

The Master of Money: "The Snowball: Warren Buffett and the Business of Life" review - dpapathanasiou
http://www.tnr.com/story_print.html?id=12ef5554-1023-4be9-ad93-681003b280ef

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byrneseyeview
_His share price is still off more than 40 percent from its highs,
underperforming even the S &P 500._

Oh, wow. I thought Lewis was in finance, but apparently he doesn't realize
that the peak-to-trough performance of one member of an average is very likely
to be higher than the peak-to-trough performance of that average. This is
true, even with a two-stock index:

    
    
        Year  Stock A  Stock B  Avg.
        0     10       12       11
        1     12       10       11
        2     5        5        5
    

Note that A and B both had a larger peak to trough loss than the average. And
yet, the average consists of A and B.

 _e railed against derivatives as weapons of mass destruction, and now turns
out to have been sitting on a $68 billion pile of credit default swaps and
exotic put options on various stock market indexes._

He complains specifically about counterparty risk. Someone who read what he
said would know that; someone who heard thirdhand quotes might not. The
derivatives he holds don't have any counterparty risk for him, because he's
getting all the cash up front and paying out based on future events.

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davidw
I read it recently and liked it quite a bit. I think one of the things that
stuck out for me is that he and Graham were taking this sort of 'quant' (using
the term very loosely, as some people here do that, and I don't really know
about it in detail) approach back in the 50ies - they absolutely poured over
the stats in an era when that wasn't as easy as it is now. Now, Buffet is big
enough to be able to do stuff ordinary investors can't, like buy entire
companies.

In other words, perhaps part of his success belongs to a bygone era that won't
come around again.

~~~
jzachary
Graham and Buffet engaged in"fundamental analysis", which attemptes to
determin an implicit value of a company based on business
(accounting/financial) information. The traditional source of this information
is from balance sheets, income statements, sales figures, and talking with
management.

This is drastically different from "quant analysis", which tries to determine
a stock price, or engage in arbitrage, from previous movements, relations to
other stocks, and a host of other data largely irrelevant to computing the
implicit value of a company. This information comes from real-time data
streams from god-knows-where.

~~~
sachmanb
that and buffett has been outspoken against quants. he has also been accused
of 'being in the right place at the right time' or 'lucky' quite a few times,
but this is not the case.

another good book on buffett which has some sections dedicated to buffett vs
quants and buffett vs 'its all luck' ppl is "The making of an American
Capitalist" ([http://www.amazon.com/Buffett-American-Capitalist-Roger-
Lowe...](http://www.amazon.com/Buffett-American-Capitalist-Roger-
Lowenstein/dp/0385484917)) -- first book I got on him, perhaps the best (got
snowball, haven't read it yet).

~~~
byrneseyeview
The books go well together. "Making of" is way more hagiographic, and less
detailed.

What would be really great would be a wikified list of his transactions,
linked to the financial statements and news stories that were current at the
time.

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biohacker42
Great article worth the long read.

