Mimicking Buffett's Picks

Below is a link to a paper by Gerald S. Martin and John Puthenpurackal about mimicking Berkshire Hathaway's stock picks (and exits), whenever they become publicly known.

BTW, the decisions could have been made by either Warren Buffett, Charles Munger, or Lou Simpson.

Imitation is the Sincerest Form of Flattery: Warren Buffett and Berkshire Hathaway

Actually they seem to show that this would result in an out performance of over 14 % of the S&P.

Buffett's Statement on Taxes

Buffett prepared an eloquent statement about taxes for a hearing in Washington DC.

From CNBC: VIDEO AND TRANSCRIPT: Warren Buffett's Statement to Congress on Estate Taxes

Berkshire Hathaway's Portfolio

Yesterday came out SEC form 13F-HR of Warren Buffett's Berkshire Hathaway, which lists all its public company stock holdings at the end of the third quarter 2007.

The total was USD 65.8 billion. In comparison, Berkshire Hathaway has today a market capitalisation of around USD 213 billion.

Have a look at the list (13F-HR form) for yourself.

Woman Quants

Woman in the quants field by Leah McGrath Goodmann: Women in Trading 2007 : Women on the Edge

You need an account first, but it is a longer article, has some names and gives an idea what is going on in the world of developing trading algorithms.

“Of the 7,000 quants we have in our global database, only about 3 percent are women,” says Dominic Connor, director of Paul & Dominic Quantitative Recruitment in London.

The STOCK BLOCK

Renamed the Clemens Investment Blog to The STOCK BLOCK. Please note also the URL change to http://stockblock.info/.

Gannon On Investing

Another blog for the watchlist: Gannon On Investing

The Big Picture

Have a look at this blog The Big Picture. On occasion, the comments might be interesting as well.

E*Trade Volatility

E*Trade bounced back +41%.

Bloomberg: E*Trade Bankruptcy Is `Highly Unlikely,' BMO Says (Update4)

Van K. Tharp

Van K. Tharp is a psychologist specialized in coaching traders.

A very good book is:
Trade Your Way to Financial Freedom

From No Requirements to Be Happy: Part II:

A critical difference between good traders and the average trader is that good traders thrive on simplicity and not knowing. They come from being and simply go with the flow of the markets. If the markets tell them it's time to go up, then they buy. They might be wrong 60% of the time, but that is part of the game. They'll get out when the markets are no longer going up. They do this by simply observing what is happening, and are much more joyful because they are going with the flow. They allow themselves to let their profits run, because it's okay to be in the market when it is going up. They also allow themselves to get out, because it's okay to get out when the markets start to do something else.

What I've just described is pure trading. Its essence is simple. It doesn't require a lot of time. Instead, it gives you lots of time to play. It also involves seeing all possibilities and being in the flow of what is happening right now. You cannot do this if you are preoccupied with being right, doing hard work, or having money or profits. You can only do this when your mind is pure and you can be at one with what is going on around you.

E*Trade -58 %

Another one bytes the dust... today 2007-11-12 E*Trade is down 58 % after announcing writedowns on asset backed securities. They have an investmen of around USD 3 billion in ABS. You wonder what an online broker has on its balance sheet.

Update on Bloomberg: E*Trade Shares Fall; Analyst Says Bankruptcy Possible (Update4)

Here is the wording from E*Trade itself.

Banking Blood Bath

Very interesting albeit scary article about what is on the balance sheets of the big investment banks.

Nouriel Roubini's Blog: The bloodbath in credit and financial markets will continue and sharply worsen (2007-11-05)

It also points to this FT article (from 2007-11-04) predicting more write downs at Merrill Lynch, Citigroup, and UBS: What’s the subprime damage to banks?

The first article also looks into how many structured product assets are valued on an internal model valuation method, also named 'Level 3' (level 1 means you just take market prices, level 2 means you base your valuation on other prices of similar asset classes - level 3 basically means you make up your own prices).

Look at the info Citigroup just filed with the SEC today: they have $135 BILLION in LEVEL 3 ASSETS.

I have a neat idea.

Why don't we take every single major financial institution out there and then divide their total Level 3 assets by their equity capital base and make comparisons?

This will give us a better idea as to which of them may really remain solvent at the end of the day. Shall we?

Let's have a look at Citigroup. Their equity base is $128 billion. Therefore, their Level 3 assets to equity ratio: 105%

How about Goldman Sachs? Level 3 assets are $72 billion, equity base is $39 billion. Their Level 3 assets to equity ratio is 185%.

Morgan Stanley: $88 billion in Level 3, equity base is $35 billion. Ratio: 251% (WOW!)


Bear Stearns: $20 billion in Level 3, equity base is $13 billion. Ratio: 154%

Lehman Brothers: $35 billion in Level 3, $22 billion in equity. Ratio: 159%

Merrill Lynch: $16 billion in Level 3, $42 billion in equity. Ratio: 38%

Here is the Level 3 assets to equity ratio summary:

Citigroup 105%

Goldman Sachs 185%

Morgan Stanley 251%

Bear Stearns 154%

Lehman Brothers 159%

Merrill Lynch 38%

This becomes very interesting now, doesn't it?

Looks to me like Goldman Sachs and Morgan Stanley are by far in the WORST situation among the investment banks.

And yet the media is focusing all of their attention on Merrill Lynch---which actually has by far THE LEAST EXPOSURE of all of them.

BTW, UBS reported in third quarter 2007 CHF 23.4 billion in 'level 3' assets. This in addition to another CHF 21.6 billion in MBS and CDO assets. UBS has equity (without Goodwill) of CHF 33 billion.

IFRS

Here is an online version of IFRS as far as it has been adopted by the EU.

The individual standards are ordered historically by their adoption, so you might have to scroll down a bit...


Amazon (Germany) has a book version with both English and German text next to each other.


In case you wonder what IFRS is, here is the Wikipedia article.

Victor Niederhoffer

Blowing Up by Malcom Gladwell.

The Blow-Up Artist by John Cassidy.