Efficient Market Hypothesis - Hogwash!

[2B]

I was a exceptional investor that routinely beat market averages. I was successfully doing this for well over a decade. Unfortunately, I started to actually track my performance, recording all trades, in a spreadsheet. My performace suddenly dropped. If I hadn't of done that, I'd still be beating the market averages.

[NW-Bound]

Buffet is now too big to beat the market. When he was a smaller investor, he could spot sweet deals and maneuvered quickly to capture it.

[Lsbcal]

I have observed that these debates on the Efficient Market Hypothesis are very inefficient.

[REWahoo]

Quote:

Originally Posted by Lsbcal I have observed that these debates on the Efficient Market Hypothesis are very inefficient.

And you've been able to figure out the correct time to get out, right?

[NW-Bound]

I got out in the past, then I got back in.

It's because they keep saying that you can't win if you don't play.

[Lsbcal]

Quote:

Originally Posted by REWahoo And you've been able to figure out the correct time to get out, right?

Not in real time yet.
Currently in same mode as buy-hold investors.

[NW-Bound]

I thought REW was talking about getting in/out of the "inefficient debate".

Were you, REW?

[REWahoo]

Yes!

[audreyh1]

I've lived through way too many bubbles to believe markets are efficient. You can see the herd mentality in market psychology and that doesn't seem particularly efficient. That's why I allocate across a broad set of (somewhat poorly correlated) asset classes and rebalance when any get strongly out of whack. And that actually happens pretty often (one getting particularly out of whack - just watch REITs).

If they all go up or down in unison, can't do much about it.

[NW-Bound]

Quote:

Originally Posted by audreyh1 ... If they all go up or down in unison, can't do much about it.

Then it means cash is either over or undervalued. One can balance using cash as another asset. Oui?

[audreyh1]

Quote:

Originally Posted by NW-Bound Then it means cash is either over or undervalued. One can balance using cash as another asset. Oui?

We'll, OK - cash won't change

[clifp]

Quote:

Originally Posted by 2B I haven't specifically run the numbers but I've read his recent performace is far less than spectacular. His performance is heavily based on acquisitions made decades ago that look good from that perspective but not from 5 to 10 years ago. I can't remember when/where I saw this article. I'm certainly not going to fight this point but I wanted to bring it up.

The gain in the book value of Berkshire stock has trailed the S&P 500 the last 5 years. First time that has happened. Now there are lot of reasons this has occurred, but the biggest reason was size.

If you look at all of Buffetts great deals during the crisis, Goldman Sachs, GE, BofA etc. They totaled about $30 billion and Buffett probably got an extra 2-3% more than you or I would have gotten due to the value of his name. He also got warrents which were worth a few billion (although they were pretty typical for deals like this.) So best case Buffett made an extra $100 million in interest per year for Berkshire and got a few billion dollars in excess profit. Now as shareholder paying Warren $100K CEO salary this is a hell of a bargain. However, considering Berkshire made $20 billion in profit last year alone it hardly registers.

[NW-Bound]

Quote:

Originally Posted by audreyh1 We'll, OK - cash won't change

Cash does not change, only with respect to itself.

Because we use it to measure other assets, we do not think of it being possibly over or undervalued. However, should we not think of it as an asset, like anything else such as gold, real estate, etc...? In a deflationary period, cash is an "appreciating asset" with respect to everything else, oui? It's rare, of course.