About Watheeqa Investor Digest
Some of the world's renowned investors when asked what makes them great - the unusual but common answer is "We read and think". The main goal of WID is to bring our clients the best interviews, articles, research and thought provoking material that we come across, read and thoroughly enjoy. Our collections are old, nevertheless timeless treasures while some are recent and highly recommended.
We thought; why not put these fascinating gems together each month and share the collective wisdom of what we read. WID is our contribution from that inspiring idea. We truly believe - what you read and how much of that you internalize; reflects who you are. We suggest you archive our premium collections; read them and re-read them.
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Watheeqa Investor Digest - March 2010
Buffett’s 2009 - Annual Letter to Berkshire Shareholders
Buffett writes, "We've put a lot of money to work during the chaos of the last two years. It's been an ideal period for investors: A climate of fear is their best friend. Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance."
In his letter, Buffett admits to what he calls "a very expensive business fiasco entirely of his own making." Thinking that GEICO policyholders would be good credit risks, Buffett "unfortunately" came up with the "brilliant insight" that the insurance company should market its own credit card.
Buffett writes "GEICO's managers, it should be emphasized, were never enthusiastic about my idea. They warned me that instead of getting the cream of GEICO’s customers we would get the – – well, let's call it the non-cream. I subtly indicated that I was older and wiser. I was just older."
Source: http://www.cnbc.com/id/35616702/
Was It All Just A Bad Dream? Or, Ten Lessons Not Learnt
(Note: Free registration required at http://www.gmo.com/Asia-Pacific/ to access James Montier’s White Paper – Feb 2010. We recommend you do so. You will find a treasure tome of wisdom here).
James Montier writes "Finance has turned the art of transforming the simple into the perplexing into an industry. Nowhere (at least outside of academia) is overly complex structure and elegant (but not robust) mathematics so beloved. The reason for this obsession with needless complexity is clear: it is far easier to charge higher fees for things that sound complex."
Montier adds "Two of my investing heroes were cognizant of the dangers posed by elegant mathematics. Ben Graham wrote: Mathematics is ordinarily considered as producing precise and dependable results; but in the stock market the more elaborate and abstruse the mathematics the more uncertain and speculative are the conclusions we draw there from ... Whenever calculus is brought in, or higher algebra, you could take it as a warning that the operator was trying to substitute theory for experience, and usually also to give to speculation the deceptive guise of investment."
Source: http://www.gmo.com/America/
James Montier - Value Investing – Tools and Techniques for Intelligent Investing
James Montier argues “The sheer amount of irrelevant information faced by investors is truly staggering. Today we find ourselves captives of the information age, anything you could possibly need to know seems to appear at the touch of keypad. However, rarely, if ever, do we stop and ask ourselves exactly what we need to know in order to make a good decision.
Seductive details are the kind of information that seems important, but really isn’t. Let me give you an example. Today investors are surrounded by analysts who are experts in their fields. I once worked with an IT analyst who could take a PC apart in front of you, and tell you what every little bit did, fascinating stuff to be sure, but did it help make better investment decisions, clearly not. Did the analyst know anything at all about valuing a company or a stock, I’m afraid not. Yet he was immensely popular because he provided seductive details.
Source: Simoleon Sense » Blog Archive » Miguel Barbosa Interviews James Montier – Part 1- Value Investing: Tools & Techniques For Intelligent Investing
Smart people – Dumb decisions
Michael Mauboussin writes “If you ask people to offer adjectives that they associate with good decision makers, words like "intelligent" and “smart” are generally at the top of the list. Yet, history contains plenty of examples of smart people who made poor decisions as the result of cognitive mistakes. These mistakes can have horrific consequences, from the space shuttle Columbia disaster to the scores of bank failures across the United States since the start of the 2007 recession. But faulty decision making is also avoidable. Every day, research is offering new insights into the decision- making process. A science of choice is emerging, and the good news is that everyone, from students to stockbrokers, can learn how to make better decisions.
Source: http://www.michaelmauboussin.com