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#61
11-19-2007, 06:41 PM
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Re: Improving On Buffett And Desert Cat
"Edit: And let me make it clear that I don't ignore the market price. I have to understand why something is so cheap and why I disagree with the market, just to be sure I've allowed for all known risks. If something is just mysteriously cheap, that's a red flag that I don't understand it properly. But I don't adjust my value estimates for it."
Yes you do. Your comment is an oxymoron. Unless your definition of "value" is something other than "the price where you have no edge whether you buy it or short it". Meanwhile in spite of the hard time I have been giving you, and in spite of the fact that you are way more experienced and successful in the stock market than I am, would you be so kind as to tell this fellow Stephen that his posts are way off base. 
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#62
11-19-2007, 07:16 PM
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Re: Improving On Buffett And Desert Cat
[ QUOTE ]
[ QUOTE ] [ QUOTE ] ...What he's saying essentially is that the market price is a pretty good unbiased estimator of future prices. .... [/ QUOTE ] No he's saying that the current market price is at least a decent indication of the current, true value. Perhaps I"m being a nit, perhaps you meant future earnings. [/ QUOTE ] No I meant future prices - value is dependent upon the discounting mechanism (and the holder, to a lesser extent), so there's no such thing as the single current true value, other than the current price. ..... [/ QUOTE ] Well I guess we're talking about the same thing. What you're indicating is a rate of return that's acceptable to the investor and in order to acheive that rate of return the threshold price that offers at least that return currently. The true value of a stock is the present value of future earnings more or less.
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#63
11-19-2007, 08:25 PM
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Re: Improving On Buffett And Desert Cat
[ QUOTE ]
[ QUOTE ] FWIW I think David is really saying that if you disagree with the current valuation by a wide margin, you should be highly suspicious of the valuation you've arrived at. It's much more likely the market is right. [/ QUOTE ] If he had said that in the first place there would only be three posts in this entire thread. [img]/images/graemlins/smile.gif[/img] Jimbo [/ QUOTE ] Thank You Jimbo [img]/images/graemlins/smile.gif[/img] And David....you are right.....and this "Stephen fellow" gives up
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#64
11-20-2007, 04:39 AM
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Re: Improving On Buffett And Desert Cat
[ QUOTE ]
I will try to rephrase things differently. If there are stocks where my theory isn't true and my technique is unnecessary, then it is also unnecesary to have anywhere near the 50% cushion you require, when investing in these stocks, as long as you have any sort of reasonable value assigning skills. The above is pure logic. You don't even need to know what a stock IS for it to be true. [/ QUOTE ] Unnecessary for what? Unnecessary for who's goals, yours or his? You don't make your argument correct by invoking magical phrases like, "Amen", "Right on", or "It's pure logic". Let's suppose that, as you say, your theory is not true and your technique is unnecessary. Why does this imply that DC's strategy of only buying bargains at 50% discount to Instrinsic Value is by "pure logic" now obviously too conservative? You use the phrase 50% "cushion". "Cushion" is not the idea. The idea is to do research to find the best bargains possible without insisting on such rare super bargains that you can't find them often enough to put your money to work adequately. You have to decide on some cutoff point which you think is optimal. DessertCat has settled on buying bargains at a 50% discount. There's no reason why supposing your theory is untrue should imply a change in the optimality of that cutoff point. If buying at 40% discounts to DC's evaluation of intrinsic value amounts to pulling the cash trigger too fast and missing out on the adequately plentiful 50% discounts that a little more patience and research will uncover then supposing your theory to be untrue does not change that fact. Your Pure Logic is Pure Baloney in this case. PairTheBoard
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#65
11-20-2007, 09:47 AM
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Re: Improving On Buffett And Desert Cat
[ QUOTE ]
All this of course is related to my Fundamental Theorem Of Investing. Don't invest unless you can explain why people are taking the other side. [/ QUOTE ] So in order to be long the stock market, I have to be able to explain why people are short the stock market? WTF
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#66
11-20-2007, 10:02 AM
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Re: Improving On Buffett And Desert Cat
[ QUOTE ]
[ QUOTE ] [ QUOTE ] FWIW I think David is really saying that if you disagree with the current valuation by a wide margin, you should be highly suspicious of the valuation you've arrived at. It's much more likely the market is right. [/ QUOTE ] If he had said that in the first place there would only be three posts in this entire thread. [img]/images/graemlins/smile.gif[/img] Jimbo [/ QUOTE ] Thank You Jimbo [img]/images/graemlins/smile.gif[/img] And David....you are right.....and this "Stephen fellow" gives up [/ QUOTE ] David likes to challenge the status quo and use logical analysis to do so. I'm fairly certain that David wants some of his ideas challenged here to see if people can shoot them down IMO.
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#67
11-20-2007, 10:04 AM
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Re: Improving On Buffett And Desert Cat
[ QUOTE ]
[ QUOTE ] All this of course is related to my Fundamental Theorem Of Investing. Don't invest unless you can explain why people are taking the other side. [/ QUOTE ] So in order to be long the stock market, I have to be able to explain why people are short the stock market? WTF [/ QUOTE ] That's a good question.
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#68
11-20-2007, 10:28 AM
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Re: Improving On Buffett And Desert Cat
[ QUOTE ]
[ QUOTE ] [ QUOTE ] All this of course is related to my Fundamental Theorem Of Investing. Don't invest unless you can explain why people are taking the other side. [/ QUOTE ] So in order to be long the stock market, I have to be able to explain why people are short the stock market? WTF [/ QUOTE ] That's a good question. [/ QUOTE ] Try reading the thread.
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#69
11-20-2007, 10:33 AM
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Re: Improving On Buffett And Desert Cat
[ QUOTE ]
[ QUOTE ] I will try to rephrase things differently. If there are stocks where my theory isn't true and my technique is unnecessary, then it is also unnecesary to have anywhere near the 50% cushion you require, when investing in these stocks, as long as you have any sort of reasonable value assigning skills. The above is pure logic. You don't even need to know what a stock IS for it to be true. [/ QUOTE ] Unnecessary for what? Unnecessary for who's goals, yours or his? You don't make your argument correct by invoking magical phrases like, "Amen", "Right on", or "It's pure logic". Let's suppose that, as you say, your theory is not true and your technique is unnecessary. Why does this imply that DC's strategy of only buying bargains at 50% discount to Instrinsic Value is by "pure logic" now obviously too conservative? You use the phrase 50% "cushion". "Cushion" is not the idea. The idea is to do research to find the best bargains possible without insisting on such rare super bargains that you can't find them often enough to put your money to work adequately. You have to decide on some cutoff point which you think is optimal. DessertCat has settled on buying bargains at a 50% discount. There's no reason why supposing your theory is untrue should imply a change in the optimality of that cutoff point. If buying at 40% discounts to DC's evaluation of intrinsic value amounts to pulling the cash trigger too fast and missing out on the adequately plentiful 50% discounts that a little more patience and research will uncover then supposing your theory to be untrue does not change that fact. Your Pure Logic is Pure Baloney in this case. PairTheBoard [/ QUOTE ] PTB, The 50% number isn't an arbitrary number set by DC that is meant to say, "I want a minimum 50% return on my investments." I believe it is a cushion that is used to protect himself from variance. What DS is trying to say is that there needn't be such a large cushion if you can more accurately determine which of the investments is more likely to do well, which his "accounting for the other side of the market" is meant to do. The misleading thing about the title of this thread is the fact I can guarantee there's zero chance that successful FAs take this into account at least somewhat.
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#70
11-20-2007, 11:31 AM
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Re: Improving On Buffett And Desert Cat
[ QUOTE ]
[ QUOTE ] [ QUOTE ] [ QUOTE ] All this of course is related to my Fundamental Theorem Of Investing. Don't invest unless you can explain why people are taking the other side. [/ QUOTE ] So in order to be long the stock market, I have to be able to explain why people are short the stock market? WTF [/ QUOTE ] That's a good question. [/ QUOTE ] Try reading the thread. [/ QUOTE ] If this was covered in the thread, I missed it, but I'm guessing Sklansky meant to provide some caveat, such as "in order to beat the market..." Since stocks drift up, investing in index funds is a good move for someone who can handle the volatility. You shouldn't need to explain why someone might be short the market in order to be long..
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