The Tao of Charlie Munger - David Clark

• He decided that each day he would devote one hour of his time at the office to work on his own real estate projects (90/60/1 rule)
• I succeeded because I have a long attention span
• I think that, every tiem you see the word EBITDA, you should substitute the word “bullshit earnings.” … Charlie considers interest, depreciation, and taxes to be very real expenses that have to be paid.
• If you want accurate numbers from financial companies, youre in the wrong world
• Derivates hide risks
• never set aside any reserves to cover its losses
• risk exposure
• Charlies lessno here is that a combination of supersmart people and large amounts of leverage often ends in disaster.
• The economic reality of the hedge fund business model makes it madness for hedge funds to do anything but leverage up and throw the dice.
• “All of humanitys problems stem from mans inability to sit quietly in a room alone.
• Waiting, for most investors, is no tan easy thing to do.\
• Applies to mutual and hedge fund managers, hey are driven to produce quarterly results.
• When Charlie and Warren say that they intend to hold an investment forever, they mean forever
• View a stock as an ownership of the business and judge the staying quality of the business in terms of its competitive advantage.
• it it has a durable competitive aadvantage, he will keep an eye on it in the hope that at some future date it will be selling at a bargain price or even a fair price.
• Companies that have manufactured the same product or provided the same service for fifty or more years.
• Its the strong swimmers who drown
• Strong swimmers are the ones who swim way out and potentially get themselves in trouble. Weaker swimmers stay close to shore, where it is safe.
• How do we know when the stock market is too high? When the financial press starts writing articles about how Charlie and Warren have lost their Midas touch.
• Thats contrary to human nature, just to sit there all day long doing nothing, waiting. … For an ordinarz person, can you imagine just sitting for five years doing nothing? You dont feel active, you dont feel useful, so you do something stupid.
• Greedy bankers: Mortgage lending became a dirty way to make money. You take people that cant handle credit and try to make very high returns by abusing and encouraging their stupidity - thats not the way I want to make money in banking. You should try to make money by selling people things that are good for the customer. … In the old days banks kept home mortgages on their own books, so they were very careful whom they loaned money to. But then the business model changed and banks started selling the mortgages they wrote to other companies. It no longer mattered whom they loaned money to, because they were oing to sell off the mortgage as soon as they wrote it.
• I dont think anyone should buy a bank if they dont have a feel for the bankers. Banking is a business that is a very dangerous place for an investor. Without deep insight, stay away
• As Warren says, if you get into a card game and you cant figure out who is the patsy, you are the patsy.
• Inflation is the friend of people who own assets. Inflation is also he enemy of the people who own cash or bonds.
• It wasnt greed that drove our grandparents to work so hard, it was the fear that they wouldnt be able to pay the rent and their family would go gunfray. Today that fear is gone. It has been replaced with a sense of entitlement that demands that health care be free, that a college education be free, that freee food and housing be provided if one is out of work.
• I do not think you can ttrust tbankers to control themselves. They are like heroin addicts.
• Bankers can destroy themselves and an entire nations economz. Bankers are entrusted with an enormous amount of other peoples money and should be conservative in investing it.
• About trading with derivatives> Its like having thousands of professional poker players. What damn good are they doing for anybody?
• A carry trade is the borrowing of large amounts of money at one rate and using it to buy an asset that earns a higher rate of return.
• all of Berkshires business have in common> Keep costs low.\
• Berkshire itself> Doesnt have a public relations or investor services department and for many years the annual report was printed on the cheapest paper possible and had no expensive color photos.
• A great business at a fair price is superior to a fair business at a great price.
• the product was the same year after year. The business required very little in capital expenditures, so it was possible to take money out of it every year to invest in other businesses.
• From Carl von Clausewitz: No war plan outlasts the first encounter with the enemy.
• Strategz of decentralization frees Berkshires subsidiary managers - the people with the best knowledge - to adapt their businesses to the economic environment as they see fit, without being meddled with by a less knowledgeable home office. It also allows Charlie and Warren to avoid the financial costs and inefficiencies of running a large corporate bureaucracy.
• Spend each day trying to be a little wiser. One inch at a time, day by day.
• He implemented a self/educatin regime for one hour a day
• The compounding effect of knowledge
• The best way to get a good spouse is to deserve a good spouse.
• Extreme specialization is the way to succeed.
• Its specialists who make the big bucks - everyone else, the little bucks
• Just keep thinking and reading, and you will be all right
• That is all there is to the investment game
• you think a lot, and you read a lot
• Overspending can make us miserable.
• Oh, its just so useful dealing with people you can trust and getting all the others the hell out of your life.
• In my whole life, I have known no wise people who didnt read all the time - none, zero. Youd be amazed att how much Warren reads - and how much I read. My children laugh at me. They think Im a book with a couple legs sticking out.
• Thats what manhood is, taking life as it falls. Not whining all the time annd trying to fix it by whining.
• I dont think its terribly constructive to spend your time worrying about things you cant fix
• I constantly see people rise in life who are nott tthe smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a litlle wiser than they were when they got up, and boy, does that help, particularly when you have a long run ahead of you.
• compounding our intellect.
• Thomas Edison:”I failed my way to success.”

Fooled by Randomness - Nassim Taleb

• It is as simple as that: Past events will always look less random than they were (it is called the hindsight bias) I would listen to somehone's discussion of his own past realizing that much of what he was saying was just backfit explanations concocted ex post by his delutet mind.
• Probability is not a mere cmoputation of odds on the dice or more complicated variants; it is the acceptance of the lack of certainty in our knowledge and the development of methods for dealing with our ignorance. Outside of textbooks and casinos, probability almost never presents itself as a mathematical problem or a brain teaser.
• I spend all my career attacking the quantitative use of propability
• Let me make it clear here: Of course chance favors the prepared! Hard work, showing up on time, wearing a clean (preferably white) shirt, using deodorant, and some such conventional things contribute to success - they are certainly necessary but may be insufficient as they do not cause success. The same applies to the conventional values of persistence, doggedness and perseverance: necessary, very necessary. One needs to go out and buy a lottery ticket in order to win. Does it mean that the work involved in the trip to the store caused the winning? Of course skills count, but they do count less in highly random environments than they do in dentistry.
• That all millionaires were persistent, hardworking people does not make persistent hard workers become millionaires: Plenty of unsuccessful entrepreneurs were persistent, hardworking people.
• Clearly risk taking is necessary for large success - but it is also neccessary for failure. Had the author done the same study on bankrupt citizens he would certainly have found a predilection for risk taking.
• It is a mistake to use, as journalists and some economists do, statistics without logic, but the reverse does not hold: It is not a mistake to use logic without statistics.
• Most journalists do not take things too seriously: After all, this business of journalism is about pure entertainment, not a search for truth, aprticularly when it comes to radio and television.
• Regrettably, some people play the game too seriously, they are paid to read too much into things. All my life I have suffered the conflict between my love of literature and poetry and my profound allergy to most teachers of literature and "critics". Te French thinker and poet Paul Valery was surprised to listen to a commentary of his poem that found meanings that had until then escaped him (of course, it was pointed out to him that these were intended by his subconscious)
• Probability theory is a young arrival in mathematics; probability applied to practice is almost nonexistent as a discipline.
• Needless to say that the ideas of this book fall sqwuarely into the Tragic category: We are faulty and there is no need to bother trying to correct our flaws. We are so defective and so mismatched to our environment that we can just work around these flaws.
• Work ethics draw people to focus on noise rather than the signal
• He is extremely rich on the average of lives he could have led - he takes so little risk. [...] He protects himself from the rare event. [...] Arguably, in expectation, a dentist is considerably richter than the rock musician who is driven in a pink Rolls Royce [...] For one cannot consider a professino without taking into account the average of the people who enter it, not the sample of those who have succeeded in it.
• An event that has already taken place has 100% probability, i.e. certainty
• When you look at the past, the past always be deterministic, since only single observation took place. [...] While we know that history flows forward, it is difficult to realize that we envision it backward.[...] Those, who are very good at predicting the past will think of themselvey as good at predicting the future.
• If there is anything better than noise in the mass of "urgent" news pounding us, it would be like a needle in a haystack. People do not realize that the media is paid to get your attention. For a journalist, silence rarely surpasses any word.
• It takes a huge investment in introspection to learn that the thirty or more hours spend "studying" the news last month neither had any predictive ability during your activities of that month, neither had any predictive ability during your activities of that month nor did it impact your current knowledge of the world.
• Over one year we observe roughly 0.7 parts noise for every one part performance. Over one month 2,32 for 1, one hour 30 to 1, one second 1796 to 1. [...] I deal with it by having no access to information. [...] If an event is important enough, it will fnid its way to my ears. [...] Why I prefer not to read the newspaper.
• Finally, this explains why people who look too closely at randonmness burn out, their emotions drained by the series of pangs they experience. [...] negative effect for an average loss (then mostly by noise) to be up to 2.5 the magnitude of a positive one (also here from noise))
• Let us remember that economists are evaluated on how intelligent they sound, not on a scientific measure of their knowledge of reality.
• Investors and businesses are not paif in probabilities, they are paid in dollars. Accordingly, it is not how likely an event is to happen that matters, it is how much is made when it happens that should be the consideration.
• The best description of my lifelong business in the market is "skewed bets", that is, I try to benefit from rare events that do not tend to repeat themselves frequently, but, accordingly, present a large payoff when they occur. I try to make money infrequently, as infrequently as possible, simply because I believe that rare events are not fairly valued, and that the rarer the event, the more undervalued it will be in price. In addition to my own empiricism, I think that the counterintuitive aspect of the trade (and the fact that our emotional wiring does not accomodate it) gives me some form of advantage.
• The agent would prefer the number of losses to be low and the number of gains to be high, rather than optimizing the total performance.
• No amount of observations of white swans can allow the inference that all swans are white, but the observation of a single black swan is sufficient to refute that conclusion.
• There is a severe aspect of naive empiricism. I can use data to disprove a proposition, never to prove one. I can use history to refute a conjecture, never to affirm it.
• The Astologist can always find a reason to fit the past event, by saying that Mars was probably in line but not too much so.
• In other words those that have failed do not show up in the sample. (...) By living on Park Avenue, one does not have exposure to the losers, one only sees the winners.
• The social treadmill effect: You get rich, move to rich neighborhoods, then become poor again. To that add the psychological treadmill effect, you get used to wealth and revert to a set point of satisfaction. This problem of some people never really getting to feel satisfied by wealth.
• Real randomness does not look random
• You may study for a year and learn nothing, then, unless you are disheartened by the empty results and give up, something will come to you in a flash. (...) Those who go the extra mile are rewarded.(...) Most people give up before the reward.
• Better to be loved by a dozen than liked by the hundreds.
• Recall that the accomplishment from which I derive the most pride is my weaning myself from television and the news media.
•  The so-called attribution bias. You attribute your successes to skills, but your failures to randomness.
• The findings that 80 to 90% of people think that they are above the average in many things.
• How to behave:
• Dress at your best
• Leave a good impression
• Try not to blame others for your fate
• Never exhibit any self-pity
• Do not complain
• The only article Lady Fortuna has no control over is your behavior

Investing

Antizyklisch

Etf on greece

Based on spon article that gdp growth isnt in line with stock return. Highest performance when you invest at times with strong decline. At the moment greece, croatia. Based on a ubs study.

Open question: when to sell? Exit?

http://www.spiegel.de/wirtschaft/unternehmen/schwellenlaender-boersen-panik-macht-sich-breit-a-907108.html