1/"All Losses Are Not Alike: Real versus Accounting-Driven Reported Losses" by Feng Gu, @lev_baruch and Chenqi Zhu. Dwells on the important distinction between losing money because of accounting method and losing money because of a poor business: papers.ssrn.com/sol3/papers.cf…
2/"the results of this study demonstrate the fundamental differences between losses driven by the immediate expensing of internally-generated intangible investments and losses reflecting genuine business performance shortfalls."
3/"Standard accounting reports, however, do not properly reflect these differences and their implications."
4/"GAAP losers" outperform "real losers" over time
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1/Yesterday was my last meeting as chairman of the board @sfiscience. Serving the board, the team at the Santa Fe Institute, and our scientific community has been an honor.
2/And I am thrilled that board voted to make Katherine Collins, @honeybeecap, our next chair. She's SFI's 12th chair in 37 years and the first woman to serve in this capacity. She is an awesome colleague and will be great in this role.
1/Tonight I start Security Analysis @Columbia_Biz. This is my 28th consecutive year teaching the course and I am as nervous as ever. Preparation always provides a wonderful opportunity to take stock of process. www8.gsb.columbia.edu/courses/mba/20…
2/Ben Graham started this program in 1927 at the Extension Division of Columbia College. He taught in a building a few blocks from where we'll be tonight. Graham didn't teach at the business school until 1951 - and he had a pretty good student in that class - @WarrenBuffett
3/People often think about value investing in one of two ways: (1) statistical factors - e.g., P/B, P/E; or (2) buying securities with prices below value. I am firmly in the second camp, although the approaches are not mutually exclusive Sometimes statistically cheap = good value
1/Spent some time with some of the books on these shelves this weekend. There are some great ones...
2/Phil Mirowski's book, More Heat than Light, is 30 years old but still fascinating. A complementary read to @ole_b_peters work on ergodicityeconomics.com. "the progenitors of neoclassical economic theory boldly copied the reigning physical theories in the 1870s."
3/David Warsh's book, Knowledge and the Wealth of Nations, is also great. In my notes, I wrote down four ways in which we refer to "increasing returns" in economics
A couple of weeks ago I mentioned Jeff Friedman's book, War and Chance.
It's about uncertainty in international politics, but has a lot of application to thinking about businesses and investing. Some thoughts: amazon.com/War-Chance-Ass…
2/Two quotes from early on:
“…analysts avoid assessing uncertainty in a manner that supports sound decision making" and “analysts cannot speak about the future without engaging in some form of probabilistic reasoning.”
3/Common mistakes:
1.Use words of estimative probability instead of probabilities themselves;
2.Discuss relative probability – probability assessment that conveys an analyst’s beliefs with respect to an unspecified baseline;
1/A quick comment on Buffett and buybacks. The comment in today's letter, "Blindly buying an overpriced stock is value destructive," is not incorrect but it is incomplete
2/Here's the way to think about it
3/The first point is that value is conserved. If a company is worth $100,000 and it pays out $20,000, the new value of the company is $80,000 and $20,000 is now out in the world