in the world. Hershey’s Kisses were invented in 1901 and their chocolate chips were introduced in 1928. The stock has a P/E of 22, a forward PE of 17, with a flavorful yield of 2.8%. It sports a PEG ratio of 2.39.

Tootsie Roll Industries Inc. (TR) is known for its ever famous Tootsie Rolls. It also produces Apple Pops, Charms, Sugar Daddy, Sugar Babies, and Tootsie Roll Pops. The stock has a P/E and forward PE of 26 and sports a yield of 1.3%.

Parsons’ Rules

Bob Parsons is the founder of GoDaddy is the domain name site with those obnoxious Superbowl ads — and the company that made Parsons a billionaire.
(I guess when you’re a billionaire you can get away with an awful looking earring.)
Many years ago, I came across “Parsons’ Rules” — a list of 16 rules for success in business and life. They struck me as pretty damn good.
I was reminded of Parsons’ Rules while tinkering with another project this weekend, and realized they also apply to trading.
So here they are (original list here):
1. Get and stay out of your comfort zone. I believe that not much happens of any significance when we’re in our comfort zone. I hear people say, “But I’m concerned about security.” My response to that is simple: “Security is for cadavers.”
2. Never give up. Almost nothing works the first time it’s attempted. Just because what you’re doing does not seem to be working, doesn’t mean it won’t work. It just means that it might not work the way you’re doing it. If it was easy, everyone would be doing it, and you wouldn’t have an opportunity.
3. When you’re ready to quit, you’re closer than you think. There’s an old Chinese saying that I just love, and I believe it is so true. It goes like this: “The temptation to quit will be greatest just before you are about to succeed.”
4. With regard to whatever worries you, not only accept the worst thing that could happen, but make it a point to quantify what the worst thing could be. Very seldom will the worst consequence be anywhere near as bad as a cloud of “undefined consequences.” My father would tell me early on, when I was struggling and losing my shirt trying to get Parsons Technology going, “Well, Robert, if it doesn’t work, they can’t eat you.”
5. Focus on what you want to have happen. Remember that old saying, “As you think, so shall you be.”
6. Take things a day at a time. No matter how difficult your situation is, you can get through it if you don’t look too far into the future, and focus on the present moment. You can get through anything one day at a time.
7. Always be moving forward. Never stop investing. Never stop improving. Never stop doing something new. The moment you stop improving your organization, it starts to die. Make it your goal to be better each and every day, in some small way. Remember the Japanese concept of Kaizen. Small daily improvements eventually result in huge advantages. (more…)

Soros Says "Crisis Far From Over, We Have Just Entered Act 2"

The bearish case has just gotten another notable supporter in the face of George Soros, who during his remarks at a conference in Vienna, said that the “we have only just entered Act II” of the global financial crisis.

Bloomberg reports:

Billionaire investor George Soros said “we have just entered Act II” of the crisis as Europe’s fiscal woes worsen.

“The collapse of the financial system as we know it is real, and the crisis is far from over,” Soros said today at a conference in Vienna. “Indeed, we have just entered Act II of the drama.”

Concern that Europe’s sovereign-debt crisis may spread sent the euro to a four-year low against the dollar on June 7 and has wiped out more than $4 trillion from global stock markets this year. Europe’s debt-ridden nations have to raise almost 2 trillion euros ($2.4 trillion) within the next three years to refinance maturing bonds and fund deficits, according to Bank of America Corp.

“When the financial markets started losing confidence in the credibility of sovereign debt, Greece and the euro have taken center stage, but the effects are liable to be felt worldwide,” Soros said.

One wonders if Soros, who made a name for himself originally in the currency markets, is involved in the current record FX volatility. Of course, with animosity toward “speculators” at unprecedented levels, it probably would not be very prudent of anyone to disclose they are now taking on Central Banks directly.

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