Sunday, May 5, 2013

Charlie Munger On Bankers & High Frequency Trading

On high frequency trading: "It is legalized front running." Very simple, and correct. For an example of how they front run (your stock purchases) see:

Dark Pools: Understanding The World Of High Frequency Trading

Some of the greatest quotes from Warren Buffett over the years, list courtesy of Barry Ritholtz at The Big Picture.

“The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities ¾ that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future ¾ will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.

     - Source: Letter to shareholders, 2000

“Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.

     - Source: Letter to shareholders, 2004

“Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, “I can calculate the movement of the stars, but not the madness of men.” If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.”

     - Source: Letters to shareholders, 2005

“After all, you only find out who is swimming naked when the tide goes out.”

     - Source: Letter to shareholders, 2001

“SUPPOSE that an investor you admire and trust comes to you with an investment idea. “This is a good one,” he says enthusiastically. “I’m in it, and I think you should be, too.”
Would your reply possibly be this? “Well, it all depends on what my tax rate will be on the gain you’re saying we’re going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent.” Only in Grover Norquist’s imagination does such a response exist.”

     - Source: New York Times

“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.”
     - Source: Warren Buffet Speaks, via msnbc.msn

Buffett comments on some of Charlie's comments and discusses other market ideas from the weekend:

No comments:

Post a Comment