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Education, LINKS
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  • That’s enough ‘kicking ass’, Mr President: Barack Obama’s attacks on BP may play well at home, but they are damaging millions of British people (London Times)
  • Banks with state debt ignore not-if-but-when default (Bloomberg)
  • As reported, Caja Madrid, Bancaja start moves to form Spain top savings bank, as BBVA says Spain may need €50 billion of capital to infuse into insolvent banks (Bloomberg)
  • BP weighs cutting dividend (WSJ)
  • Kerviel co-worker says SocGen should have known about trades (Bloomberg)
  • Waiting for inflation? It’s already here (Minyanville)
  • Enough with the economic recovery. It’s time to pay up (WaPo)
  • Irked CDO investors now targetting Merrill (WSJ)
  • Lehman emails that say “stupid” didn’t stay “just between us” (Bloomberg)
  • US firms holding record piles of cash underscoring worries about sustainability of financial recovery (WSJ)
  • Hungary PM says to issue second economic action plan in H2 (Reuters)
  • The bearish forecasters who rose to fame in the market crash of 2008 have, for the most part, not surrendered their pessimism. Their moment could be coming back around (BusinessWeek)
  • Risk/reward from current levels (Green Faucet)
  • The beginning of the end for Wall Street (RCM)
  • Daily humor from disgraced car czar Steve Rattner at the only venue desperate enough for clicks to still have him: How Wall Street stokes populist fury (MSN)

Links worth reading

  
  Education
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  • The secrets of the Afghan war released (WSJ)
  • BP set to announce Hayward departure (FT)
  • Must read: The death of paper money (Telegraph)
  • European Banking’s Next Focus Is Funding (WSJ)
  • U.K. Growth Forecast Cut on Budget Curbs, Ernst & Young to Say (BusinessWeek)
  • Taleb: Government Deficits Could Be the Next ‘Black Swan’ (BusinessWeek)
  • Deficits Don’t Matter as Geithner Growth Gets Lowest Yield (Bloomberg)
  • When will the US go the way of Rome (RCM)

    • Nassim Taleb: Soros versus Buffett

      
    Analysis, Education
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    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.”

     [From: http://www.businessweek.com/news/2010-09-25/obama-s-stimulus-plan-made-crisis-worse-taleb-says.html]

     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.”

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