TonyCinTX

Why You Don't Need an Informational Advantage, Just an Emotional One

As a statistician, let me say I don't know any mathematician or statistician that has worked on the market that thinks the market is efficient. For a while the idea was that it is long-term efficient but not short-term, but if the bubbles last more than five years and your averaging has to be over decades long periods, this is an empty assertion too. You can't do anything with it.

The latest (July 2009) Scientific American has a great, lengthy article on this topic. It has always been *economists* making the efficiency claim, based on their idiotic insistence on rational players and simpleton math. The same mentally retarded crowd that believes in the magical powers of free markets to set prices. For thirty years I have read study after study after study (all peer reviewed) disproving the foundational premises of economics, one after another, and still they persist in using them because presumably, that is all they have.

Hopefully, the alternative (behavioral economics) outlined in Scientific American will take root and take over, once these bozos are discredited by their failures. Or maybe not -- Economics is a non-science good at insulating itself from ugly facts.

Good article, Mr. Kenyon. One of the few I have read on this site.

On a different topic, I am long BRK-B and unconcerned by the decline. The question is whether it outperforms the **market** in the long term, I never had ANY expectation it would hold price like an island unto itself. All stocks are affected by the climate; even if their fundamentals are fine, they can be subject to selling pressure because some of the big fish incurred debts elsewhere in the market. When you are leveraged to 200% invested and there is a 25% market decline, you have to cover your margins somehow. This is just ONE of the reasons the market is not efficient. Read the Scientific American article.

Buffett Holdings Doing Okay

Yeah, when the market dropped 500 points, my BRK.B was steady as a rock (actually, went up!). I think it is undervalued right now; I don't know why. But I am holding it and may add to it, I think the current blood bath is Buffett's bread and butter, now is the time to buy good assets from desperate sellers for dimes on the dollar, and he has the money to do it. AIG may have to sell some good going concerns to raise capital for their more idiotic moves. This market should be a goldmine for Warren and Charlie.

Buying Berkshire: The Ultimate No-Brainer

I am long BRK-B, and unconcerned by the downturn. Buffett is doing now exactly what I would do if I had hundreds of millions to play with; he is buying brokerages for 20 cents on the dollar because their only option is to go bankrupt and lose everything.

Buffett (his R.E. manager Peltier, actually) has bought $200 million worth of quality brokerages. So what if earnings are down 7% for a quarter, or a year? They can drop 25% and the stock can drop by 50% and I will remain unconcerned as long as Berkshire's strategy remains sound.

I am unconcerned because recessions kill everybody's profits, and what separates the winners from the losers in 2012 is whether, in 2008, they were being forced by the recession into selling their hard-earned hard assets at 20 cents on the dollar, or buying somebody else's hard-earned hard assets AT 20 cents on the dollar. Guess which side I am on.

Buffett said from the beginning the sub-prime market was B.S. and would come to tears. Well, those tears turn out to be an opportunity, there is real value to be found in the debris of the sub-prime hurricane. It might not become apparent for years, until real estate skies are clear and sunny again, but I am glad Berkshire has all the cash, expertise, and corporate wherewithal to be first in line to cherry pick the bargains.