"Super Investors"

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Adam Smith: The Stock Market as a Game​

It’s become abundantly clear to me that there’s a high degree of gambling in today’s stock market. From the frenzied trading of meme stocks to the speculative bets on tech IPOs, investing often feels more like a high-stakes poker table than a carefully calculated financial strategy.

This isn’t a new phenomenon, though. The tendency to treat investing as a game, rather than a disciplined approach to building wealth, has existed for decades.

Investing is serious business—or is it? In The Money Game by Adam Smith (the modern one, not the 18th-century economist) makes a compelling argument that the stock market is both a game and a Game.

He describes it as “both sport, frolic, fun, and play, and a subject for continuously measurable options.” That idea might sound strange to some. After all, investing is about making money, right? Well, not necessarily.

Smith quotes a leading Wall Streeter who claims, “Eighty percent of investors are not really out to make money.” At first glance, that seems absurd.

Why else would people put their hard-earned cash into the market? But when you think about it, investing often has less to do with pure profit-seeking and more to do with entertainment, ego, and the thrill of the chase.

For many, the stock market is a national pastime. Smith points out that “we have more than twenty-six million direct investors in this country” and that the number keeps growing.

That’s a massive pool of people engaged in an activity that, for some, is less about long-term wealth accumulation and more about the action itself. It’s a form of legalized gambling, only with better odds (most of the time).

And like any good game, there are winners, losers, and the house always takes its cut. Smith acknowledges that “the investment game is intolerably boring save to those with a gambling instinct, while those with the instinct must pay to it ‘the appropriate toll.’”

That’s the cost of playing—whether it’s trading fees, bad decisions, or just the emotional highs and lows of watching your portfolio bounce around like a yo-yo.

So what about bonds, preferred stocks, and other “safer” investments? Smith argues that serious investors rarely touch them, because “they lack romance enough to be part of the game; they are boring.”

In other words, no one gets an adrenaline rush from tracing their finger down a bond yield table. The action, the thrill, and the big wins are in stocks.

But here’s the real question: is it wrong to approach the market as a game? Not necessarily. As Smith points out, “Sometimes illusions are more comfortable than reality.” The danger comes when people fail to recognize which game they’re playing. If you see investing as a casino and treat it accordingly, then fine—just be aware of the risks.

But if you believe the market is some sort of get-rich-quick machine that always rewards daring moves, you’re in for a rude awakening.

Ultimately, the key is awareness. If you acknowledge that investing has a built-in gambling instinct, “we can ‘pay to this propensity the appropriate toll’ and proceed with reality.” In other words, play the game if you want—but know the rules before you bet the house.

i disagree
as a former race-course ( and off-course ) punter , 'the game ' is similar but different sure you have 'the tipsters ' , 'the commissioners ' ( agents that obscure who is actually spending the cash at the time ) the sharks and the outright crooks ... and that is just the legal betting

you have the gossip and frenzy , and herd mentality , but also the few that employ straight mathematics , and the rare contrarian , and some students of history

now unless you are ' the house ' ( these days i hold TAH ) it is hard for slow , steady gains on the race-track ( unlike shares or bonds when played carefully a bond doesn't break a leg twenty metres after the start )

share race-track skills are an adventage , you develop the ability to 'filter the noise ' detect opportunity and avoid hype , develop an instinct when something isn't all square and legit , remember shady characters when making decisions

shares and bonds are slower to yield results ( one of my best race track wins yielded an average of 20 to 1 ( a twenty bagger ) in just 2 minutes of racing and was a predictable result ( in fact the only reason i went to the track that day ) , i was only looking for 12 to 14 to one , but hype and noise gifted my the bonus

now why don't i use the same skills on the ASX

1. my equipment isn't reliable enough to place those bets at the desired moment ( most of the time )

2. the information known is usually affected by a time delay ( certain folk always make that bet before you ) AND maybe inaccurate

3. the results are usually slower and smaller ( if playing short term ) HOWEVER sometimes you can control how much profit you make AND the time you take it

4. treating buying shares like becoming a part-owner of the business makes more sense to me ( and when buying corporate debt thinking like a banker )

sure i still take some passing opportunities , but real gambling wants a defined outcome within a certain time .

investing might bear fruit at the predicted rate or months/years later ( if failure doesn't get you first )

AND capital gains , isn't the only reward offered when investing

 

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Warren Buffett on Benjamin Graham​

Several years ago Ben Graham, then almost 80, expressed to a friend the thought that he hoped to do every day “something foolish, something creative and something generous.”

The inclusion of that first whimsical goal reflected his knack for packaging ideas in a form that avoided any overtones of sermonizing or self-importance. Although his ideas were powerful, their delivery was unfailingly gentle.

Readers of this magazine need no elaboration of his achievements as measured by the standard of creativity. It is rare that the founder of a discipline does not find his work eclipsed in rather short order by successors. But, over 40 years after publication of the book that brought structure and logic to a disorderly and confused activity, it is difficult to think of possible candidates for even the runner-up position in the field of security analysis.

In an area where much looks foolish within weeks or months after publication, Ben’s principles have remained sound-their value often enhanced and better understood in the wake of financial storms that demolished flimsier intellectual structures. His counsel of soundness brought unfailing rewards to his followers-even to those with natural abilities inferior to more gifted practitioners who stumbled while following counsels of brilliance or fashion.

A remarkable aspect of Ben’s dominance of his professional field was that he achieved it without that narrowness of mental activity that concentrates all effort on a single end. It was, rather, the incidental by-product of an intellect whose breadth almost exceeded definition.

Certainly I have never met anyone with a mind of similar scope. Virtually total recall, unending fascination with new knowledge and an ability to recast it in a form applicable to seemingly unrelated problems made exposure to his thinking in any field a delight.

But his third imperative-generosity-was where he succeeded beyond all others. I knew Ben as my teacher, my employer and my friend. In each relationship-just as with all his students, employees and friends-there was an absolutely open-ended, no-scores-kept generosity of ideas, time and spirit. If clarity of thinking was required, there was no better place to go.

And if encouragement or counsel was needed, Ben was there. Walter Lippmann spoke of men who plant trees that other men will sit under. Ben Graham was such a man.

Warren Buffett

 

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Even The Most Intelligent Investors Succumb To Human Frailty – Including Ben Graham​

Benjamin Graham: The Memoirs of the Dean of Wall Street......Here’s an excerpt from the book:

it’s not undue modesty to say that I had become something of a smart cookie in my particular field. Still, I was capable of doing some foolish things in other areas of Wall Street. One day, when I was chatting with Barnard Powers about an article for The Magazine of Wall Street, he told me he was thinking of retiring soon, as he had just made a killing in a stock called Ertel Oil.

A close friend had invited him in on ground floor. He had been part of the original group which had bought the shares at $3. A few days later trading had begun the Curb Market at $10. The syndicate manager had sold out all the participants’ stock at this figure, and Powers had just received a large check as his share of the profit. I was unduly impressed by this story and may have uttered some words of envy.

Powers good-naturedly offered to let me in on the next deal of this sort, if there was room for my money. Sure enough, another and apparently promising deal did come along soon afterwards, and a limited participation was available. A new company had been formed, called Savold Tire, which had a patented process for retreading automobile tires. Retreading was then a new idea, and was especially attractive because of the relatively high price of tires.

The subscription price of the shares was to be $10, and they were expected to open on the New York Curb at a much higher figure. I think I put up $5,000. As by clockwork or magic, a few days later trading began in the shares at 35, amid considerable excitement.

Before the week was out, I had received a check for some $15,000 in return for my $5,000. In spite of my innate conservatism and commonsense understanding that operations of this kind were essentially phoney, cupidity ruled me. I eagerly sought other deals of this kind, and so did a few friends to whom I had communicated the glad tidings.

The price of Savold Tire kept advancing. A large electric sign quickly appeared on Columbus Circle, which first flashed “SAVE,” then flashed “OLD,” and then deftly combined the two words into “SAVOLD.” Soon I heard some exhilarating news. The parent company had decided to license its process to affiliated companies in the various states, and these companies, too, would have shares on the market.

Barnard Powers promised to put my money in along with his own. Action came fast. Four weeks after the original Savold made its appearance, the second company—New York Savold Tire—was organized, and we invested something like $20,000 in the syndicate.

Our subscription price was $15 or $20 a share. The stock opened on the Curb at 50, and on sales of 96,000 shares advanced immediately to a high of 60. This was the week of May 10, 1919; I celebrated my twenty-fifth birthday in a blaze of excitement. Promptly I received a fat check for our contribution plus some 150 percent in profits. (No accounting came with the check, and we wouldn’t have dreamed of asking for one.)

When I announced their share to each of my friends, they all told me to keep their money for them and be sure to put it all in the next deal. After all, there were forty-eight states in the union, weren’t there?

Disappointment was in store for us. A third company—Ohio Savold—was duly floated in June, but it was a relatively small affair; we were told that there was no room for our money in that one. It came out on the Curb at 28, advanced the next month to 34, but did not imitate the pyrotechnics of the two previous companies. Nevertheless, we were worried. Was our wonderful party at an end? Powers reassured us. A very large deal was cooking, and we would positively be taken into it. But this company—Pennsylvania Savold—was to be the last of the series. It would have production rights for the whole country except New York and Ohio.

Management had decided that more than four Savold companies would be cumbersome and confusing. We neither understood nor approved of this restraint, but we prepared to profit to the hilt from our last gorgeous opportunity.

When funds were called for, I sent over some $60,000, half of which was contributed by three wealthy young brothers named Hyman. Maxwell Hyman had been an old schoolmate, friend, and customer. (Once, when we were still bachelors, we had teamed up to win a tennis-doubles tournament at a weekend party at the large summer home of four sisters named Jacobs.)

In August 1919, the world was harassed by a host of problems growing out of the collapse of Germany. But in Wall Street the market continued a headlong advance, especially in stocks of the poorest quality and the rankest speculative flavor. The original Savold was active and strong. In fact, at the beginning of the month it soared to 773/4 but fell back immediately to 53 in the same week. We waited impatiently for Pennsylvania Savold to make its spectacular debut, smacking our lips over our impending killing.

The promised day arrived, but trading didn’t begin. There was a “slight delay” for reasons explained neither then nor later. Suddenly all the Savold issues were acting very badly; we wondered what was wrong. Came September and still no trading in our stock. Suddenly a complete debacle occurred in the Savold markets. The parent issue fell to 12½! A few more trades, and then the coup de grâce was announced: “No bid for any of the Savold issues.” After October 4 all three companies disappeared completely from the records—as if they had never existed.

I had many conferences with Barnard Powers, who had invested most of his own money, and that of his friends, in Savold. He told me that the arch-promoter who had managed all these flotations had diverted our money to other uses. We could put him in jail, but that wouldn’t do us any good. Powers and I formed a committee to represent his victims, and we visited him in his office close to the Curb. I still remember the beautiful blue shirt and expensive cuff links he wore at our meeting.

Powers did all the talking, except once. That was when the promoter asked me if I would like to have a very low number for my automobile license. He could get one for me, since he was a close friend of New York Secretary of State Hugo. I declined with cold thanks.

The upshot was that the promoter turned over about 10 percent of our contributions in cash and certificates for shares of companies he had been promoting. In one way or another we managed to sell some of these, and finally returned about 33 cents on the dollar to our respective groups.

What happened to the Savold companies themselves? I never really knew. Presumably they went into bankruptcy—if they ever really existed. There is no trace of any of them in the financial manuals of the following year. All that we as so-called insiders ever knew about those enterprises was the (supposed) nature of their business and the number of shares alleged to be outstanding. This information appeared in a flimsy “descriptive circular” of unknown origin.

Yet, gullible as we were, we had felt highly privileged to put our money in this manipulative scheme, relying on a speculative public even greedier and more foolish to pay us a huge profit. In the six months between April and September 1919, thousands of shares of the three companies changed hands on the Curb, in trades involving millions of real people’s real dollars. But as far as I know, the only thing real about Savold Tire itself was the electric sign at Columbus Square which bore its name.

Also, as far as I know, nobody complained to the district attorney’s office about the promoter’s bare-faced theft of the public’s money.

 

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Burton Malkiel: Risk Tolerance – What’s Your Sleeping Point?​

In his book – A Random Walk Down Wall Street, Burton Malkiel discusses the investor’s risk tolerance using what calls the ‘sleeping point’. Here’s an excerpt from the book:

Determining clear goals is a part of the investment process that too many people skip, with disastrous results. You must decide at the outset what degree of risk you are willing to assume and what kinds of investments are most suitable to your tax bracket.

The securities markets are like a large restaurant with a variety of menu choices suitable for different tastes and needs. Just as there is no one food that is best for everyone, so there is no one investment that is best for all investors.

We would all like to double our capital overnight, but how many of us can afford to see half our capital disintegrate just as quickly? J. P. Morgan once had a friend who was so worried about his stock holdings that he could not sleep at night. The friend asked, “What should I do about my stocks?” Morgan replied, “Sell down to the sleeping point.” He wasn’t kidding.

Every investor must decide the trade-off he or she is willing to make between eating well and sleeping well. The decision is up to you. High investment rewards can be achieved only at the cost of substantial risk-taking. That has been one of the fundamental lessons of this book. So what’s your sleeping point?

 

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John Rogers & Mario Gabelli on Buffett’s Playbook, Small Caps, and Moats​

In a market increasingly driven by quarterly headlines, momentum trades, and algorithmic noise, Mario Gabelli and John Rogers are still putting their faith in time, discipline, and deep research. Speaking at the recent Gabelli Omaha Value Investor Conference, the two icons didn’t just honor Warren Buffett—they laid out a clear case for staying patient and thinking decades ahead.

“People are more short-term oriented than ever,” said John Rogers, founder of Ariel Investments. “We still believe that slow and steady wins the race.” He pointed to an industry where too many managers fixate on near-term earnings beats instead of digging into “how the business generates cash flow… and the size of the moat around the company.”

Gabelli echoed that. “That’s not an investor—that’s a day trader,” he quipped about the market’s knee-jerk reactions to news. “We think about how do we create wealth and maintain wealth… buying companies like John just shared with you: what is the intrinsic value, how do they generate cash flow, how do they allocate it?”

Both men emphasized the neglected world of small-cap stocks. “Small value is one of the biggest gaps between large-cap growth when it comes to valuation in history,” Rogers noted. He described the sector as “a fishing pond” Ariel has used since 1986—now filled with “bargain-priced companies that people have fallen out of love with.”

Gabelli warned structural forces are making these opportunities even more compelling. “There’s a company in XYZ Pennsylvania… sells at $15 a share with a $1.16 dividend… book value is 30. Why? It’s not in an ETF. Nobody covers it.” He lamented how Wall Street’s shift away from research and regulation-heavy IPOs has left many quality companies in the shadows.

Beyond valuation, both spoke to the importance of management. “There’s nothing more important than [understanding] how that moat is evolving,” Rogers said. He underscored the value of consistency: “Do they have a plan to win? Are they staying on that plan?”

Looking ahead, Gabelli sees a market shaped by AI, tax awareness, and global insights. “Think about how AI will influence the world… You won’t need John and I except for judgment,” he joked.

But at the end of the day, both investors still look to Buffett. “Warren is the best of the best,” Rogers said. “Keep a belief in that playbook it’ll serve him [Greg] well over the next 20 to 30 years.” Gabelli agreed: “Warren has never changed.”

For these two titans, timeless investing still beats timely trading.

 

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“Speculation is a name given to a failed investment and… investment is the name given to a successful speculation.” – Edward Chancellor

 

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New Evidence Shows Graham and Dodd Were Right About Most Quant Investing Strategies​

A recent publication in the Financial Analysts Journal called Facts about Formulaic Value Investing, by U-Wen Kok, Jason Ribando and Richard Sloan demonstrates that most quantitative investing strategies used today are unlikely to generate superior investment performance even with the advent of computers and financial databases.

The research states, “We found little compelling evidence that a strategy of buying US equities that seem under priced in light of simple fundamental-to-price ratios provides superior investment performance.” Adding, “Over 80 years ago, Graham and Dodd (1934) argued that trading strategies based on simple valuation ratios were unlikely to generate superior investment performance.”

It seems Graham and Dodd have proven to be right.

Here’s an excerpt from the paper:

Value investing is one of the most popular and enduring styles of investing. The idea that investors should buy securities that represent good value has obvious appeal. Yet the term value investing is increasingly being associated with quantitative investment strategies that use ratios of common fundamental metrics (e.g., book value or earnings) to price. Proponents of these strategies claim that they provide a simple and effective way to achieve superior investment performance (e.g., Lakonishok, Shleifer, and Vishny 1994; Chan and Lakonishok 2004).

Such investment strategies sound like easy wins for investors, but our analysis reveals a less favorable assessment. The “value” moniker creates the impression that these strategies identify temporarily under priced securities. But the strategies do not use a comprehensive approach to identify temporarily under priced securities and have systematically failed to do so.

Our findings can be summarized as follows:

1. We found little compelling evidence that a strategy of buying US equities that seem under priced in light of simple fundamental-to-price ratios provides superior investment performance. The evidence does indicate that small-cap stocks that seem expensive given such ratios have under performed. Such stocks, however, are relatively capacity constrained, illiquid, and costly to borrow, so the opportunity to exploit these lower returns in practice is unclear.

2. Instead of identifying under priced securities, simple ratios of accounting fundamentals to price identify securities for which the accounting numbers used in the ratios are temporarily inflated.

a. The book-to-market ratio systematically identifies securities with overstated book values that are subsequently written down.

b. The trailing-earnings-to-price ratio systematically identifies securities with temporarily high earnings that subsequently decline.

c. The forward-earnings-to-price ratio systematically identifies securities for which sell-side analysts offer relatively more optimistic forecasts of future earnings.

We conclude that quantitative investment strategies based on such ratios are not good substitutes for value-investing strategies that use a comprehensive approach in identifying under priced securities.

Conclusion

Our main contribution in this article is to demonstrate that formulaic value-investing strategies primarily identify stocks with temporarily inflated accounting numbers. These are precisely the accounting distortions that Graham and Dodd (1934, p. 20) deem the function of a capable analyst to detect. Quantitative approaches to detecting these distortions—such as combining formulaic value with momentum, quality, and profitability measures—can help in avoiding these “value traps.” A capable analyst, however, should be able to significantly enhance quantitative approaches with Graham and Dodd–style security analysis.

More generally, our results show that major securities markets are highly competitive. Over 80 years ago, Graham and Dodd (1934) argued that trading strategies based on simple valuation ratios were unlikely to generate superior investment performance. The advent of computers and financial databases has generated new interest in such strategies, thousands of which have been back tested. It is not surprising that some strategies have worked in some markets over some periods. It is also not surprising that some strategies have produced impressive back test results in illiquid stocks with significant impediments to arbitrage. We caution against using this evidence to conclude that such strategies can deliver healthy out-performance in the future.

You can read the full paper here.

 

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Stanley Druckenmiller: Concentrated Bets Beat Diversification​

During his talk at the Lost Tree Club, Stanley Druckenmiller discusses his unique risk management approach, shaped by both luck and experience. He challenges traditional diversification, stating that the best way to achieve superior long-term returns is by being a “pig” — someone who makes concentrated, high-conviction bets.

He cites great investors like Warren Buffett, Carl Icahn, and Ken Langone, who focus on a few high-potential opportunities and invest heavily.

Druckenmiller emphasizes that most investors make the mistake of spreading their investments too widely, while real success comes from betting big on rare, exciting opportunities and monitoring them closely.

Here’s an excerpt from the talk:

The third thing I’d say is I developed partly through dumb luck – I’ll get into that – a very unique risk management system. The first thing I heard when I got in the business, not from my mentor, was bulls make money, bears make money, and pigs get slaughtered.

I’m here to tell you I was a pig.

And I strongly believe the only way to make long-term returns in our business that are superior is by being a pig. I think diversification and all the stuff they’re teaching at business school today is probably the most misguided concept everywhere.

And if you look at all the great investors that are as different as Warren Buffett, Carl Icahn, Ken Langone, they tend to be very, very concentrated bets. They see something, they bet it, and they bet the ranch on it.

And that’s kind of the way my philosophy evolved, which was if you see – only maybe one or two times a year do you see something that really, really excites you.

And if you look at what excites you and then you look down the road, your record on those particular transactions is far superior to everything else, but the mistake I’d say 98 percent of money managers and individuals make is they feel like they got to be playing in a bunch of stuff.

And if you really see it, put all your eggs in one basket and then watch the basket very carefully.

You can find the entire talk here:

Lost Tree Club Talk – Stanley Druckenmiller

 

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Stanley Druckenmiller Pulls Back: What His Latest Sales Say About the Market​

Stanley Druckenmiller is one of the sharpest macro investors of our time. So when he slashes positions across airlines, tech, and emerging markets in one quarter, it’s worth paying attention.

In his latest 13F filing, Druckenmiller made bold cuts. Not soft trims. Full-on surgical reductions.

Start with the airlines. He gutted them.

American Airlines? Down 85%.

United Airlines? Cut by almost two-thirds.

Delta? Down nearly 58%.

That’s a coordinated exit. This wasn’t about rebalancing. This was an entire theme getting the axe. Likely a signal that he sees storm clouds ahead for travel—perhaps driven by rising fuel costs, softening demand, or an economic slowdown.

He also pared back Amazon by 58%. Think about that. One of the most dominant companies of our era—cut in half. Same story with Tesla—he slashed that position by 50%. While both stocks have had strong runs, Druckenmiller appears to be questioning whether future upside justifies the current price.

Then there’s the quiet trim of Philip Morris, Kinder Morgan, and Brookfield. Each of these got a haircut in the 18–48% range. Not full exits, but sizeable shifts. Maybe he’s concerned about inflation resilience in these cash-flow-heavy names. Or just harvesting gains.

But what’s really telling are the big positions he’s still holding—Natera (NTRA), Woodward (WWD), and Coherent (COHR). Even after trimming, these remain top holdings. Natera especially. At $481 million, it makes up nearly 16% of the entire portfolio. That’s conviction.

Healthcare innovation and industrial precision tech—these are long-term growth themes that Druckenmiller seems willing to ride through volatility.

And then there’s Argentina. He trimmed his bets in ARGT, GGAL, and BMA, cutting exposure by 10–20%. He’s not abandoning the country altogether—but clearly he’s locking in some gains after the post-election rally under Milei.

All told, this quarter’s activity paints a picture of a manager growing more defensive. Less enthusiasm for cyclical and reopening names. More skepticism around expensive tech. And a subtle flight to quality and conviction.

Druckenmiller once said, “Earnings don’t move the overall market; it’s the Federal Reserve board.” If that’s still his belief, this latest activity might be his way of hedging against what comes next.

When Stanley pulls back this sharply, he’s not just trimming weeds. He’s repositioning the whole garden.

 

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A Message to all New investors.....

The information that i am Posting here is for educational purposes only!.........Is is NOT a recommendation in the Buying and selling of the Stocks Posted.

Should Anyone decide that they would like to invest in the Stock Market, i strongly urge that they do their own Due Diligence & seek Professional advice from a Financial Advisor before doing so.

 

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Tom Gayner: Investing Can Make You Look Dumber Than You Really Are​

At the Acatis Value Conference in Frankfurt, Tom Gayner spoke about his approach to long-term investing and the principles that shape his portfolio.

“We try to find good companies and give them time to compound over time,” Gayner said, referring to his decades-long position in Novo Nordisk. “My decision was wholly based on insulin, all the weight loss stuff came later.” Despite recent volatility, he remains unfazed: “Right now I suspect market participants are acting emotionally. I tend to be mild about reacting to that.”

He values the tax efficiency of holding: “We now have about 8 billion dollars of deferred gains in our portfolio of publicly listed stocks. It was 2 billion dollars in 2014. Part of that is due to Novo Nordisk.”

On management changes, Gayner noted, “The smaller a company, the more critical the CEO is… the value of the team grows.” He added humorously, “I would give twenty bucks to anyone in the room that could name four CEOs of Exxon after John D. Rockefeller.”

Touching on political risks like Trump’s drug price proposals, he admitted, “The risk is real, but I would have a hard time quantifying it.”

A significant 15% of Gayner’s portfolio is in Berkshire Hathaway. “I think it can [succeed post-Buffett], and for many reasons. One of which is they have laid out the playbook about how you should run Berkshire.” On Greg Abel, Ted Weschler, and Todd Combs, he said, “Greg Abel will have the ultimate say… My team and I together made that capital allocation decision. I think the same dynamic will exist at Berkshire.”

He appreciates differing styles among decision-makers: “I do like to spend time with people, and Mike [Heaton] accuses me of falling in love with people… But I recognize that I have that problem.”

Asked if Berkshire has too much cash, Gayner replied, “Not at all. I would gladly take that.” On reinvestment risk: “I expect them to deploy some of that capital… It is likely that they might start paying a dividend… and that the pace of share repurchases might increase.”

On Brookfield and other private equity firms, he emphasized, “Those companies have demonstrated their ability to adapt to changing circumstances.” He shared a line from Chad Rowe: “Investing is a business where you either look a lot smarter or dumber than you really are at any given point in time.”

And finally, when asked about tech: “We have not put a lot of new money in the set of technology names that we hold probably in four or five years… So far, I’ve not responded by going back to that well and buying.”

You can read the entire interview here:

Tom Gayner: Warren Buffett and Charlie Munger Laid Out the Playbook (The Market)

 

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“Speculation is a name given to a failed investment and… investment is the name given to a successful speculation.” – Edward Chancellor

only if you change your mind later about the reason ( goal ) of what you buy , i very rarely buy into a stock with the intention of selling out completely later ( the reverse index ETFs being the obvious exceptions , so my unsuccessful forays , are labeled as failed ( or failing i) investments

Stanley Druckenmiller: Concentrated Bets Beat Diversification​

During his talk at the Lost Tree Club, Stanley Druckenmiller discusses his unique risk management approach, shaped by both luck and experience. He challenges traditional diversification, stating that the best way to achieve superior long-term returns is by being a “pig” — someone who makes concentrated, high-conviction bets.

He cites great investors like Warren Buffett, Carl Icahn, and Ken Langone, who focus on a few high-potential opportunities and invest heavily.

Druckenmiller emphasizes that most investors make the mistake of spreading their investments too widely, while real success comes from betting big on rare, exciting opportunities and monitoring them closely.

Here’s an excerpt from the talk:

The third thing I’d say is I developed partly through dumb luck – I’ll get into that – a very unique risk management system. The first thing I heard when I got in the business, not from my mentor, was bulls make money, bears make money, and pigs get slaughtered.

I’m here to tell you I was a pig.

And I strongly believe the only way to make long-term returns in our business that are superior is by being a pig. I think diversification and all the stuff they’re teaching at business school today is probably the most misguided concept everywhere.

And if you look at all the great investors that are as different as Warren Buffett, Carl Icahn, Ken Langone, they tend to be very, very concentrated bets. They see something, they bet it, and they bet the ranch on it.

And that’s kind of the way my philosophy evolved, which was if you see – only maybe one or two times a year do you see something that really, really excites you.

And if you look at what excites you and then you look down the road, your record on those particular transactions is far superior to everything else, but the mistake I’d say 98 percent of money managers and individuals make is they feel like they got to be playing in a bunch of stuff.

And if you really see it, put all your eggs in one basket and then watch the basket very carefully.

You can find the entire talk here:

Lost Tree Club Talk – Stanley Druckenmiller

high concentration/conviction is great IF you get timely ( or even advance ) info and statistics , remember Warren often appoints a board member or two ( as does SOL in Australia )

having your eggs in the basket but your view of the eggs is 3 , 6 , or even 12 months stale .. your eggs have either hatched while you couldn't see them , or gone bad

 

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Seth Klarman: Madness of Crowds Creates Opportunities For Value Investors​

In his book – Margin of Safety, Seth Klarman discusses how the madness of crowds creates opportunities for value investors. Here’s an excerpt from the book:

A second important reason to examine the behavior of other investors and speculators is that their actions often inadvertently result in the creation of opportunities for value investors. Institutional investors, for example, frequently act as lumbering behemoths, trampling some securities to large discounts from underlying value even as they ignore or constrain themselves from buying others.

Those they decide to purchase they buy with gusto; many of these favorites become significantly overvalued, creating selling (and perhaps short-selling) opportunities. Herds of individual investors acting in tandem can similarly bid up the prices of some securities to crazy levels, even as others are ignored or unceremoniously dumped.

Abetted by Wall Street brokers and investment bankers, many individual as well as institutional investors either ignore or deliberately disregard underlying business value, instead regarding stocks solely as pieces of paper to be traded back and forth.

The disregard for investment fundamentals sometimes affects the entire stock market. Consider, for example, the enormous surge in share prices between January and August of 1987 and the ensuing market crash in October of that year. In the words of William Ruane and Richard Cunniff, chairman and president of the Sequoia Fund, Inc.,

“Disregarding for the moment whether the prevailing level of stock prices on January 1, 1987 was logical, we are certain that the value of American industry in the aggregate had not increased by 44% as of August 25. Similarly, it is highly unlikely that the value of American industry declined by 23% on a single day, October 19.”

 

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Howard Marks: How to Overcome Fear and Greed in Investing​

As someone who’s been investing for many years, I’ve realised that investing is a psychological battlefield, where the hardest decisions are rarely about numbers and valuations—they’re about emotions. Howard Marks captures this dilemma perfectly in The Most Important Thing, where he reflects on the tech bubble and the 2008 financial crisis.

As he puts it, “As hard as it was for most people to resist buying in the tech bubble, it was even harder to resist selling—and still more difficult to buy—in the depths of the credit crisis.”

This is the core struggle for any investor: overcoming the urge to follow the herd. It’s easy to get swept up when markets are soaring, when “the pundits are positive, the rationale is widely accepted, prices are soaring, and the biggest risk takers are reporting huge returns.”

But it’s even harder to stay rational when the market is in freefall, when losses feel unlimited, and “Armageddon actually seemed possible.”

The truth is, no one is immune. Marks warns us: “Investors who believe they’re immune to the forces described in this chapter do so at their own peril.” If entire markets can be moved by collective emotions, why should any individual believe they can simply rise above them? If a bull market can make professionals overlook reality, why wouldn’t it do the same to us?

There’s no formula to protect against these cycles, no foolproof strategy to time the market, no “magic pill that will protect you against destructive emotions.”

The only way forward is to recognize these forces for what they are. To have the courage to resist them. And to remember, as Charlie Munger wisely said, “It’s not supposed to be easy.”

 

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Mario Gabelli: “I Want the Ignored” — Inside His 2025 Investment Strategy​

Mario Gabelli’s 2025 investment outlook comes down to one simple idea: “we want the ignored and unloved, Howard wants the loved, I want the ignored.” The veteran investor’s approach remains as straightforward as ever – find value where others aren’t looking.

At this year’s annual meeting, Gabelli explained his core methodology: “What is private market value? Companies public like yours. What happens if it goes private? How much will you pay? What are the sum of the parts.” This fundamental question drives every investment decision at his firm.

Some sectors have caught Gabelli’s sharp eye recently. In waste management, he pointed out “why is Republic Services gone from $10 a share to 250? Why is waste management gone up?” He’s also tracking opportunities in sports and media, noting “you’ll hear more about is a company in Buffalo New York. Buffalo New York. And we’ll talk about that later” and reminding attendees “each of you have a keychain, it’s called the Atlanta Braves, the stock closed at 44.”

Corporate actions that unlock value particularly interest Gabelli. He watches for “What is financial engineering? What are the elements, a change in management like you did 10 years ago at Sony, like you did at so on and IT&T.” These strategic moves often create the best opportunities for value investors.

With “we started the firm at 1977, our history goes back even further than that in terms of research. Our teammate Doug Jameson is here he says hello he’s been with us 40 years,” Gabelli emphasizes the advantage of long-term perspective in spotting market inefficiencies.

While acknowledging macroeconomic challenges like “the debt of the United States 37 trillion dollars, our deficits we spend 7 trillion and we take in five so all of a sudden how do we handle that?” Gabelli keeps the focus on actionable strategies: “How do we allocate capital for you? How do we match what you want and what your needs are relative to earning returns.”

His survival guide for turbulent markets comes from an unlikely source: “My cousin Darwin said it best-it’s not the strongest that survive, it’s not the smartest, it’s those that are most flexible, that’s what we want to do.” This adaptability defines Gabelli’s enduring success.

 

[divs4ever]

Mario Gabelli: “I Want the Ignored” — Inside His 2025 Investment Strategy​

Mario Gabelli’s 2025 investment outlook comes down to one simple idea: “we want the ignored and unloved, Howard wants the loved, I want the ignored.” The veteran investor’s approach remains as straightforward as ever – find value where others aren’t looking.

At this year’s annual meeting, Gabelli explained his core methodology: “What is private market value? Companies public like yours. What happens if it goes private? How much will you pay? What are the sum of the parts.” This fundamental question drives every investment decision at his firm.

Some sectors have caught Gabelli’s sharp eye recently. In waste management, he pointed out “why is Republic Services gone from $10 a share to 250? Why is waste management gone up?” He’s also tracking opportunities in sports and media, noting “you’ll hear more about is a company in Buffalo New York. Buffalo New York. And we’ll talk about that later” and reminding attendees “each of you have a keychain, it’s called the Atlanta Braves, the stock closed at 44.”

Corporate actions that unlock value particularly interest Gabelli. He watches for “What is financial engineering? What are the elements, a change in management like you did 10 years ago at Sony, like you did at so on and IT&T.” These strategic moves often create the best opportunities for value investors.

With “we started the firm at 1977, our history goes back even further than that in terms of research. Our teammate Doug Jameson is here he says hello he’s been with us 40 years,” Gabelli emphasizes the advantage of long-term perspective in spotting market inefficiencies.

While acknowledging macroeconomic challenges like “the debt of the United States 37 trillion dollars, our deficits we spend 7 trillion and we take in five so all of a sudden how do we handle that?” Gabelli keeps the focus on actionable strategies: “How do we allocate capital for you? How do we match what you want and what your needs are relative to earning returns.”

His survival guide for turbulent markets comes from an unlikely source: “My cousin Darwin said it best-it’s not the strongest that survive, it’s not the smartest, it’s those that are most flexible, that’s what we want to do.” This adaptability defines Gabelli’s enduring success.

that is getting closer to how i find some gems , i am probably not as flexible as these guys , but sometimes i have made what seems 'inspired exits ' BCT , IPL , ISX , AMP , ART , EML , ... having that nagging worry , and grabbing the parachute , just before the unexpected strikes

in dark , dusty corners , so illiquid even small-cap funds can't get a good position without moving the market .

but one day the value is so attractive , a small fund jumps on board moving the market for me

 

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Michael Mauboussin: The Hard Truth About Drawdowns​

Let’s cut to the chase: if you can’t stomach big drawdowns, you shouldn’t be investing in stocks. As Michael Mauboussin and Dan Callahan put it in their latest Morgan Stanley report, Drawdowns and Recoveries, Charlie Munger’s take on this is brutally clear:

“I think it’s in the nature of long-term shareholding with the normal vicissitudes in worldly outcomes and in markets that the long-term holder has his quoted value of his stock go down by say 50 percent. In fact, you can argue that if you’re not willing to react with equanimity to a market price decline of 50 percent 2 or 3 times a century, you’re not fit to be a common shareholder and you deserve the mediocre result you are going to get—compared to the people who do have the temperament who can be more philosophical about these market fluctuations.”

Ouch. But here’s the kicker: even the best investments suffer massive drawdowns. Mauboussin notes: “The partnership that Munger managed produced a compound annual growth rate of 19.8 percent from 1962 to 1975, but it suffered a 53.4 percent drawdown in the 2 years ended in 1974.”

The data is staggering. “The median drawdown was 85 percent and the time from peak to trough was 2.5 years.” And here’s the real gut punch: “About 54 percent of stocks never return to par after hitting bottom.” So, more than half of the stocks that crash never recover to their former highs.

But wait—there’s a twist. “The average recovery, at nearly 340 percent of par, is a lot higher than the median recovery because of the skewness in the data. This tells you that some stocks produced very high returns off of the bottom.” In other words, a few outliers skyrocket, pulling up the averages while most languish.

Mauboussin drives this home with a stark example: “Assume a stock peaked at $100 and draws down 77.5 percent… to $22.50. If the stock recovers to the median of that cohort, 122 percent of par, the stock would be up 5.4 times ($122 ÷ $22.50 = 5.4).” Sounds great, right? But here’s the catch: “The unrealistic assumption is the ability to buy at the bottom.”

Even the best stocks punish you. Take NVIDIA: “From January 4, 2002 to October 8, 2002, NVIDIA’s stock dropped 90 percent… The median time back to par for all companies is 2.5 years. NVIDIA shares fell more quickly and recovered more slowly than the median stock within the S&P.” Yet, long-term holders were rewarded—if they didn’t panic.

Contrast that with Foot Locker: “The stock had a maximum drawdown of 91 percent… It took 13.6 years… to return to par.” And even then, “In May 2025, Foot Locker agreed to be acquired… for $24.00 per share. That price is 30 percent of the stock’s all-time peak price.”

The lesson? “Trying to pick a bottom is a fool’s errand.” But if you’re going to try, Mauboussin offers a stark reminder: “The first step in the path to recovery is acknowledgement of the hurdles the business faces.”

So, can you handle the truth? Because as Mauboussin puts it: “Big drawdowns are a price to pay for superior long-term investment returns.” If you can’t take the heat, stay out of the market.

You can find the paper here:

Drawdowns and Recoveries – (Mauboussin, Callahan)

 

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Li Lu: How To Invest During Turbulent Times​

n a wide-ranging and deeply philosophical keynote at Peking University, Li Lu, founder of Himalaya Capital, offered a roadmap for value investors grappling with today’s turbulent environment. He reminded the audience, “The macro is what we must accept; the micro is where we can and should make a difference.”

Li Lu doesn’t shy away from the challenges. “Both domestically and internationally, a series of issues have emerged in recent years that can be referred to as the ‘predicaments of our era,’” he warned, pointing to rising youth unemployment, deflationary pressures, and a strained global order. But rather than panic, he urges long-term investors to lean into clarity and discipline.

The heart of Li’s message is enduring: know what real wealth means. “The essence of wealth is the proportion of purchasing power in the economy,” he said. In a world of inflation and macro volatility, “static wealth, carried in cash, cannot achieve sustainable, compound growth.” His solution? Own “shares of the most dynamic companies in the most vibrant economies.”

Importantly, Li distills the philosophy of value investing into six core principles. Among them: “A stock is not just a tradable piece of paper; it represents part ownership of a company.” And investors must “fish where the fish are,” meaning focus on sectors and markets where mispricing exists and competition is low.

Perhaps most critically, he emphasizes the concept of a “circle of competence,” urging investors to “clearly know what they understand, what they do not, and the boundaries” of their knowledge.

Li also pays tribute to mentors like Charlie Munger, sharing a story of Munger fishing in different lakes with a local guide. The takeaway? “Investors don’t need to understand every company… The key is to find that ‘lake’ where you can catch fish.”

Drawing inspiration from history, Li notes that value investing was born in times of turmoil. “Ben Graham… discovered the methodology of value investing during a time of tremendous macroeconomic challenges,” including the Great Depression and WWII. Similarly, John Templeton bought every U.S. stock under $1 in 1939, profiting handsomely.

In closing, Li reaffirms the enduring appeal of value investing: “It is a way to breathe in sync with the times and grow together with it.” For investors seeking stability in uncertain times, his message is clear: focus on what you can control, stay rational, and invest with a long-term mindset rooted in deep understanding.

You can read the transcript from the keynote here:

Li Lu – Keynote Speech Peking University – December 2024

 

[divs4ever]

Michael Mauboussin: The Hard Truth About Drawdowns​

Let’s cut to the chase: if you can’t stomach big drawdowns, you shouldn’t be investing in stocks. As Michael Mauboussin and Dan Callahan put it in their latest Morgan Stanley report, Drawdowns and Recoveries, Charlie Munger’s take on this is brutally clear:

“I think it’s in the nature of long-term shareholding with the normal vicissitudes in worldly outcomes and in markets that the long-term holder has his quoted value of his stock go down by say 50 percent. In fact, you can argue that if you’re not willing to react with equanimity to a market price decline of 50 percent 2 or 3 times a century, you’re not fit to be a common shareholder and you deserve the mediocre result you are going to get—compared to the people who do have the temperament who can be more philosophical about these market fluctuations.”

Ouch. But here’s the kicker: even the best investments suffer massive drawdowns. Mauboussin notes: “The partnership that Munger managed produced a compound annual growth rate of 19.8 percent from 1962 to 1975, but it suffered a 53.4 percent drawdown in the 2 years ended in 1974.”

The data is staggering. “The median drawdown was 85 percent and the time from peak to trough was 2.5 years.” And here’s the real gut punch: “About 54 percent of stocks never return to par after hitting bottom.” So, more than half of the stocks that crash never recover to their former highs.

But wait—there’s a twist. “The average recovery, at nearly 340 percent of par, is a lot higher than the median recovery because of the skewness in the data. This tells you that some stocks produced very high returns off of the bottom.” In other words, a few outliers skyrocket, pulling up the averages while most languish.

Mauboussin drives this home with a stark example: “Assume a stock peaked at $100 and draws down 77.5 percent… to $22.50. If the stock recovers to the median of that cohort, 122 percent of par, the stock would be up 5.4 times ($122 ÷ $22.50 = 5.4).” Sounds great, right? But here’s the catch: “The unrealistic assumption is the ability to buy at the bottom.”

Even the best stocks punish you. Take NVIDIA: “From January 4, 2002 to October 8, 2002, NVIDIA’s stock dropped 90 percent… The median time back to par for all companies is 2.5 years. NVIDIA shares fell more quickly and recovered more slowly than the median stock within the S&P.” Yet, long-term holders were rewarded—if they didn’t panic.

Contrast that with Foot Locker: “The stock had a maximum drawdown of 91 percent… It took 13.6 years… to return to par.” And even then, “In May 2025, Foot Locker agreed to be acquired… for $24.00 per share. That price is 30 percent of the stock’s all-time peak price.”

The lesson? “Trying to pick a bottom is a fool’s errand.” But if you’re going to try, Mauboussin offers a stark reminder: “The first step in the path to recovery is acknowledgement of the hurdles the business faces.”

So, can you handle the truth? Because as Mauboussin puts it: “Big drawdowns are a price to pay for superior long-term investment returns.” If you can’t take the heat, stay out of the market.

You can find the paper here:

Drawdowns and Recoveries – (Mauboussin, Callahan)

now if i think the stock is still worthy of cash injection , despite being in a determined slide , about minus 20% i reassess the stock and IF i still like it i will buy some more say 25% to 30% down on the initial buy , IF the stock still keeps dropping to say 50% ( ish ) , again i re-assess ... etc etc.

now one beginner mistake i made when applying this strategy to MQG in 2011 , was that each buy was for the same number of shares for each buy , in hindsight a better outcome would have been buying the same dollar value each time .

now obviously in a widespread market turn-down , you need to be highly selective OR buy an index ( or sector-focused ) ETF to apply this strategy , ( trying to buy 20 stocks cheap at the same time can be distracting )

but despite all assurances the market CAN go down , and some of those drops can be SAVAGE ( work out some strategies for yourself , just in case )