Reste avec moi s'il vous plaît

Original here: http://online.wsj.com/article/NA_WSJ_PUB:SB10001424052748703545604575407603142377076.html

How is Bruce Berkowitz making your mutual fund managers look bad? Easy. By doing all the things they say can’t be done. Most fund companies say you can’t time the market. He has. They say you shouldn’t hold lots of cash in an equity fund. He does. They say you mustn’t put too much money into a few stocks. He does that, too.

However, in general we do not say ‘you should not hold lots of cash in an equity fund’, although it may make your portfolio looks a little weird. Cash is the most universal tool available and the most liquid one as well.
The last statement of putting too much money into a few stocks is  no doubt a double-edged sword when it comes to strategy. All or nothing and winner takes it all. Remember: a strategy that earned money in any specific time period is NOT yet proved to be a right one, scientifically or practically. This is the most annoying feature of finanical market: you never know if you were truly right or it was no more than a coincidence that in favor of you.

He puts those names through tough stress tests–”he tries to kill the company,” as Mr. Breen puts it–before buying.
Stress test : a common methodology that the governments use on grand financial institutions during crisis. Wait.What does that reminds us of?Or why don’t we all nip in the bud?

Unlike Mr. Buffett, he’s willing to switch around a lot. With remarkable timing, he jumped out of energy stocks near the peak two years ago, hunkered down in defensives for much of the crash, and bought financials last year. “He’s reinvented the portfolio three or four times,” says Mr. Breen.
Remarkable timing. Did you see the glitter around the letters?Market timing needs some gift besides a CFA charter.

Mr. Berkowitz is an excellent investor, but he has not discovered the Holy Grail. None exists.
Well, but it may exist, in people’s hearts?If someone is extremely eagle-eyed and looks extremely hard?

In general, market is a place of possibilities and events. One happen event doesn’t necessarily mean that it had to happen or the chance is larger. There will be winners and losers, but most of the time, nobody knows why or how. It just happens.

Click to access sserule20060515.pdf

http://online.wsj.com/article/SB10001424052748703478704574612533936177614.htm

Very insightful article from Wallstreet Journal.

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The price something used to be is irrelevant.
Psychologists call this “anchoring” — we let previous prices influence our views of current value.
Let’s track back to old economic theories first which state that price is a reflection of both supply and demand force.  It is of course a signal lamp of corresponding condition of the market, hence a reference when we are predicting the future.

It is true that whatever the price curves look like, it usually moves little by little, if seen in short intervals(daily chart, for example). The key factor is that the information we emphasize routinely(like the new price of a fixed asset as of an internet portal) is merely a point, rather than the full curve of the whole picture.   our brain functions more like the RAM than the hard-disk : Upon a new price’s arrival, the old one got erased much more than consequent continuation.

Have a portfolio that doesn’t keep you awake at night.
For real people with real lives, investments that let you sleep at night are far more valuable than exciting speculations that offer “pin action” and “momentum”.

Investment is completely different from speculative trading : if you trust your investment, why don’t you stick on it and enjoy the possible gain brought by a, say, buying-in during a market crash?

Beware the phrase “relative value.”
It’s the financial equivalent of “half pregnant”—pure nonsense.
Not ‘pure’, just nearly.
When someone says that he/she wants to invest in some specific field, such as telecom/beverage, relative pricing works best inituitively, if not hypercritical on the absolute value. Yet it is the bottomless expansion that ruins this valuing methodology.Certain advices of a buy order come right from relative valuation, which IS nonsense: there’s always stocks relatively cheaper than others, whatever it’s already highly overpriced, or not.

There is no substitute for saving.
Anyways,  saving equals to be a ‘house slave’ to some certain cities of Emerging Markets:Shanghai, Bombay and New Delhi.

Never confuse a trade with an investment.
This is one of the main conflicts between analysts with a view to a long run and front-line traders.

Never confuse the unlikely with the impossible.
Ten years ago it seemed unlikely that Enron and WorldCom (and Bernie Madoff) were giant frauds, or that oil, recently $10 a barrel, would rise to $140, or that gold would skyrocket above $1,000 an ounce,or that Bear Stearns and Lehman Brothers would collapse, or Fannie Mae, Bank of America and AIG would all need a rescue.
It goes without saying that, the famous ‘Black Swan’ Effect.