Do you mean, "The New Buffetology" by Mary Buffet & David Clark?

Nice to know your viewpoint on this subject, BubbleVision!

Thanks BubbleVision

You seem to be a voracious reader. Nice to know about this book.

By the way, my parachute is always wide open !!

Basant,

Thanks for the great compilation of books.

I have read three books from your list and trying to read other books.

There is another book, I am reading now. "Poor Charlie's Almanac" written by Charles Munger. This man is only second to Warren Buffet. You can try this book. I find the book very interesting and gives great insight to value investing. You can also realise how value investing and human values go together and complimentary to each other.

Shashi Praharaj,

Mumbai

The Tao Jones Averages A Guide to whole-brained investing by Bennet Goodspeed is excellent. An interesting point from the book-Jim Rogers is predominantly left-brained-analytically inclined and not emotionally attached to his investments.

This one is for Mr.Kulman. Buffettville

http://www.go2cio.com/extra/link.php?catid=1 - http://www.go2cio.com/extra/link.php?catid=1

By the way kulman ji you are not a secular man in our political term (Cong. & Leftist) why did`nt you mention "QURAN" with "GITA & BIBLE". Mind you I have written QURAN with respect so please dont take this other wise, this clarification is important for my safety.

Sir, Please take it lightly it was "JOKE cum Advice" but yet did`nt used "QURAN"  losely..

Great. For the jokes and humour we have the section lounge. It is really very funny. In fact we hjave a very different profile of audience contributing to that section.

Students should start by actually investing small sums, not just investing on paper. Without actually investing, one will not experience the emotions resulting from price increases as well as price decreases. “There are books on investments and sex. But, the real thing is different”.

Infact this advice should me made in from of a screensaver in every traders Comp....It takes courage to be a pig.It takes courage to ride a profit with huge leverage.... When you right on something, you cant own enough

A small slide show on http://images.businessweek.com/ss/06/10/dharma_dons/index_01.htm?campaign_id=rediff - The Dharma Dons: A few of today's most prominent management thinkers of Indian descent.

BubbleVision, I downloaded that presentation on Great  http://www.usc.uwo.ca/clubs/investment/downloads/investors.ppt - Traders . It is interesting.

Strangely though the filename is "investors.ppt". So I changed the file name while saving on my PC otherwise Mungerilal kind of feeling will resurface!

At present i am reading:

In the winter of 1928, goes the legend, Joseph Kennedy, the famous American businessman, stopped by a shoeshine stand on the way to his posh Wall Street office. The shoeshine boy worked up a sweat trying to earn a tip, but the humorous Kennedy was going to offer the boy a tip of a different kind.

When the boy swiped the rag across the rich gentleman's shoes for the last time and looked up at him from the dirty sidewalk, Kennedy said: "You've done a fine job, my boy. So, here's a tip for you: Stay in school." And he smiled and chuckled as he walked away pulling up his nubuck leather gloves, walking cane under his armpit, very pleased by the joke.

But the boy was not of the timid kind. "Oh yeah," he yelled back at Kennedy, "well, I got a tip for you too: buy Hindenburg!" Intrigued, Kennedy turned around and walked back. "What did you say?" – "Buy Hindenburg, they are a fine company," said the boy. "How do you know that?" –- "A guy before you said he was gonna buy a bunch of their stocks, that's how." – "I see," said Kennedy. "That's a fine tip. I suppose, I was a little harsh on you earlier," he said, pulling off a glove and reaching in his side pocket for some change. "Here, you've earned it."

Little did Kennedy know that the man whose shoes the clever boy polished before him was not a stockbroker with a hot tip. He was a naval engineer from a base in New Jersey, who, flattered by the kid's attention to his golden-button uniform, told him that for Thanksgiving the navy would float a huge zeppelin in the sky called Hindenburg – but made the boy promise that he would never, never ever get close to it because of the dangerous gas they used to make it fly.

Little did the boy know that Kennedy, a cunning investor, thought to himself: "You know it's time to sell when shoeshine boys give you stock tips. This bull market is over."

So, the past performance in various aspects of life is not a good indicator of things to come, or is it? “I do not deny that if someone performed better than the crowd in the past, there is a presumption of his ability to do better in the future. But the presumption might be weak, very weak, to the point of being useless in decision making. Why? Because it all depends on two factors: The randomness content of his profession and the number of monkeys in operation,” writes Taleb.

Randomness is obviously a complicated word for chance. To prove his point, Taleb considers a situation where in he has 10,000 fictional investment managers. It is assumed that during a year, each one of them has 50% probability of making $10,000 or 50% probability of losing $10,000. It is also assumed that once a manager has had a bad year, i.e. he has lost $10,000, he is thrown out of the sample. “Thus, we will operate like the legendary speculator George Soros who was said to tell his managers gathered in a room: “Half of you guys will be out by next year,” writes the author.

A toss of a coin decides who wins and who looses. “Heads and the manager will make $10,000 every year, tails and he will lose $10,000. We run it for the first year. At the end of the year, we expect 5,000 managers to be up $10,000 each, and 5000 down $10,000. Now, we run the game a second year. Again, we can expect 2,500 managers to be two years in a row; another year, 1,250; a fourth one, 625; a fifth, 313. We have now, simply in a fair game, 313 managers who made money for five years in a row. Out of pure luck,” he writes.

Taleb then makes the argument a lot more interesting. An urn having 45 black and 55 red balls comes in. Every time a ball is drawn, the urn is replaced with a similar ball. If a black ball is drawn then it is assumed that the investment manager earns $10,000 and if a red ball is drawn he is expected to lose $10,000. As Taleb points out, “The manager is thus expected to earn $10,000 with 45% probability, and lose $10,000 with 55%.”

So, at the end of the first year, from a total investment manager population of 10,000, 4,500 managers would have earned a profit of $10,000. The remaining 5,500 managers i.e. 55% of the initial investment manager population, would have lost money and hence not a part of the sample.

“At the end of the first year, we still expect to have 4,500 managers turning a profit (45% of them), the second, 45% of that number, 2025. The third, 911; the fourth, 410; the fifth, 184. Let us give the surviving managers names and dress them in business suits. True, they represent less than 2% of the original cohort. But they will get attention. Nobody will mention the other 98%.”

The point being made here is that a small proportion of bad investment managers can come up with a great track record. Hence, as Taleb writes, “the number of managers with great track records in a given market depends far more on the number of people who started in the investment business (in place of going to dental school), rather than their ability to produce profits.”

And like always, this performance of the select few investment managers will be picked up by the business media, and they’ll go to town about it, making a hero out of them. “We would get very interesting and helpful comments on his remarkable style, his incisive mind, and the influences that helped him achieve that success. Some analysts may attribute his achievement to precise elements among his childhood experiences. His biographer will dwell on the wonderful role models provided by his parents; we would be supplied with black and white pictures in the middle of the book of a great mind in the making,” writes Taleb.

If in the next year, the performance is not up to the mark, the same media will try its best to tear the guy apart. The media likes to create heroes, only to pull them down on the first available opportunity.

“And the following year, should he stop outperforming ( recall that the odds of having a good year have stayed at 50%) they would start laying blame, finding fault with the relaxation in his work ethics, or his dissipated lifestyle. They will find something he did before he was successful that he has subsequently stopped doing, and attribute his failure to that. The truth will be, however, that he simply ran out of luck.”

And as far as the media is concerned, writes Taleb, “People do not realise that the media is paid to get your attention. For a journalist, silence surpasses any word.” But will we ever see a day when a journalist views the matter like a historian and says, “Today the market went up, but this information is not too relevant as it emanates mostly from noise.”

“At the end of the first year, we still expect to have 4,500 managers turning a profit (45% of them), the second, 45% of that number, 2025. The third, 911; the fourth, 410; the fifth, 184. Let us give the surviving managers names and dress them in business suits. True, they represent less than 2% of the original cohort. But they will get attention. Nobody will mention the other 98%.” __________________________________________________________

Here is the real story of Goldilocks and the three bears (as told by a bear).

• Once upon a time there was a family of three bears; a mama bear, a papa bear and a baby bear. 
• This family of bears lived in a quiet cottage in the woods.
• One day, waiting for their porridge to cool, they decided to take a leisurely walk in the woods, as bears are known to do.   
• While they were out on their walk, a little girl named Goldilocks who happened to be playing in a field nearby, discovered their house, and also the porridge inside, which, let's be honest, is not really porridge, but a metaphor for the collective savings of the three bears which they wisely keep under their mattress for fear of an economic collapse. 
• Being curious, and an expert burglar, Goldilocks managed to break into the three bears' house, though she later claimed the front door was left "wide open."
• Once inside, she examined the first bowl of "porridge'" (a metaphor for U.S. Treasuries) . 
• "This porridge is too cold!" she exclaimed.  
• So she whipped out her cell phone and ordered the Federal Reserve to take some kind of policy action to to try and force this "cold porridge" out of the hands of domestic holders and into the equity markets where returns would look great, even to bears, as long as the bears didn't bother to notice that the returns were due solely to the devaluation of their paper currency. 
• Moving on to the second bowl of "porridge," which is clearly gold, Goldilocks noted, "This porridge is too hot!" 
• So she dumped it onto the open market, even going so far as to sell gol... er, "porridge," that she doesn't even own and can never ever possibly physically deliver in order to make it unattractive to bears. 
• Finally, she moved to the third bowl of "porridge," which in this case is a metaphor for a stack of U.S. dollars that the baby bear kept under his mattress to use as "writing paper." 
• "Ahhhhh," Goldilocks said.  "This porridge is just right." 
• Then, she abruptly fell asleep in the baby bear's bed.  (Editor's note:  Certain metaphorical acts committed by Goldilocks, such as raising taxes, browbeating foreign trading partners for structural deflation, etc. have been omitted for the sake of brevity.)
• As she was sleeping, the three bears came home. 
• "Someone's been eating my porridge," growled the papa bear.
• "Someone's been eating my porridge too," growled the mama bear.
• "And someone's been messing around with my writing paper and used it all up!," cried the baby bear. 
• Just then, Goldilocks woke up, saw the three bears and screamed.  "Help!," she cried.  "Print more money!" she demanded.  "Buy something... anything!" she screamed. 
• But it was too late.  
• By 10:30 a.m. the corporate debt market had locked up, and forced selling by overleveraged hedge funds was spilling over into commodities and equities markets. 
• By 11 a.m. the first round of trading curbs kicked in, but this had the perversely ill effect of actually withdrawing even more liquidity and bids from the market. 
• By noon the Federal Reserve had called a special meeting with Wall Street's money center banks to see which, if any, could remain operable through the end of the week. 
• Goldilocks, meanwhile, was vilified in the press for her reckless breaking and entering and total disregard for good porridge. 
• The bears felt vindicated, but not particularly good.  After all, in a real bear's market, no one wins, not even the bears. 

Mohnish Pabrai, Managing Partner of Pabrai Investments, gave an illuminating presentation at this year's 2nd Annual VIC in New York City. Titled, "Dhandho! Low Risk+High Uncertainty = Ultra High Rewards," Mohnish brilliantly illustrates the rise of the Patels in the U.S hotel industry.

Coming as refugees from East Africa, the Patels were filled with entrepreneurial spirit and nothing to lose. By buying small motels, living in the motels, and staffing the motel with family members, the Patels were able to reduce overhead costs down to the bare minimum (low risk).

This low cost structure gave the Patels one of the most prized attributes in all of business: a sustainable competitive advantage. Patels had no idea how their model would work out (high uncertainty), but they did know that they had no downside (the hotels were highly leveraged).

Mohnish referred to this as The Patel Motel Dhandho model (clever choice of words).

So how did this model turn out? Collectively, Patels own over 33% of all U.S hotels (about 20,000) or so worth over $40 billion.

Essentially what Mr. Pabrai is illustrating is the arbitrage spread that exists due to a gap that start ups step in to fill. In the Patel case, because they were able to operate with the lowest costs, they were able to provide the lowest prices and so they generated super sized returns.

Like all arbitrage opportunities, however, over time the gap diminishes. As Patels applied their model on a larger scale, the profits eroded and the gap diminished. In this situation the gap persisted long enough for a lot of Patels to make a lot of money.

I found Mohnish's talk to be brilliantly refreshing. Before his discussion, I was puzzled with the title of his topic, but as I have come to discover about Mr. Pabrai, give him a few minutes and he will explain his thoughts in such a way that you taken by thier combination of simplicity and potency (I am often reminded of Warren Buffett's responses to shareholder at annual meetings in much the same way)

This talk contained valuable nuggets of information that are essential to any long-term investment philosophy: seek out companies with sustainable advantages and you don't need to take on higher risk to generate higher returns.

Mohnish's Dhandho model is a powerful frame work for all equity investors to use.