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- Manlobbi
Halls of Shrewd'm / US Policy❤
No. of Recommendations: 5
Just finished Guy’s 20 page annual letter. I thoroughly enjoyed it and reinforced some core principals common to most of us shrewds. I thought it was very well written, honest, insightful and full of uncommon sense with many parallels to the BRK philosophy. Topics include performance, not chasing the latest fad of recent successful investing, patience, long-term orientation, position building/ sizing, watering the flowers, avoidance of permanent capital loss/staying in the game, compounding, BRK, BYD, AXP, caution wrt Mag. 7, investing in India, aligned interests/ having skin in the game, importance of health/life balance & relationships and some Emersonian overtones.
https://www.aquamarinefund.comI received a link to the latest aquamarine letter via email and after email verification and reading the disclosure was provided access to the DocSend. I’ve briefly met Guy and think very highly of him as a fund manager, intellectual and human being.
No. of Recommendations: 3
His best holding to buy, at current prices/valuation, is Nestle. He has owned it forever.
BIG First Manhattan, Tom Russo and Tweedy Browne position. Under 20x earnings>>>GIFT.
Boring but never going away in 100 years.
No. of Recommendations: 1
What has guy’s record been net of fees?
No. of Recommendations: 0
On his website
He is trying to compound $ with no loss of capital>>>beating the index is not the game
No. of Recommendations: 26
What has guy’s record been net of fees?
I had looked into this a while back and the answer is long term underperformance. He is a good teller of stories in the Buffett style to those that value that sort of thing but his anointed "guru" status is more a product of marketing via blogs and books to a receptive crowd than anything justified by investment performance. In addition, I got the impression that he has few original ideas.
No. of Recommendations: 2
Thanks. I need to check out monish pabrai as well. Since he rides the Buffett / Munger coattails
No. of Recommendations: 8
guy has been in the 'stay rich' club for a while.
ever since he stopped discussing details on individual positions, his philosophy has become quite repetitive, and not tangibly actionable. i preferred the interesting earlier days, even if it meant massive busts like horsehead.
biggest takeaway : move somewhere nice and live the good life with no stress.
No. of Recommendations: 12
Since he rides the Buffett / Munger coattails
My term for these folks is "Buffett Remora".
There are a lot of them, both money managers and authors. They will be present in abundance at the annual meeting.
Some of the authors earn their rewards. It' hard to find money managers who do. But they talk an excellent game.
Ppant captured this well. They have a receptive audience.
No. of Recommendations: 1
Of course, ppant sums it up exactly how I see it.
No. of Recommendations: 8
In a recent Richer, Wiser, Happier podcast episode featuring Guy Spier, William Green opened with the following: "Guy launched the Aquamarine Fund back in 1997. By the end of February 2024, the fund had returned a total of 932 percent. To put that in context, this means that he’s beaten the S&P 500 Index by 157 percentage points, and the MSCI Global Index by 396 percentage points over the last 26 years or so. That record puts Guy in a tiny minority of fund managers who have outperformed the market over more than a quarter of a century."
No. of Recommendations: 11
In a recent Richer, Wiser, Happier podcast episode featuring Guy Spier, William Green opened with the following: "Guy launched the Aquamarine Fund back in 1997. By the end of February 2024, the fund had returned a total of 932 percent. To put that in context, this means that he’s beaten the S&P 500 Index by 157 percentage points, and the MSCI Global Index by 396 percentage points over the last 26 years or so. That record puts Guy in a tiny minority of fund managers who have outperformed the market over more than a quarter of a century."
This might be an example of marketing to an encouraging interviewer who is already an admirer and receptive audience.
I have the performance record from his recent letter. For any holding periods less than 20 years, he has underperformed the S&P. In fact the record shows that he has underperformed in "every" holding period between 1 and 20 years which is by itself pretty remarkable. All the "outperformance" is if you started your holding between 20 and 24 years ago.
I think it may be a similar case with Pabrai.
To his credit he supplies the figures pretty transparently but the marketing and positioning tells a different story. This might explain why some these managers are guarded in sharing a lot of this information publicly.
No. of Recommendations: 15
This might be an example of marketing to an encouraging interviewer who is already an admirer and receptive audience.
I have the performance record from his recent letter. For any holding periods less than 20 years, he has underperformed the S&P. In fact the record shows that he has underperformed in "every" holding period between 1 and 20 years which is by itself pretty remarkable. All the "outperformance" is if you started your holding between 20 and 24 years ago.
I think it may be a similar case with Pabrai.
To his credit he supplies the figures pretty transparently but the marketing and positioning tells a different story. This might explain why some these managers are guarded in sharing a lot of this information publicly.
Though I have no information about whether or not they are good investment managers, one metric for any manager that isn't very useful is the performance over the last 1/2/5/10/15 years. Which is of course what you most often see.
Why is it a terrible metric? because all those figures end today, so in one sense it's only one data point. Today might be a typical end date, making all the figures pretty meaningful. Or today might be an unusual end date, making all the figures wildly atypical to the upside or the downside.
Underperformance over short to medium to even medium-long periods might mean one of two things: the stuff in their wheelhouse is very cheap right now, or they are terrible managers. Those figures give you zero information about which situation it is. For example, virtually every outstanding value manager failed over almost any lookback you care to choose if you looked at all the return figures for all the various holding periods ending around the exact same time in 1999.
Check out the year by year returns. I like to look at a graph of the ratio of managed portfolio value to [appropriate] index portfolio value. A flat line is an index tracker. It is an uptrend with a dip at the end (everybody has a bad year) or is it a gradual downwards trend over many many years? Is it jagged, meaning a lot of big random positions?
Jim
No. of Recommendations: 14
Underperformance over short to medium to even medium-long periods might mean one of two things: the stuff in their wheelhouse is very cheap right now, or they are terrible managers.
Not really. All it is telling you that through various cycles over a fairly long time, a passive index was more efficient manager of your wealth than this manager. 20 years is a significant chunk of time.
I undertstand that the manager could be particularly unlucky when the point at which the end date for comparison is set is particularly unfair or untypical.
In this particular case there is plenty of data available that suggests that this is not likely to be the case.
Given the data I saw for this manager, I wouldn't waste time going through the convolutions to find some justications when it comes to choosing a wealth manager for myself if there was ever a need. Obviously others might be more generous with their money or their time !
No. of Recommendations: 0
I agree with the idea that it's been tough for active value managers to compete against the S&P in the last couple of decades, especially given the current lofty valuations on that index. How does Spier do against the MSCI Global Index over the timeframes you mentioned? I'm not sure why he'd use the S&P as a benchmark rather than the MSCI index. Being based in Europe, I'm sure he's got a lot more non-U.S. holdings than most U.S.-based managers.
No. of Recommendations: 1
"In this particular case there is plenty of data available that suggests that this is not likely to be the case."
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Using performance data from Guy Spier's latest 2023 Aquamarine Annual report,
https://www.aquamarinefund.com/aqua-ar/The 1,3,5,10,15,& 20 yr IRR returns, relative to the S&P, are all negative varying from;
-1.2%/yr...(20 yrs)..... ($785 in Aqua for every $1000 in S&P)
-5.9%/yr...(10 yrs)..... ($554 in Aqua for every $1000 in S&P)
ciao
No. of Recommendations: 19
The 1,3,5,10,15,& 20 yr IRR returns, relative to the S&P, are all negative varying from;
-1.2%/yr...(20 yrs)..... ($785 in Aqua for every $1000 in S&P)
-5.9%/yr...(10 yrs)..... ($554 in Aqua for every $1000 in S&P)
FWIW, my own comment was not about the Aquamarine Fund, but about what metrics are sensible ones. This isn't a sensible one. These metrics are not sufficient to tell you much so should be ignored unless you have much better data to supplement it. The reason is that all those figures end at the same spot, so it's really only one data point.
For example, consider Berkshire's performance relative to market (S&P 500) ending in early 2000:
1 year - underperformance by -50.5%/year
2 years - underperformance by -26.9%/year
3 years - underperformance by -14.3%/year
4 years - underperformance by -17.4%/year
5 years - underperformance by -10.3%/year
6 years - underperformance by -2.7%/year
7 years - tie
10 years - outperformance by only 1.9%/year
The reason wasn't bad performance and consistent lagging for a decade, it was that the end period of ~18 months to Feb 2000 was unusually poor. That poor stretch was anomalous and transient. Poor relative-to-market trailing 1/2/3/5/10 year performance stats by themselves can't distinguish between a recent hiccup and a long slow torture of money loss.
Again, this isn't saying anything about the Aquamarine Fund being useful or not, merely that you can't tell one way or another from that statistic. Money managers love to quote if when they have just had a good stretch specifically BECAUSE it's a terrible metric of their performance. One good short stretch unduly flatters a whole lot of longer intervals ending at the same point.
Jim
No. of Recommendations: 4
"These metrics are not sufficient to tell you much so should be ignored unless you have much better data to supplement it."
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In totally agree with your comment regarding the starting & ending points being carefully chosen to make one’s point.
However…. I still feel that over a long term, the 1,3,5,& especially the 10,15,20 Yr relative comparisons are of value as Morningstar uses these time periods for its relative comparisons.
As you make the point, the 5 Yrs from 95 thru 99 were , as the Queen would say, “Annus Horribilis” for Berkshire and would guess many on this board recall the "Y2K" & "Party Like It’s 1999”, feeling existing & promoted by Wall St.
I was also convinced that Berkshire was being managed by the best CEO in the country and fully accepted his comments on " Not understanding Tech" as a reason to avoid the investments that could have increased Berkshire's performance in the Y@K runup.
In the Aqua case, "ALL" comparison % were negative over the last 20 yrs & I would find it hard to look much further into an investment that had a 20 yr history of underperformance.
In the case of Berkshire, the 5 years 95 to 99 were also negative however the previous 30 yrs were "ALL" positive with IRR out-perf of the S&P varying from 2.3%/yr (10yrs) , 9.8%/yr (15 yrs), 11.8%/yr (20 yrs)….14.8%/yr (35 yrs , 1965 to 1999).
Over this 35 yr period , Berkshire’s IRR outperformed the S&P over all but the last 5 and the worst starting point for comparison.
ciao
No. of Recommendations: 0
In totally agree with your comment regarding the starting & ending points being carefully chosen to make one’s point.
However…. I still feel that over a long term, the 1,3,5,& especially the 10,15,20 Yr relative comparisons are of value
Wouldn't it make more sense to avoid start/end point effects by using one of those metrics, like 1-year-performance, or a few of them (1, 2, and 3 years) and to look at the average relative performance in ALL intervals during a long enough timeframe?
Kind of "In how many of all 2 year intervals '1.1.xxxx - 1.1.xxxx +2' between 2000 and now did BRK under/overperform and by how much on average?" With eventually even using a smaller timeframe than 2000 and now, maybe 10 years only, and shifting that 1 year at a time forward/backward, each time repeating this evaluation? Wouldn't the results be much much informative?
Just a spontaneous thought, not really thought through.
No. of Recommendations: 1
Does anyone here invest in the Aquamarine Fund?
No. of Recommendations: 2
"Thanks. I need to check out monish pabrai as well. Since he rides the Buffett / Munger coattails"
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The Pabrai Funds Q1 results for it's oldest fund, PIF2, are discussed in this weeks April 17, 2024 letter to partners.
https://pabraifunds.com/letter-to-partner/The 1 yr PIF2 perf ending 3/31/24 outperformed the benchmark S&P by ~+20% however results for longer term holders, the 3,5,10,15,& 20 year %/Yr comparisons are all neg similar to Guy Spier's Aquamarine Fund.
%/Yr shortfalls vary from ~ -2%/yr at 20yrs to ~ -10%/yr at 10 yrs.
ciao
No. of Recommendations: 4
Guy seems to be more LTBH orientated (despite returns) Pabrai seems to chop and change a lot more despite saying he's LTBH, opening new funds etc. Is that for marketing purposes do you think so he can quote attract 1 & 3 year rates. There seems to be a lot of material focussed around marketing rather than quoting 10 or 20 year truck record.
No. of Recommendations: 5
Similar to the Kardashians, some folks are famous for being famous.
No. of Recommendations: 0
His returns suck. Period.
But he admits it is about quality of life and preservation of his family's capital NOT outperforming INDEX. Good for him bad for outside investors. Have to be nuts to pay him a fee for that>>>prove me wrong.
Smooth marketer.
No. of Recommendations: 5
This may be the reason why Mr. Bufett did not hire either Pabrai or Spier to handle investments at Berkshire. Mr. Buffett has known them since their famous lunch in 2007 at the Smith & Wollensky steakhouse in New York City. Pabrai was also close to Charlie Munger.
During and after that lunch, Mr. Buffett was actively looking for investment managers for Berkshire. He hired Todd Combs in 2010 and Ted Weschler in 2012.
No. of Recommendations: 1
From all the interviews I've read and listened to from T&T they are like clones on Warren and Charlie.
WEB definitely recruited in his own image.
However, even with T&T and Greg, BRKs future may be better off by investing excess cash in indexes.
No. of Recommendations: 30
This may be the reason why Mr. Bufett did not hire either Pabrai or Spier to handle investments at Berkshire. Mr. Buffett has known them since their famous lunch in 2007 at the Smith & Wollensky steakhouse in New York City. Pabrai was also close to Charlie Munger.
There was no reason whatsoever for Buffett to even consider hiring them. They were run of the mill small-money investment managers who leveraged a winning bid in a charity auction to create careers as a kind of investing celebrity. They are good at marketing via association. The amazing thing is that both have managed to get themselves perceived as investing "gurus" even to the extent that dataroma has dedicated pages for both in their guru list. This is good marketing and none of this is backed by any exceptional performance as far as I can see,
To be fair, there has always been a demand for gurus dispensing wisdom particularly in investing which a lot of people find confusing. They are just supplying this demand. They seem like nice guys who are just running their businesses but I haven't detected much behind the level of hype they generate for themselves.
No. of Recommendations: 11
What is interesting to me is there are probably several posters here who have far superior track records but are modest.
No. of Recommendations: 5
Buffett has often said that money managers are better at marketing than in producing. It doesn’t get worse than at public pension funds, school endowments etc. The everyday folk on these boards are no match against the slick marketing of Wall Street. I live in Chicagoland area, one of my friends observed that the richest neighborhoods here are filled with money managers. Where-are-the-customers-yachts, anyone?
No. of Recommendations: 8
Apparently, before Pabrai launched his own investment career, he approached Buffett about a job at Berkshire. Pabrai reportedly offered to work without compensation, mirroring Buffett's own gesture to work for Benjamin Graham for free after graduating Columbia in 1951. However, Buffett declined Pabrai's request.
No. of Recommendations: 6
“ They are good at marketing via association”
Well put. 100% agree. Although I may still be biased against Pabria, having copied one of his ideas into bankruptcy back in 2007. 100% loss in 6 months.
I regularly remind myself: THERE IS ONLY ONE WARREN BUFFETT. ONE.
No. of Recommendations: 0
THERE IS ONLY ONE WARREN BUFFETT. ONE.
Boston Omaha (BOC) guys could be next Warren/Charlie
No. of Recommendations: 3
"BRKs future may be better off by investing excess cash in indexes."
There's almost no way this could be true. The excess cash is always there waiting on the sidelines for a sudden good deal that shows up. Most of the time, sudden good deals show up after a big drop. If the excess cash is in an index that means they would have to sell during or after a big drop to free up the cash to pay for the sudden good deal. Remember the GFC? Those few good deals showed up very quickly and Berkshire needed ready cash to fund them. And those good deals proved to be very profitable over time.
No. of Recommendations: 6
"And those good deals proved to be very profitable over time."
I think one also has to consider the opportunity cost of keeping funds in cash for a long time. That is, it's not accurate to look at how profitable those deals ended up being. Instead, one should compare that with what would have happened if the excess funds were invested in an index all along.
No. of Recommendations: 0
So true. Plus we really have no insight on how T&T are doing.
Also, it is not all or nothing since the cash pours in and Berkshire is arguably over capitalized. Heresy I know
No. of Recommendations: 23
As someone who was looking for a few other "value guys" over 20 years ago when I was still managing my original business, I will share that this is one of the more insightful and "spot on" threads I've read in a very long time.
Without naming names,...(Was not Pabrai, Tilson or Spier).... I kicked lots of tires in person with investors who were lauded in Outstanding Investor Digest (remember them?) and elsewhere. I mostly passed but but did make some smaller investments in a few through SMA's, funds etc. for a while. When you saw the decision making up close it was nothing like what you would expect from someone who had studied Buffett and Munger closely.
In the end I just decided I would rather do it myself. If you're gonna be good at this game there is very little time for marketing in my opinion.
When Charlie closed his partnership, he said it was like lancing a carbuncle because he knew his clients were suffering in the early 70's even though he knew it would all work out in the end. You won't find many people with that attitude that also have the skill.
A few other worthy Charlie quotes on this subject:
• “We have this investment discipline of waiting for a fat pitch. If I was offered the chance to go into business where people would measure me against benchmarks, force me to be fully invested, crawl around looking over my shoulder, etc., I would hate it. I would regard it as putting me into shackles.”
• “Most investment managers are in a game where the clients expect them to know a lot about a lot of things. We did not have any clients who could fire us at Berkshire Hathaway. So we didn’t have to be governed by any such crazy construct. And we came to this notion of finding a mispriced bet and loading up when we were very confident that we were right. So we are way less diversified. And I think our system is miles better.
However, in all fairness, I do not think a lot of money managers could successfully sell their services if they used our system. But if you are investing for 40 years in some pension fund, what difference does it make if the path from start to finish is a little more bumpy or a little different than everybody else’s so long as it is all going to work out well in the end? So what if there is a little extra volatility.
In investment management today, everybody wants not only to win, but also to have the path never diverge very much from a standard path except on the upside. Well, that is a very artificial, crazy construct. That is the equivalent in investment management to the customer of binding the feet of the Chinese women. It’s the equivalent of what Nietzsche meant when he criticized the man who had a lame leg and was proud of it.
That is really hobbling yourself. Now, investment managers would say, “We have to be that way. That is how we are measured.” And they may be right in terms of the way the business is now constructed. But from the viewpoint of a rational consumer, the whole system is “bonkers” and draws a lot of talented people into socially useless activity.
And the Berkshire system is not “bonkers”. It is so damned elementary that even the bright people are going to have limited, really valuable insights in a very competitive world when they are fighting against other very bright, hard-working people.
• “Finally, I’d like to once again talk about investment management. That is a funny business, because on a net basis, the whole investment management business together gives no value added to all buyers combined. That is the way it had to work.
Of course, that is not true of plumbing and it isn’t true of medicine. If you are going to make your careers in the investment management business, you face a very peculiar situation. And most investment managers handle it with psychological denial—just like a chiropractor. That is the standard method of handling the limitations of the investment management process. But if you want to live the best sort of life, I would urge each of you not to use the psychological denial model.
I think a select few—a small percentage of the investment managers—can deliver value added. But I don’t think brilliance alone is enough to do it. I think that you have to have a little of this discipline of calling your shots and loading up—if you want to maximize your chances of becoming one who provides above average real returns for clients over the long pull.
But I’m just talking about investment managers engaged in common stock picking. I am agnostic elsewhere. I think there may well be people who are so shrewd about currencies and this, that and the other thing that they can achieve good long-term records operating on a pretty big scale in that way. But that doesn’t happen to be my milieu. I’m talking about stock picking in American stocks.
I think it is hard to provide a lot of value added to the investment management client, but it is not impossible.”
No. of Recommendations: 5
“Plus we really have no insight on how T&T are doing.”
Well, FT has just “reconstructed the company’s US stock portfolio starting in 2010, just before Combs and Weschler joined Berkshire, based on quarterly filings with the Securities and Exchange Commission.
The FT then used Buffett’s comments in dozens of interviews, speeches at annual meetings and media reports to determine which trades were his and which belonged to one of his deputies.”
“Overall, according to the analysis, the pair have generated an average total annual return of about 7.8 per cent over the past decade. That falls short of the 12 per cent return of the S&P 500 and Buffett’s own 10.2 per cent gain. They have trailed the index in seven out of 10 years.
Their portfolios, worth about $27bn out of a total $354bn, excluding billions of dollars of pension investments for Berkshire’s employees, are up about 113 per cent over the past 10 years.
That trails a 165 per cent gain by Buffett over the same period and a 211 per cent total return by the S&P.”
https://www.ft.com/content/fd3b3324-d775-4e09-a916...
No. of Recommendations: 0
wow thanks for finding this....
"“Overall, according to the analysis, the pair have generated an average total annual return of about 7.8 per cent over the past decade. That falls short of the 12 per cent return of the S&P 500 and Buffett’s own 10.2 per cent gain. They have trailed the index in seven out of 10 years."
no wonder Warren doesn't disclose this
No. of Recommendations: 1
Indexes don't sound so bad after all.
