Talking Stocks 2.0

[904VT]

Originally Posted by BraveBold

Buffett has generated superior -risk-adjusted- returns over very long periods of time. Sure, he has longevity and a good starting point (wealthy family as an enabler) but so do countless others.

As for his stock picking advice, it makes good sense. Michael Jordan might recommend a different general approach to playing the point guard position vs. the approach he took… and there is nothing inconsistent with doing one thing and advising another, when you are exceptional. In fact, it is excellent advice.

Definitely understand the point you’re making about expertise/experience. Though I’d argue there isn’t anything overly complicated about value investing or growth at a reasonable price/GARP. Buffet’s own philosophy was largely influenced by Benjamin Graham. Regardless of the decade I think Graham’s core tenants hold true and would benefit the majority of investors greater than highly volatile beta focused on buy high sell low capitalization weight.

[BraveBold]

Originally Posted by 904VT

Definitely understand the point you’re making about expertise/experience. Though I’d argue there isn’t anything overly complicated about value investing or growth at a reasonable price/GARP. Buffet’s own philosophy was largely influenced by Benjamin Graham. Regardless of the decade I think Graham’s core tenants hold true and would benefit the majority of investors greater than highly volatile beta focused on buy high sell low capitalization weight.

Agreed. But his approach evolved over time and, also, his own legend and prudence (resources) compounded his advantages.

He could change market sentiment around a stock or even industry merely by investing in a company. This doesn’t change the long-term thesis directly, but it may indirectly (access and cost of capital) and is definitely a catalyst to unlock value. His success then compounds. He can calm markets and act as a lead investor in times of distress. His resource breadth and ability to make quick, centralized decisions allows him to negotiate favorable terms as a lead rescue investor.

He has virtually peerless wealth and influence. He isn’t like Musk (in countless ways), who cannot unlock the vast, vast majority of his paper wealth (any attempt would easily lead to his wealth declining by 50%-80%+). He has credibility that isn’t matched by oligarchs or family funds. Gates is the closest to being similarly situated - and they happen to be close friends…

You cannot disentangle that reputation or influence from the last 30-40 years of Buffett’s success but I still think the skill element is what generates the majority of his excess returns.

[eanzenberg]

Originally Posted by SDGT3

Undoubtedly you are correct insofar as how he made start, but I would argue that the way he made his money is really through compounding over the very very long life he has enjoyed. Most of his wealth came after the age of 65.

Slight comment: Buffett made most of his money on 1 stock: Apple. It did occur much later in his life, and in fact he didn't initiate the investment (one of his managers, Ted Weschler did) and Buffett was notoriously anti-tech investment throughout his life. Regardless, Buffett through Berkshire acquired ~$36B of Apple which grew to ~$156B. This is his most profitable trade by far, but I also believe he generated more $ in this 1 stock than his prior 5-decades at Berkshire and before in the family office he ran.

Regarding Buffett's investing advice, I agree. 99% of people should not be picking individual stocks to invest in unless they 1) really very truly enjoy reading shareholder reports, documentation, 10-k's and other news items in their free time and/or 2) have intimate highly technical knowledge or inside information the instruments they want to bet on (ie, a medical researcher knowing bio-medical company research) and enjoy knowing the business landscape and/or 3) have unique and challenging methods to price securities, a la RenTech. Hopefully the person who chooses to bet on individual stocks has 1 or more than these if they want to consistently beat the market over multiple decades.

Warren Buffett and Charlie Munger are the 1% of investors. Those people are out there, but are pretty rare to find and converse with. It's much easier to tell who is not serious about investing theory than who is. Just my 2c.

[BroncoOne]

Originally Posted by 904VT

It’s kind of odd imo that Buffet made his wealth by doing the opposite of the advice he gave in the quote. Buffet has been a stock picker for years and invested in value and/or growth at a reasonable price. At least if were to recommend something like the equal weight SP500 it would take the cap weight influence out which conflicts with investing philosophies of buying low selling high. The idea of a tax-efficient and passive fund was originally for cheap exposure. But what they have evolved to and the cult like following has really been detrimental to markets with increased systemic risk. Poor companies receive capital influx by being part of the index alone. So while we can argue the cheap exposure and tax efficiency may be beneficial for the individual investor, if you dive deeper it has harmed the markets. I’d argue a simple cap weight buy high sell low is never better for any investor. Once you crowd out active management it becomes self fulfilling that they lag broad index. Because if stocks no longer trade in fundamentals they are only trading beta, fulfilling exactly what they argue.

Buffet and Munger often say that their investment decisions are most often to not make any investment most times.

Munger said in Poor Charlie’s Almanack that nearly all of their cash was generated by 10 investments, and could have been even fewer, absent some blunders which they were intentional on cutting losses with.

They certainly have been stock pickers, and extremely selective ones. Most simply don’t have that same discipline and rigorous analysis, let alone the time or resources to run their models. And, when they bet, they bet big when they thought that they had some statistical advantage.

[SDGT3]

Originally Posted by eanzenberg

Slight comment: Buffett made most of his money on 1 stock: Apple. It did occur much later in his life, and in fact he didn't initiate the investment (one of his managers, Ted Weschler did) and Buffett was notoriously anti-tech investment throughout his life. Regardless, Buffett through Berkshire acquired ~$36B of Apple which grew to ~$156B. This is his most profitable trade by far, but I also believe he generated more $ in this 1 stock than his prior 5-decades at Berkshire and before in the family office he ran.

Regarding Buffett's investing advice, I agree. 99% of people should not be picking individual stocks to invest in unless they 1) really very truly enjoy reading shareholder reports, documentation, 10-k's and other news items in their free time and/or 2) have intimate highly technical knowledge or inside information the instruments they want to bet on (ie, a medical researcher knowing bio-medical company research) and enjoy knowing the business landscape and/or 3) have unique and challenging methods to price securities, a la RenTech. Hopefully the person who chooses to bet on individual stocks has 1 or more than these if they want to consistently beat the market over multiple decades.

Warren Buffett and Charlie Munger are the 1% of investors. Those people are out there, but are pretty rare to find and converse with. It's much easier to tell who is not serious about investing theory than who is. Just my 2c.

On a nominal value, yes, Apple has been very good to Buffett/BRK, but they only started investing in Apple in 2016. Obviously Buffett and BRK were highly successful decades prior to that investment, Apple just compounded their wealth.

I've read several books about Buffett and Munger and there were a couple things that definitely stood out. The first was, as someone eluded to before, was that most of their success was down to just a handful of choices/investments. They hit a lot of singles, struck out a few times and only hit a few homeruns. Those homers, for lack of a better term, is what sets them apart and they don't come very often. Interestingly enough, this can be virtually applied to many successful businesses or people where a few good decisions paint a different picture of their success as compared to the perception that they always hit home runs.

The second was a mindset Munger changed in Buffett where Buffett was always looking for an exception price on a good company. Munger changed his perspective to look to buy exceptional companies at fair prices. Going back to Apple, it was at ~$95 per share in 2016 and a cash cow, something that Buffett loves, free cash flow. Since that time it's split 4 to 1 with quarterly stock buybacks and the rest is history.

[Krash]

If you watch enough YouTube videos about Buffet, you notice how he sometimes contradicts himself over time. This isn’t a bad thing. It just proves that his investment/business philosophy evolves over time.


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[BroncoOne]

Originally Posted by Krash

If you watch enough YouTube videos about Buffet, you notice how he sometimes contradicts himself over time. This isn’t a bad thing. It just proves that his investment/business philosophy evolves over time.


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Absolutely. The investment inApple is a great example of this.

Buffet and Munger repeatedly said that they didn’t invest in tech because they felt that they were at a knowledge disadvantage to other investors. That chanegd with Apple. They got the knowledge in house and then applied their same cognitive models to that

Buffet even talks about some of the psychology models that they use when describing the almost fanatical demand for an iPhone and what it would take to get a consumer to switch out from Apple. They compare it to how different and much easier it is to get someone to switch from, say, a Ford to a Chevy.

They still use the same models to weigh the investments, just adapted to the world as it evolved

[INC]

Originally Posted by BroncoOne

Buffet and Munger repeatedly said that they didn’t invest in tech because they felt that they were at a knowledge disadvantage to other investors.

I'm not that familiar with Buffet's activities, but if I remember correctly, he didn't mention tech companies before, but airlines. Later he changed his mind, and regret his decision very shortly after.

IMHO, when he could say that, it might have been before the tech bubble, and the term applied to companies that only had "visions" but no products. In contrast, Apple is an old company with robust fundamentals, production and huge profits. From this point of view, I believe that investing in Apple did not mean changing their investment policy, but strengthening it.

[eanzenberg]

I highlighted Apple above as an example. Here's another: Buffett's first large tech purchase was IBM in 2011. The bet size was ~$11B. He got rid of it in 2018 for an 18% loss. In that time span, while the IBM investment fell 18%, the S&P500 grew 120%. In fact, he could've bought any other tech stock (AMZN, FB, AAPL, GOOG, NFLX, etc.) and done insanely better in that time period.

I took a look since 2011: BRK has done about as well as the S&P500 and has underperformed the Nasdaq by ~40%. Is this mostly because of age, since Buffett was already 80 in the start of 2011? Or is due to his aversion of tech in general? Or maybe it's because what gave him such an edge in the from the 50's to 90's worked in those eras of investing. The notion of "cigar butt investing", or buying when book value exceeds current price, works great in the depression-era times when Graham was at his peak. Those opportunities don't exist, and Buffett surpassed Graham fairly early on with his own strategies. I credit Charlie Munger a LOT with "guiding" Buffett to appreciate "wonderful companies at fair prices" as opposed to "fair companies at wonderful prices". Investing is an ever-evolving field and the work required to "keep current" doesn't end.

Originally Posted by BroncoOne

Absolutely. The investment inApple is a great example of this.

Buffet and Munger repeatedly said that they didn’t invest in tech because they felt that they were at a knowledge disadvantage to other investors. That chanegd with Apple. They got the knowledge in house and then applied their same cognitive models to that

Buffet even talks about some of the psychology models that they use when describing the almost fanatical demand for an iPhone and what it would take to get a consumer to switch out from Apple. They compare it to how different and much easier it is to get someone to switch from, say, a Ford to a Chevy.

They still use the same models to weigh the investments, just adapted to the world as it evolved

[pianomankd]

Quote:
Originally Posted by beshannon
Well it went a bit off track
Ah.

[huncho]

well this is insane to say the least, $115m in shares and $65m in calls 3 weeks out. normally this would go to 0 but because his post will move markets he'll probably be up 20m+ tomorrow at least

https://www.reddit.com/r/Superstonk/...e_june_2_2024/

[enjoythemusic]

Wall Street Games

i'm just glad he doesn't front-run trades like the majors. Nice to see some different gameplay in the Dollar-based maket.

[BraveBold]

Originally Posted by huncho

well this is insane to say the least, $115m in shares and $65m in calls 3 weeks out. normally this would go to 0 but because his post will move markets he'll probably be up 20m+ tomorrow at least

https://www.reddit.com/r/Superstonk/...e_june_2_2024/

My guess is most short positions are well-capitalized (or should be) so pre-market action was mostly his cult followers transferring wealth to their “leader”… between pre-market and initial opening trading trading down about 50%+, means the short-term impact is a bunch of “silly” folk transferring wealth back and forth in a closed system. Akin to a lottery structure…

Lots of market manipulation (actual, if not illegal) here and few winners. Plenty of losers with these “silly” games.

[huncho]

Originally Posted by enjoythemusic

Wall Street Games

i'm just glad he doesn't front-run trades like the majors. Nice to see some different gameplay in the Dollar-based maket.

he pretty much is though, he loaded up before posting and he knows his posts will create a squeeze. i just don't understand why he didn't sell anything today or what his actual plan is now. what he did the first time (3 years ago) was amazing to witness but now he's just exploiting his cult following of bag holders

Originally Posted by BraveBold

My guess is most short positions are well-capitalized (or should be) so pre-market action was mostly his cult followers transferring wealth to their “leader”… between pre-market and initial opening trading trading down about 50%+, means the short-term impact is a bunch of “silly” folk transferring wealth back and forth in a closed system. Akin to a lottery structure…

Lots of market manipulation (actual, if not illegal) here and few winners. Plenty of losers with these “silly” games.

you would think that with the giant pop followed by bleeding all day but he posted an update and he hasn't sold a single share or call today. he's up $85m currently

i don't know what his exit plan is because there's no real market to sell the calls to and he doesn't have enough to exercise them. the liquidity could've been there today but now he showed his hand and MMs/shorts can plan accordingly. will be interesting to see what happens the rest of the week, but yeah, his entire following will be the losers for sure lol

[enjoythemusic]

Originally Posted by huncho

.. but now he's just exploiting his cult following of bag holders.

Reminds me of Jim Cramer and other guys who talk their book on financial news and information networks. CNBC profits from Jim's "Club" of influence. Talk about double-dipping market manipulation. How is he really any different than other Wall Street hustlers? Still, i'd rather be the middleman making tiny fractions off each transaction.

[BraveBold]

Originally Posted by huncho

he pretty much is though, he loaded up before posting and he knows his posts will create a squeeze. i just don't understand why he didn't sell anything today or what his actual plan is now. what he did the first time (3 years ago) was amazing to witness but now he's just exploiting his cult following of bag holders



you would think that with the giant pop followed by bleeding all day but he posted an update and he hasn't sold a single share or call today. he's up $85m currently

i don't know what his exit plan is because there's no real market to sell the calls to and he doesn't have enough to exercise them. the liquidity could've been there today but now he showed his hand and MMs/shorts can plan accordingly. will be interesting to see what happens the rest of the week, but yeah, his entire following will be the losers for sure lol

He likely didn’t sell today figuring it would land him in jail.

[BraveBold]

Originally Posted by BraveBold

He likely didn’t sell today figuring it would land him in jail.

Meant to say “could”… I think there is only a weak case for any conviction but there is definitely risk for charges or other actions by either a regulator or private party. The risk may be amplified by looking at multiple events together, any additional facts (not yet known), etc…

This whole thing (“meme” stocks, “meme” crypto, “meme” CEOs) is indicative of a period of excess in everything but rational thought. Will be looked back upon as clear evidence of overhyped markets, alongside snake-oil sales people like Cathy Wood (nothing analytical about her price predictions or “investment” patterns) and Elon Musk.

[SDGT3]

Originally Posted by BraveBold

Meant to say “could”… I think there is only a weak case for any conviction but there is definitely risk for charges or other actions by either a regulator or private party. The risk may be amplified by looking at multiple events together, any additional facts (not yet known), etc…

This whole thing (“meme” stocks, “meme” crypto, “meme” CEOs) is indicative of a period of excess in everything but rational thought. Will be looked back upon as clear evidence of overhyped markets, alongside snake-oil sales people like Cathy Wood (nothing analytical about her price predictions or “investment” patterns) and Elon Musk.

In reading the posts today, the name "Cathy Wood" did pop into mind...

Also anyone seen a SPAC or NFT lately? LOL...

[Zack21]

I have no position in GME but, some guy posts his actual position (presumably) and it is called by some market manipulation? Really? Did I miss some posts where he assured anyone of anything or made any false statement? Please explain.

[BraveBold]

Originally Posted by Zack21

I have no position in GME but, some guy posts his actual position (presumably) and it is called by some market manipulation? Really? Did I miss some posts where he assured anyone of anything or made any false statement? Please explain.

Yes, in fact I don’t think anyone doubts it is market manipulation in the broadest sense. The question would only be if it is in the legal sense.

Here is a simple way to think about it. In what scenario would he anticipate his call options to be worth anything over their (short) life? Specifically, to risk (apparently) his entire net worth and then some…

There is none other than the expectation his posting would drive his cult followers to pile into the shares to attempt to drive the price higher.

He expected and achieved manipulation of the trading price.

Some may point out others do “the same thing” - well, Buffett certainly impacts market prices when disclosing his positions. Is that the “intent” of the disclosure? To boost prices? Is there always evidence of another, bigger driver? Is the disclosure boost secondary to Buffett but instead the fact other investors believe Buffett has attributed greater intrinsic value than the market was previously assigning?

Cramer is given as an example - and often there is a modest pop from retail buyers following Cramer’s calls. Didn’t Cramer modify his investment portfolio to insulate his for-profit investments from his recommendations and trades primarily through a not-for-profit (essentially making his money off his show, not his portfolio).

Short sellers “manipulate” markets too - well, some do and some don’t. Disclosing analysis and insights is not market manipulation. It actually can be helpful. However, if the intent is solely to manipulate the market itself - that is indeed market manipulation (and is often scrutinized and sometimes litigated).

This “ roaring kitty “ knew what he was doing… Gill knew what he was doing and I cannot think of a better term than market manipulation based on what is publicly known so far.

Not my “legal” opinion or analysis… of course.

[Krash]

It’s not illegal for people to announce what company they’re investing in, how much money money they’re investing in it, and how they’re investing in it. Unless of course you’re a CEO or Sr Executive investing or divesting in your own company, and then there are regulations about how you go about doing that.

Assuming we had the financial wherewithal, any one of us could legally announce we’re buying $150 million worth of GME. It could be on X, TRF, YouTube, Reddit, or a meme on Instagram. And we should be thankful for that.


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[FLGatorM5]

Amen.

Also, if he is S65 licensed still he would be subject to investment advisory rules. I’m assuming he let them lapse but that was part of the issue last go around.

[eanzenberg]

In a broad sense, anything and everything is market manipulation and insider info. Unless you have material non-public information, ie, you get access to NVDA’s future order sheet from a supplier, you are good to go.

[HHIslander]

Originally Posted by Zack21

I have no position in GME but, some guy posts his actual position (presumably) and it is called by some market manipulation? Really? Did I miss some posts where he assured anyone of anything or made any false statement? Please explain.

As long as he didn’t collude/conspire/collaborate with other market participants, he should be fine. I say “should” because there are currently several folks in key regulatory positions who have a rather aggressive interpretation of the law and their power to enforce the law.

[Krash]

It’s a matter of style. There’s nothing wrong with going on CNBC, Bloomberg or Yahoo Finance and telling the world you’re buying stock in GME.

But if someone with a handle of “Roaring Kitty” posts a meme on X about buying the stock, then some people think it’s market manipulation.

I saw a financial analyst on TV yesterday saying that NVDA is going to 1500. That undoubtedly fueled another run up in the stock. But he was wearing a nice suit and doing so on a socially acceptable television network.

He didn’t blast that out on X using a childish handle and meme. That’s the only difference.


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[BraveBold]

Originally Posted by Krash

It’s a matter of style. There’s nothing wrong with going on CNBC, Bloomberg or Yahoo Finance and telling the world you’re buying stock in GME.

But if someone with a handle of “Roaring Kitty” posts a meme on X about buying the stock, then some people think it’s market manipulation.

I saw a financial analyst on TV yesterday saying that NVDA is going to 1500. That undoubtedly fueled another run up in the stock. But he was wearing a nice suit and doing so on a socially acceptable forum.

He didn’t blast that out on X using a childish handle and meme. That’s the only difference.


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If you believe that is the only difference…

Interesting…

[huncho]

Originally Posted by Krash

It’s a matter of style. There’s nothing wrong with going on CNBC, Bloomberg or Yahoo Finance and telling the world you’re buying stock in GME.

But if someone with a handle of “Roaring Kitty” posts a meme on X about buying the stock, then some people think it’s market manipulation.

I saw a financial analyst on TV yesterday saying that NVDA is going to 1500. That undoubtedly fueled another run up in the stock. But he was wearing a nice suit and doing so on a socially acceptable forum.

He didn’t blast that out on X using a childish handle and meme. That’s the only difference.


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it would be more comparable if that analyst bought calls of nvidia before going on tv to talk about it, but regardless a random analyst is not gonna move nvidia

roaring kitty's last post on reddit 3 years ago showed he had ~50m. on sunday he posts a position worth nearly 200m. no one knows or is even asking where he got the 150m from. could be that he spent months building a position before tweeting the first picture to cause a squeeze then spent a week loading calls for 6/21 last week and posted his position on sunday to cause another squeeze, which was cleverly posted on a sunday night even though he finished loading them friday

i guess it's technically not illegal because he's not really saying anything but he knows what he's doing. his followers think his mission is to create generational wealth for all of them and they'll jump off a bridge for him, so he knows that anything he posts that hints he's back in will cause them all to fomo into the stock again. the only difference so far is he's not selling and my guess is because he knows it could get him in trouble

[Krash]

Originally Posted by BraveBold

If you believe that is the only difference…

Interesting…

Okay, so enlighten us…

A well- respected financial analyst goes on CNBC and announces that NVDA is going to 1,500. And that fuels a run from 1100 to 1246 in a matter of 48 hours.

How is that any different?


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[Krash]

Originally Posted by huncho

it would be more comparable if that analyst bought calls of nvidia before going on tv to talk about it, but regardless a random analyst is not gonna move nvidia

roaring kitty's last post on reddit 3 years ago showed he had ~50m. on sunday he posts a position worth nearly 200m. no one knows where he got the 150m from. could be that he spent months building a position before tweeting the first picture to cause a squeeze then spent a week loading calls for 6/21 last week and posted his position on sunday to cause another squeeze. i guess it's technically not illegal because he's not really saying anything but he knows what he's doing. he's front running his cult following that will jump off a bridge for him and he's lucky all it takes is posting a random meme. the only difference so far is he's not selling and my guess is because he knows it could get him in trouble

Well, technically, his firm did buy positions in the stock. They bought positions for their clients. I know because I’m one of their clients. They previously moved money into NVDA for me and all their clients prior to his TV appearance.


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[BraveBold]

Originally Posted by huncho

it would be more comparable if that analyst bought calls of nvidia before going on tv to talk about it, but regardless a random analyst is not gonna move nvidia

roaring kitty's last post on reddit 3 years ago showed he had ~50m. on sunday he posts a position worth nearly 200m. it feels like he spent months building a position then tweeted the first picture to cause a squeeze then spent a week loading calls for 6/21 last week and posted his position on sunday to cause another squeeze. i guess it's technically not illegal because he's not really saying anything but he knows what he's doing. he's front running his cult following that will jump off a bridge for him and he's lucky all it takes is posting a random meme

It is also tacit collusion. When you -know- with extreme confidence that many other “apes” will pile in regardless of any investment thesis or underlying reason other than your post… that is collusion, even if done without active discussion. The whole group of “apes” acting in concert and in likelihood being additionally primed weeks ago by the “lean-in” meme is where Kitty may get cornered. The lean “seriousness” meme could be seen as signaling that the subsequent trade disclosure “should” be followed by the group piling in. The sole purpose to cause short sellers to cover and artificially drive the price up. This sole purpose and collusion is clearly manipulation. Anyone not recognizing that… well, not much to say there lol.

Whether it amounts to something that can be prosecuted, I will just defer to the regulators. They will certainly explore how to make this more clearly illegal in the future - and I hope they succeed.