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sâmbătă, 4 octombrie 2014
Investment sayings - XI
About simplicity
"We have a passion for keeping things simple." -Charles Munger
"The art of being wise is the art of knowing what to overlook." -William James
"Part of that [having uncommon sense], I think, is being able to tune out folly, as distinguished from recognizing wisdom. You've got whole categories of things you just bat away so your brain isn't cluttered with them. That way, you're better able to pick up a few sensible things to do." -Charles Munger
"Yeah, we don't consider many stupid things. I mean, we get rid of 'em fast...Just getting rid of the nonsense -- just figuring out that if people call you and say, 'I've got this great, wonderful idea', you don't spend 10 minutes once you know in the first sentence that it isn't a great, wonderful idea...Don't be polite and go through the whole process." -Warren Buffett
"The harder you work, the more confidence you get. But you may be working hard on something that is false." -Charles Munger
“Simplicity means the achievement of maximum effect with minimum means.” -Koichi Kawana
“Order and simplification are the first steps toward the mastery of a subject.” -Thomas Mann
“A theory is the more impressive the greater the simplicity of its premises, the more different kinds of things it relates, and the more extended its area of applicability.” -Albert Einstein
“To avoid the various foolish opinions to which mankind are prone, no superhuman genius is required. A few simple rules will keep you, not from all error, but from silly error.” -Bertrand Russell
“There is a master key to success with which no man can fail. Its name is simplicity. Simplicity, I mean, in the sense of reducing to the simplest possible terms every problem that besets us. Whenever I have met a business proposition which, after taking thought, I could not reduce to simplicity, I have left it alone.” -Henri Deterding
“The ability to simplify means to eliminate the unnecessary so that the necessary may speak.” -Hans Hofmann
“There never was a sounder logical maxim of scientific procedure than Ockham’s razor: Entia non sunt multiplicanda praeter necessitatem. That is to say; before you try a complicated hypothesis, you should make quite sure that no simplification of it will explain the facts equally well.” -Charles Sanders Peirce
Charles Sanders Peirce (September 10, 1839 – April 19, 1914) was an American philosopher, logician, mathematician, and scientist, sometimes known as "the father of pragmatism". He was educated as a chemist and employed as a scientist for 30 years. Today he is appreciated largely for his contributions to logic, mathematics, philosophy, scientific methodology, and semiotics, and for his founding of pragmatism.
Koichi Kawana ( born March 16, 1930 in Hokkaido – 1990) native garden designer, college professor, and architect. He has designed gardens in San Diego, Los Angeles, Denver, Colorado, Chicago, Illinois, Memphis, Tennessee, and St. Louis, Missouri. Some of his major works include the Seiwa-en Japanese Garden in the Missouri Botanical Garden and the Japanese Friendship Garden in San Diego's Balboa Park.
Paul Thomas Mann (6 June 1875 – 12 August 1955) was a German novelist, short story writer, social critic, philanthropist, essayist, and the 1929 Nobel Prize in Literature laureate. His highly symbolic and ironic epic novels and novellas are noted for their insight into the psychology of the artist and the intellectual. His analysis and critique of the European and German soul used modernized German and Biblical stories, as well as the ideas of Goethe, Nietzsche and Schopenhauer. Mann was a member of the Hanseatic Mann family and portrayed his family and class in the novel Buddenbrooks.
Warren Edward Buffett (born August 30, 1930) is an American business magnate, investor and philanthropist. He was the most successful investor of the 20th century. Buffett is the chairman, CEO and largest shareholder of Berkshire Hathaway, and consistently ranked among the world's wealthiest people. He was ranked as the world's wealthiest person in 2008 and as the third wealthiest in 2011. In 2012 Time named Buffett one of the world's most influential people.
Charles Thomas Munger (born January 1, 1924) is an American business magnate, lawyer, investor, and philanthropist. He is Vice-Chairman of Berkshire Hathaway Corporation, the diversified investment corporation chaired by Warren Buffett; in this capacity, Buffett describes Munger as "my partner." Munger served as chairman of Wesco Financial Corporation from 1984 through 2011 (Wesco was approximately 80%-owned by Berkshire-Hathaway during that time). He is also the chairman of the Daily Journal Corporation, based in Los Angeles, California, US, and a director of Costco Wholesale Corporation.
"We have a passion for keeping things simple." -Charles Munger
"The art of being wise is the art of knowing what to overlook." -William James
"Part of that [having uncommon sense], I think, is being able to tune out folly, as distinguished from recognizing wisdom. You've got whole categories of things you just bat away so your brain isn't cluttered with them. That way, you're better able to pick up a few sensible things to do." -Charles Munger
"Yeah, we don't consider many stupid things. I mean, we get rid of 'em fast...Just getting rid of the nonsense -- just figuring out that if people call you and say, 'I've got this great, wonderful idea', you don't spend 10 minutes once you know in the first sentence that it isn't a great, wonderful idea...Don't be polite and go through the whole process." -Warren Buffett
"The harder you work, the more confidence you get. But you may be working hard on something that is false." -Charles Munger
“Simplicity means the achievement of maximum effect with minimum means.” -Koichi Kawana
“Order and simplification are the first steps toward the mastery of a subject.” -Thomas Mann
“A theory is the more impressive the greater the simplicity of its premises, the more different kinds of things it relates, and the more extended its area of applicability.” -Albert Einstein
“To avoid the various foolish opinions to which mankind are prone, no superhuman genius is required. A few simple rules will keep you, not from all error, but from silly error.” -Bertrand Russell
“There is a master key to success with which no man can fail. Its name is simplicity. Simplicity, I mean, in the sense of reducing to the simplest possible terms every problem that besets us. Whenever I have met a business proposition which, after taking thought, I could not reduce to simplicity, I have left it alone.” -Henri Deterding
“The ability to simplify means to eliminate the unnecessary so that the necessary may speak.” -Hans Hofmann
“There never was a sounder logical maxim of scientific procedure than Ockham’s razor: Entia non sunt multiplicanda praeter necessitatem. That is to say; before you try a complicated hypothesis, you should make quite sure that no simplification of it will explain the facts equally well.” -Charles Sanders Peirce
Charles Sanders Peirce (September 10, 1839 – April 19, 1914) was an American philosopher, logician, mathematician, and scientist, sometimes known as "the father of pragmatism". He was educated as a chemist and employed as a scientist for 30 years. Today he is appreciated largely for his contributions to logic, mathematics, philosophy, scientific methodology, and semiotics, and for his founding of pragmatism.
Koichi Kawana ( born March 16, 1930 in Hokkaido – 1990) native garden designer, college professor, and architect. He has designed gardens in San Diego, Los Angeles, Denver, Colorado, Chicago, Illinois, Memphis, Tennessee, and St. Louis, Missouri. Some of his major works include the Seiwa-en Japanese Garden in the Missouri Botanical Garden and the Japanese Friendship Garden in San Diego's Balboa Park.
Paul Thomas Mann (6 June 1875 – 12 August 1955) was a German novelist, short story writer, social critic, philanthropist, essayist, and the 1929 Nobel Prize in Literature laureate. His highly symbolic and ironic epic novels and novellas are noted for their insight into the psychology of the artist and the intellectual. His analysis and critique of the European and German soul used modernized German and Biblical stories, as well as the ideas of Goethe, Nietzsche and Schopenhauer. Mann was a member of the Hanseatic Mann family and portrayed his family and class in the novel Buddenbrooks.
Warren Edward Buffett (born August 30, 1930) is an American business magnate, investor and philanthropist. He was the most successful investor of the 20th century. Buffett is the chairman, CEO and largest shareholder of Berkshire Hathaway, and consistently ranked among the world's wealthiest people. He was ranked as the world's wealthiest person in 2008 and as the third wealthiest in 2011. In 2012 Time named Buffett one of the world's most influential people.
Charles Thomas Munger (born January 1, 1924) is an American business magnate, lawyer, investor, and philanthropist. He is Vice-Chairman of Berkshire Hathaway Corporation, the diversified investment corporation chaired by Warren Buffett; in this capacity, Buffett describes Munger as "my partner." Munger served as chairman of Wesco Financial Corporation from 1984 through 2011 (Wesco was approximately 80%-owned by Berkshire-Hathaway during that time). He is also the chairman of the Daily Journal Corporation, based in Los Angeles, California, US, and a director of Costco Wholesale Corporation.
vineri, 3 octombrie 2014
Investment sayings - X
About risk
“The risk of an investment is described by both the probability and the potential amount of loss. The risk of an investment—the probability of an adverse outcome—is partly inherent in its very nature. A dollar spent on biotechnology research is a riskier investment than a dollar used to purchase utility equipment. The former has both a greater probability of loss and a greater percentage of the investment at stake.
In the financial markets, however, the connection between a marketable security and the underlying business is not as clear-cut. For investors in a marketable security the gain or loss associated with the various outcomes is not totally inherent in the underlying business; it also depends on the price paid, which is established by the marketplace. The view that risk is dependent on both the nature of investments and on their market price is very different from that described by beta.
While security analysts attempt to determine with precision the risk and return of investments, events alone accomplish that. For most investments the amount of profit earned can be known only after maturity or sale. Only for the safest of investments is return knowable at the time of purchase: a one-year 6 percent T-bill returns 6 percent at the end of one year. For riskier investments the outcome must be known before the return can be calculated. If you buy one hundred shares of Chrysler Corporation, for example, your return depends almost entirely on the price at which it is trading when you sell. Only then can the return be calculated.
Unlike return, however, risk is no more quantifiable at the end of an investment that it was at its beginning. Risk simply cannot be described by a single number. Intuitively we understand that risk varies from investment to investment: a government bond is not as risky as the stock of a high-technology company. But investments do not provide information about their risks the way food packages provide nutritional data.
Rather, risk is a perception in each investor’s mind that results from analysis of the probability and amount of potential loss from an investment. If an exploratory oil well proves to be a dry hole, it is called risky. If a bond defaults or a stock plunges in price, they are called risky. But if the well is a gusher, the bond matures on schedule, and the stock rallies strongly, can we say they weren’t risky when the investment after it is concluded than was known when it was made.
There are only a few things investors can do to counteract risk: diversify adequately, hedge when appropriate, and invest with a margin of safety. It is a precisely because we do not and cannot know all the risks of an investment that we strive to invest at a discount. The bargain element helps to provide a cushion for when things go wrong.” -Seth Klarman
“While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology.” -Seth Klarman
“Risk means more things can happen than will happen.” -Elroy Dimson
"We have two kinds of forecasters, those who don't know and those who don't know they don't know." -John Kenneth Galbraith
"It is frightening to think that you might not know something, but more frightening to think that by and large the world is run by people who have faith that they know exactly what is going on." -Amos Tversky
"It ain't what you don't know that gets you into trouble. It what you know for certain that just ain't true." -Mark Twain
“There is a great difference between knowing and understanding: you can know a lot about something and not really understand it.” –Charles F. Kettering
"I have no use whatsoever for projections or forecasts. They create an illusion of apparent precision. The more meticulous they are, the more concerned you should be. We never look at projections, but we care very much about, and look very deeply at, track records. If a company has a lousy track record, but a very bright future, we will miss the opportunity..." -Warren Buffett
"[Projections] are put together by people who have an interest in a particular outcome, have a subconscious bias, and its apparent precision makes it fallacious. They remind me of Mark Twain's saying, 'A mine is a hole in the ground owned by a liar.' Projections in America are often a lie, although not an intentional one, but the worst kind because the forecaster often believes them himself." -Charlie Munger
Seth Klarman (born 1957) is an American billionaire who founded the Baupost Group, a Boston-based private investment partnership, and the author of a book on value investing titled Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor.
Amos Nathan Tversky (Hebrew, March 16, 1937 – June 2, 1996) was a cognitive and mathematical psychologist, a student of cognitive science, a collaborator of Daniel Kahneman, and a figure in the discovery of systematic human cognitive bias and handling of risk. Much of his early work concerned the foundations of measurement. He was co-author of a three-volume treatise, Foundations of Measurement (recently reprinted). His early work with Kahneman focused on the psychology of prediction and probability judgment. Amos Tversky and Daniel Kahneman worked together to develop prospect theory, which aims to explain irrational human economic choices and is considered one of the seminal works of behavioral economics. Six years after Tversky's death, Kahneman received the 2002 Nobel Prize in Economics for the work he did in collaboration with Amos Tversky. (The prize is not awarded posthumously.) Kahneman told The New York Times in an interview soon after receiving the honor: "I feel it is a joint prize. We were twinned for more than a decade."
joi, 2 octombrie 2014
Investment sayings - IX
Warren Buffett :
"We rarely use much debt and, when we do, we attempt to structure it on a long-term fixed rate basis. We will reject interesting opportunities rather than over-leverage our balance sheet. This conservatism has penalized our results but it is the only behavior that leaves us comfortable, considering our fiduciary obligations to policyholders, depositors, lenders and the many equity holders who have committed unusually large portions of their net worth to our care."
"In the end, alchemy, whether it is metallurgical or financial, fails. A base business can not be transformed into a golden business by tricks of accounting or capital structure. The man claiming to be a financial alchemist may become rich. But gullible investors rather than business achievements will usually be the source of his wealth.”
"You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing. I’ve never borrowed a significant amount of money in my life. Never. Never will. I’ve got no interest in it. The other reason is I never thought I would be way happier when I had 2X instead of X. You ought to have a good time all the time as you go along.”
And:
"We rarely use much debt and, when we do, we attempt to structure it on a long-term fixed rate basis. We will reject interesting opportunities rather than over-leverage our balance sheet. This conservatism has penalized our results but it is the only behavior that leaves us comfortable, considering our fiduciary obligations to policyholders, depositors, lenders and the many equity holders who have committed unusually large portions of their net worth to our care."
"In the end, alchemy, whether it is metallurgical or financial, fails. A base business can not be transformed into a golden business by tricks of accounting or capital structure. The man claiming to be a financial alchemist may become rich. But gullible investors rather than business achievements will usually be the source of his wealth.”
"You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing. I’ve never borrowed a significant amount of money in my life. Never. Never will. I’ve got no interest in it. The other reason is I never thought I would be way happier when I had 2X instead of X. You ought to have a good time all the time as you go along.”
And:
"The financial calculus that Charlie and I employ would never permit our trading a good night's sleep for a shot at a few extra percentage points of return. I've never believed in risking what my friends and family have and need in order to pursue what they don't have and don't need."
Warren Edward Buffett (born August 30, 1930) is an American business magnate, investor and philanthropist. He was the most successful investor of the 20th century. Buffett is the chairman, CEO and largest shareholder of Berkshire Hathaway, and consistently ranked among the world's wealthiest people. He was ranked as the world's wealthiest person in 2008 and as the third wealthiest in 2011. In 2012 Time named Buffett one of the world's most influential people.
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