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Author: Technodweeb Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 211911  
Subject: Same old ring of fire.. Date: 10/3/2012 11:09 AM
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The market noise creeps in every once in a while, and threatens my Berkshire holdings. My future...

I have been listening to Gross and the Pimco soldiers, and also from time to time I will see El-Erian on CNBC.. for years. I hear about "the new normal". While they make believable and compelling arguments, and seem to be so knowledgeable about the financial markets (and no doubt they are), they have not done so well lately, as they have tried to time the markets on a macro level. I believe they missed the major bond rally as they thought rates would rise, and as well missed the equity rally. I will say, he was accurate about QE3. I believe he also went into CA muni bonds during the best time to get them, and that has done well also. But it still hasn't made their returns stellar.

Also when I was listening to Einhorn yesterday, and despite his great calls recently, he still could not manage to beat the SP500 by any significant degree if at all (I forget the exact numbers). And I hate to knock Tilson, but his last two years have been dreadful. So much for hedge funds. They are a dying breed I hear as the SP500 has steamrolled over most of them.

Even the Buffett of the North, Prem Watsa hedging the daylights out of his long equity portfolio to the point it made no sense to me, and buying big into a tech company that is living on a hope and a prayer.

And then it occurred to me like an old bell chiming off in the middle of town, always faithful, as I remember how Buffett has always been #1, and for so long. He follows Graham's examples to this day, of course with what he has picked up along the way through the years.

"Investing is most intelligent when it is most business like". Plain vanilla thinking that works (most of the time).

These are no doubt to me, the most important words I have ever heard on investing, and I am sure to many others.

And the stock is still cheap.
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Author: razorfangius Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 194616 of 211911
Subject: Re: Same old ring of fire.. Date: 10/3/2012 11:19 AM
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always faithful, as I remember how Buffett has always been #1, and for so long. He follows Graham's examples to this day

"Investing is the most intelligent when it most games the system." -- Benjamin Buffett

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Author: rationalwalk Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 194619 of 211911
Subject: Re: Same old ring of fire.. Date: 10/3/2012 1:21 PM
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In fairness to the long/short hedge funds, it is somewhat expected to trail the market in big up years with the expectation of outperforming in down years with the net effect being outperformance over a full bull/bear market cycle. They have a heavy burden to carry with the typical 2 & 20 model and most will fail to beat the index over time in my opinion but a select few have in the past and that includes Tilson, Einhorn and others. The counterpoint is why bother with the long/short hedge fund model when you can buy Berkshire, for example, at a cheap price. Or other long positions at cheap prices that are not necessarily correlated with the market. If hedge funds are going to have trouble beating the S&P 500 over the next 5 years, they will have an even harder time beating Berkshire itself. The problem is one cannot charge a 2 & 20 fee and put clients into long term passive holdings like Berkshire.

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Author: Technodweeb Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 194630 of 211911
Subject: Re: Same old ring of fire.. Date: 10/3/2012 6:21 PM
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Indeed Rational. Long positions at a cheap price is the only game I have ever been good at personally.

Some hedge fund managers I do recognize as being really good, unfortunately all by the rear view mirror. I guess it is about being in the right one at the right time. Naturally there will be those outliers that just trounce the market. Those are wonderful, if you are so lucky to have found one that works out in the future.

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Author: kahunacfa Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 197115 of 211911
Subject: Re: Same old ring of fire.. Date: 12/20/2012 1:14 AM
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Indeed Rational. Long positions at a cheap price is the only game I have ever been good at personally.

Some hedge fund managers I do recognize as being really good, unfortunately all by the rear view mirror. I guess it is about being in the right one at the right time. Naturally there will be those outliers that just trounce the market. Those are wonderful, if you are so lucky to have found one that works out in the future.
- Technodweeb | Date: 10/3/2012 6:21:43 PM | Number: 197114

The really good Hedge Fund managers who have outstanding records over long periods of time achieve those outstanding records by having superior investment processes as well as often having superior information sources and networks.

Cramer & Burkowitz was one such hedge fund that achieved annualized compound rates of return exceeding 25% over decades. Jim Rogers is another one, he wrote the book Investment Biker which describes an around the World trip on a motorcycle searching for investment ideas through Asia, South America, as well as throughout the United States.

Jim Cramer's book, Jim Cramer's Real Money, Sane Investment in an Insane World describes the investment process he used at the hedge fund Cramer & Burkowitz. -- A process that can, for the most part, actually be followed and duplicated by careful readers of his book.

The investment process used by Warren E. Buffett at Berkshire can also be copied, but only with great difficulty. First you have to either buy or start an Insurance Company with "Long Tail" lines of Insurance coupled with High Premium fees on the front-end of the Insurance cycle.

For the most part Warren E. Buffett employs the investment methodology described in Security Analysis, 1934 Edition, by Graham, Dodd, & Cottle. Buffett learned that at Columbia University. I learned it at the University of Wisconsin - Madison, and more specifically from Prof. Steven L. Hawk, Ph.D. and through this investment course: http://www.UWASAP.org in the nineteen seventies.

Kahuna, CFA
Investment Professional
1974 - Present

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