The Tao of Buffett.

• The smarter the journalists are, the better off society is.
• My idea of a group decision is to look in the mirror. (Has a history of standing alone that dates back to the early days of his investments.)
• Rule No.1: Never lose money. Rule No. 2: Never forget rule number 1. (Apparently he drove an old VW beetle long after being a multimillionaire. Didn't know that)
• You can' make a good deal with a bad person. (If you even have to ask yourself if you trust somebody, you should immediately leave the negotiating table and look for more honest company to do business with)
• If is easier to stay out of trouble than get out of trouble.
• It is not necessary to do extraordinary things to get extraordinary results.
• My idea of a group decision is to look in the mirror.(Not one to seek affirmation from others, because so many of his ideas are opposite from what the herd is thinking.To make big money you have to be comfortable standing alone)
• With each investment you make, you should have the courage and conviction to place at least 10% of your net worth in that stock.
• Accounting is the language of business. (When Warren was asked by the daughter of one of his business associates what courses to take in college, he replied "Accounting - it is the language of business")
• Read Graham and Fisher, read annual reports but don't do equations with Greek letters in the them.
• There comes a time when you ought to start doing what you want. Take a job that you love. You will jump out of bed in the morning. I think you are out of your mind if you keep taking jobs that you don' like because you think it will look good on your resume.
• The business schools reward difficult, complex behavior more than simple behavior, but simple behavior is more effective.
• There is nothing like writing to force you to think and get your thoughts straight.(If you can't write about it, you haven't really thought about it).
• The less prudence with which others conduct their affairs, the greater prudence with which we should conduct our own affairs.
• A person's main asset is themselves, so preserve and enhance yourself.
• In the search for companies to acquire, we adopt the same attitude one might find appropriate in looking for a spouse: It pays to be active, interested, and open-minded, but it does not pay to be in a hurry.
• We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
• If you don't make mistakes, you can't make decisions.
• If you understand an idea, you can express it so others can understand it.
• If they need my help to manage the enterprise, we are probably both in trouble.
• At the beginning, prices are driven by fundamentals, and at some point, speculation drives them. What the wise man does in the beginning, the fool does in the end.
• The smartest side to take in a bidding war is the losing side.
• Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be mis-appraised.
• Uncertainty is the friend of the buyer of long-term values.
• We do not have and never will have an opinion on where the market, interest rates or business activity will be in a year from now.
• That which is not worth doing is not worth doing well.
• I buy stocks when the lemmings are headed the other way.
• You only have to do a very few things right in your life so long as you don't do too many things wrong.(Warren decided early in his investing career that it would be impossible for him to make hundreds of right investment decisions, so he decided only to invest in businesses he was absolutely sure of and then bet heavily on them).

In the short run the market is like a voting machine and in the long run it is a weighing machine. Just really understood this today. The weighing machine is never wrong! So in the long term, the market will get it right. From Joel Greenblatt:

• Over the short term, Mr Market acts like a wildly emotional guy who can buy and sell businesses at highly depressed or highly inflated prices.
• Over the long run, Mr Market gets it right.

So if do have bad stocks, be scared that Mr Market will get it right soon enough. :(

Kelly criterion and probability, stock will go down after purchase

• Answer: People overweight the most recent information. They overreact to dramatic information, or dramatic circumstances. They tend to have what's called outcome bias, which is they judge things on their outcome, and not on their process.
• Question: What's the Kelly criterion?
  Answer: What it tells you is what fraction of your bank roll you should commit to any particular probabilistic endeavor, if you know the probabilities that pertain to it. And if you know those preconditions, you will either maximize your bankroll at the fastest possible rate, or you'll minimize your loss at the slowest possible rate.
  The rough formula, is:
  2p - 1
  where p is the probability [converted from percentage to decimal form]. So, to make it easy, if you were 100% certain that a particular investment would pay off at your expected rate, then 2 times that p is 2.0, minus 1, yields 1. That means 100% of your bankroll should go into that investment.
  Now if you were only 60% sure, then it would be two times .60, which is 1.20, minus 1, equals .20. So 20% of your bankroll should go into that proposition.
  It also shows that if you have less than a 50/50 proposition, you shouldn't bet at all. Which again, makes perfect sense.
• You have to be confident that you have an edge, And if you can't identify that edge, you probably don't have it. And if you can't identify it, you probably shouldn't commit the capital to it.
• Answer: I would advise them basically to understand, A) people are overconfident, B) that therefore whatever probability you think you have of being right, it's probably less than you think. If you think you have a small edge, you probably don't have any edge at all.
• You know, Bernard Baruch said nobody buys at the bottom and sells at the top except for liars. So what follows from that is, if you're not buying at the bottom and selling at the top, then that stock will go down after you bought it. And it will go up after you sold it.
• Answer: Right. So you need to understand that your stock will go down after you buy it, and it will go up after you sell it. But what you want it to do is go down immediately after you bought it, and be lower then. You don't want it to be lower three years, or five years, or ten years. If you understand this, then the strategy of being willing to lower your average cost [by buying more when a stock drops] is a great strategy.
• Question: I have a theory that great investors are not unemotional, but inversely emotional: They get worried when the market is making most people happy, and they feel good when everyone else is worried about it. Ben Graham had that quality, and so does Warren Buffett. Do you see that in yourself?
• Answer: [veteran trader] Richard Dennis got these 10 people he was going to teach how to trade according to his system. And the system was mechanical. There was no judgment involved. And as it turned out, that after two months of trading, he was the only one of the 10 people that actually followed the system.
• And the reason was, all these behavioral things. Because the system showed you lots of losses. And then it would tend to show you big gains. The losses made people nervous, and so the whole point of the book is that Dennis actually had understood or internalized, that there was a whole plethora of behavioral anomalies that will keep people from behaving optimally in capital markets.
• Can an individual investor do what you've done - beat the market for years ?
  Answer: Oh, sure. I think that individuals [are not hampered by the obstacles] that prevent many professionals from behaving in optimal ways.
  And, more importantly, a thoughtful individual investor doing a moderate amount of homework can easily do better than the S&P 500.
  Because that portfolio which is diversified, is just allowed to evolve. They just let the portfolio evolve over time.

"It's much harder to be the guy, the guy losing money three hundred and sixty-four days out of three hundred and sixty-five,because you start questioning yourself. Am I ever going to make it back? Am I really right? What if it takes ten years? Will I even be sane ten years from now?"

Here is what I bought "The Night of the Generals" for :

• "There's a sort of brotherhood which isn't dependent on the accident of blood relationship and has nothing in common with the herd instinct. I drink to the brotherhood of reasonable men"
• "To train a man in blind obedience is tantamount to fostering stupidity. It has nothing to do with leadership. An attempt to inculcate culture and knowledge, on the other hand, presupposes culture and knowledge on the part of the teacher. Building up an army must be a mental process. If you are training a soldier to preserve peace you must train him to be a human being"
• "A general knows that in war-time he must be prepared to take this hardest of decisions unflinchingly. That being so, he has no choice but to approach his task with profound humility. He must be fully aware of his special relationship to the highest price a human being can pay"

Also thought of "Letters from Iwo Jima" when reading this. Helpless to think of jawans under control of ruthless stupid men. How do these ever become generals? Are we a stupid race overall to allow the worst of men to be our leaders? Why is stupidity and cruelty so pervasive?
Salivating over BAC and C. Why didn't I buy LYO after reading the round table ?! Lost a good opportunity. Another decent one seems KAMN. Went to jazzercise today.

To be happy at home is the desired result of all ambition. - Samuel Johnson.

Hmm, no need for more ambition from me, Iam already happy as a lark at home :) Now if only that WFMI would go up.. that would be perfect!

Inner Game of Tennis quotes

Federer definitely has the Inner Game but Nadal should have won today, he was the better player to watch.

Quotes from the Inner Game of Tennis

• Conscious trying often produces negative results.
• The best players know that their peak performance never comes when they're thinking about it.
• "Getting it together" requires slowing the mind. Quieting the mind means less thinking, calculating, judging,worrying, fearing, trying, regretting or hoping. One should try and increase the frequency of quieting the mind.
• When we unlearn how to be judgemental, it is possible to achieve spontaneous, concentrated play.
• But who said that Iam to be measured by how well I do things? In fact, who said that I should be measured at all? Who indeed? The value of a human being cannot be measured by performance.
• As long as Self 1 (the conscious self- teller) is ignorant of the true capabilties of Self2(doer), he is likely to mistrust it. This causes him to try too hard, self-condemn and be judgemental. Trust yourself instead.
• Relaxation produces smooth strokes and results from accepting your strokes even if they are erratic
• Perhaps a better way to describe a player who is "unconscious" is by saying that his mind is so concentrated, so focused, that it is still.

From this article on non-conformists, fear same for Tulip :

Then there was my daughter, who was dressed in a demure skirt and blouse. A stranger would never have picked her out as a potential rebel; if anything, she has always been determined not to stand out.

My daughter, who, underneath her shy and somewhat diffident exterior, has always harbored the soul of an iconoclast. While I am volubly contrarian, she has always quietly done her own thing. The truth is, I am of mixed minds about having handed on the mantle of dissent to my daughter. I worry that her instinct to think for herself is as much a curse as a blessing — that she will, end up standing warily on the sidelines.

So although I admire my freethinking daughter, I also feel anxious on her account. My hope is that her idiosyncratic take on the world will lead her to unexpected places rather than to an embittered outlook. Here was a girl who eschewed getting smashed and hooking up.Far safer to bet that she’d get with the program in her own laggardly time and unlemminglike way.

Was reading the Dhando Investor by Pabrai. Talks of the business communities in India.

Marwaris : Simply expect all their invested capital to be returned in the form of dividends in no more than three years. They expect that, after having gotten their money back, their principal investment continues to be worth at least what they invested in it. They expect these to be ultra-low risk bets.

If you use this calculation, you'd quickly take a pass on most investments offered to you.

Free cash flow = money that can be removed from the business