With all of the troubles surrounding the hedge funds, I was curious to see how an investor would have done over the long term if a fund was run by the greatest investor of all time, Warren E. Buffett. It’s amazing that BRK shareholders have benefitted from Buffett’s management skills without any of the management fees you would have with a hedge fund. Using the market & BRK data from BRK’s annual letter, I calculated what the return to investors would be, after fees, from 1977 to 2007. Even with the phenomenal returns that Berkshire has experienced over the past 30 years, the fees kill the alpha generated by WEB. After the annual 2/20, the market return is almost equal to BRK. The investor would have done better in the S&P 500 than with the greatest investor of all time. Remind me again why I should invest in a hedge fund.
To take on different risks than you can take on without investing in a hedge fund. Warren Buffett may be “the greatest investor of all time” (doubtful) but he is pretty limited in the kinds of securities he invest in, his approach to doing it, and his significant correlation to the S&P.
Why is WB possibly not the greatest investor of all time?
Because he just lost his a** on GS and GE.
Just kidding, he will make a boat load on these. . . eventually.
the answer to your qustion is that there is no silver bullet in investing and the best hedge is to make a good investment to begin with. but, lots of people are busy creating formulas to prove otherwise. it’s hard to argue against WEB being in the top handful when you consider the period including his partnerships and the size that Brk has grown to. i mean he’s the richest guy in the world (or near it) and he made all his money from investing. who else is close?
What is happening to GS now? I think if Warren waited he could have gotten a way better deal.
Warren has had investments on life support many times in the past. most of them wound up being home runs. a few of them he only recovered his money. that same will be true this time around.
juventurd Wrote: ------------------------------------------------------- > Why is WB possibly not the greatest investor of > all time? read ‘Fooled by Randomness’
Buffett rebutted that argument before anyone even heard of Taleb. And, i enjoy Taleb’s books which are great. http://www4.gsb.columbia.edu/null/CIER?exclusive=filemgr.download&file_id=645551&showthumb=0
See I’ve read that defense before; however, it downplays the FBR argument a bit too much. It doesn’t address the statistical imperative that given the millions of investors out there with somewhat normally distributed returns (especially relative to a becnhmark), that some have to outperform consistently and some have to underperform. It’s only natural for humans to come back through and categorize the top %ile using terms like “growth” and “value”, etc, and attribute skill to the statistical imperitive. Sure no one argues that some investors statistically beat the market, but to an extent, with the millions of guys out there, some have to beat the market consistently.
ahahah Wrote: ------------------------------------------------------- > See I’ve read that defense before; however, it > downplays the FBR argument a bit too much. It > doesn’t address the statistical imperative that > given the millions of investors out there with > somewhat normally distributed returns (especially > relative to a becnhmark), that some have to > outperform consistently and some have to > underperform. It’s only natural for humans to > come back through and categorize the top %ile > using terms like “growth” and “value”, etc, and > attribute skill to the statistical imperitive. > Sure no one argues that some investors > statistically beat the market, but to an extent, > with the millions of guys out there, some have to > beat the market consistently. “I’m a great believer in luck, and I find the harder I work the more I have of it.” - Thomas Jefferson There are millions of people out there trying to consistently be the better CEO, the better Investor, top employee, most successful, etc. and they are all working hard to get there. If you work even harder and put yourself in the right situations over and over again, learn from the mistakes and keep pressing on, you will constantly be putting yourself in these ‘lucky’ situations. Jim Collins talks about this in Good to Great. Jack Welch is known to have said “I am a Lucky Guy” and also Joseph Cullman says “I’m a Lucky Guy” and wrote a book on it. These people all worked hard to gain and earn their luck. Within these statistics of the percentage of people who are successful or constantly beat their benchmarks, there is a visible line between those who have really worked for it and call themselves ‘lucky’ and those who are the outcome of truly being ‘lucky’ and not working for any of their success (with the latter occuring very little).
For the record, I’m playing the devil’s advocate in this thread, but in response, don’t you think there’s a bias to tell the story of the lucky guys who work hard and get rich as opposed to the unlucky guys who work hard and go BK? Sure, you can find guys in the successful subset who are smart and work hard, but its not like there aren’t smart people who work hard in the unsuccessful subset.
ahahah Wrote: ------------------------------------------------------- > For the record, I’m playing the devil’s advocate > in this thread, but in response, don’t you think > there’s a bias to tell the story of the lucky guys > who work hard and get rich as opposed to the > unlucky guys who work hard and go BK? Sure, you > can find guys in the successful subset who are > smart and work hard, but its not like there aren’t > smart people who work hard in the unsuccessful > subset. haha - devil’s advocate is always good. I have a book called “Firing Back” that talks about people who have career disasters and rebound. I actually think they end up being the strongest. There are definitely a lot of smart, hard working people that go broke, but I honestly think persistence trumps all and they just need to get back on their horse and keep pushing (even if it is late in life for them).
Whoever believes in fundamental analysis will fail. Wasn’t WB the pioneers in FA ?
Someone has to be the greatest investor of all time - I wonder what criteria one would use to judge it. Annualized risk adjusted excess returns over a 15+ year period, I guess. If not Warren, then who, and why them?
Best investor of all time – Jim Cramer (kidden) I’d say it was WB, but Paulson (forgot his first name) has put up some damn good numbers over the years, almost suspiciously good.
bchadwick Wrote: ------------------------------------------------------- > Someone has to be the greatest investor of all > time I guess this is what I’m arguing against. Is this necessarily true?
John Paulson is who you are thinking of…
ahahah Wrote: ------------------------------------------------------- > bchadwick Wrote: > -------------------------------------------------- > ----- > > Someone has to be the greatest investor of all > > time > > I guess this is what I’m arguing against. Is this > necessarily true? Logically, we are either all equally good investors (unlikely) or someone (or group, if we allow ties) has to be the greatest. I think what you’re getting at is whether there are objective indicators that we can use to identify them, or whether there are too many unobserved variables that contribute, so that one can’t really tell anything. But what do you think those variables would be?