Firstly, I want to thank The Fly, our Blog Father. For some reason today he tweeted “Everyone, quick, follow
@Rhino_Cap” I couldn’t fuckin believe it. My first thought, which was not warranted, was that Fly was gonna have everybody follow me then unfollow me or some fucked up shit like that. I always hope for the best and expect the worst, so after a few minutes passed by I retweeted him and was so glad that it was the best. I was watching and live tweeting Howard Marks, so I thought, “he just tweeted that as I was tweeting Marks so I better keep it up” and I did. Don’t call me a little bitch or anything else like that you hating fucks! When someone that has that much respect in the industry evens gives you a speck of recognition, with the respect of their name backing it, you are fucking gracious. Thanks boss I really appreciate it with the utmost gratitude.
Secondly, I know I forgot to mention a lot of you in my post the other night; Redman, LeftCoast, Razor and so many more. Much thanks.
Howard Marks, you can read his bio here, he is a fucking genius. A real genius, not some megalomaniac little fucking panty waist like Zuckerberg. He is a genius in that he is able to make the market “Efficient [his word]” thus being able to beat it. While he had many ways to make the market efficient, the real reason he was there was to talk about university finance curriculum and institutional investing. His main point was that the market per history, in theory, should always react the same way when conditions are the same. The problem is, nothing ever reacts the same, and conditions are always different, even if just a fraction of a percent. Well this is what is taught in college, any stock that has a dividend can have the dividend discount model applied to it and get a near perfect valuation. Utilities, nope sorry. Thus, theory is not the same as practice. He said it’s possible to beat the market, but you have to manage risk. you can do all the research in the world, and a stock may be very undervalued, but that doesn’t necessarily mean it goes up soon, or ever, and it can still go to zero. I couldn’t agree with him more in all his points. He also alluded to the fact that what college you went to, and how prestigious it is, does not determine how good of an investor you will be, nor does it teach the amount of intuition and creativity it requires to be successful. I’ve always hated school, and I never got good grades, even in elementary school. Even though I was in the highest percentile in standard tests and was asked to attend the “accelerated school.” School’s just not for me. I am a “do-er” not a teacher. Most of the academics that were there were cringing on his words, the heads of the finance departments of Stanford, Berkeley, and SF State were there and all looked pained. Some of my old professors were there, and they too hated what he was saying and were asking stupid questions. These are the same professors that said “you can’t beat the market, just buy index ETF’s.” Every professor ever, except for one, that taught my finance classes said that they didn’t trade/invest anymore, as it was “too stressful.” So wait? Aren’t you supposed to be the expert in your field and that is why you are teaching? Yeah, definitely not.
His second point, was that this theory thinking extends into institutional investing. Where they learn they are only supposed to invest in one way, so they just get bitch slapped by the market. The Stanford Finance Chair asked about normal distribution, and Mr Marks said that the normal distribution requires very specific parameters with precise standard deviations. “Black Box Investing” that is bell shaped, is bell shaped, but not normally distributed, again a lack of academic creativity. Thus he said “”All these scholastic and institutional theories, and the institutional directive, should just be tools for your thinking, not laws.” This is not followed however, as we have seen many firms take serious shits lately, Corzine, Dimon, Falcone, etc. Where did they go to school, what were their grades? Who the fuck cares. Howard said that anyone who says this shit is easy, per Charlie Munger, is stupid. I agree, and fuck the sell side too. You can see many more real time quotes from his presentation on my twitter feed.
I must rest now in order to bank coin tomorrow by shorting ZNGA, and going long HDSN into earnings.
11 Responses to Theory Vs Practice.
Great post here Rhino, this one definitely needs to be saved and read by many. You wrote down many thoughts that I have. I know if I ran a business, I would prefer experience over education any day. I am sure that the presentation was well worth the time.
Well said here too and great you recognize it:
“someone that has that much respect in the industry evens gives you a speck of recognition, with the respect of their name backing it, you are fucking gracious.”
Also, I appreciate the mention. I am sure your posts and thoughts will only accelerate with viewers.
I liked the Howard Marks tweets. From the importance of timing to the pics of that girl in high heels.
I’m guessing your music is a dedication to the recently swept Los Doyers De La Chavez Ravine. aka the LA Dodgers.
Dude you nailed it perfectly. Viva Los Gigantes!
He is correct about HDSN simple demand and supply with mandated barriers to entry, Everyone uses AC but do not understand the money making opportunity. Stop playing around do the homework..
Couldn’t have said it better.
howard marks is a genius. anyone putting up numbers like that without leverage for that long in credit is the man.
So glad we got to see him.
“and a stock may be very undervalued, but that doesn’t necessarily mean it goes up soon, or ever, and it can still go to zero. ”
this is SO true and it is THE PRECISE reason that shorting is such a screwed up exercise. if you’re long at least the ‘worst’ it can get is the stock goes to zero but god damnit, you short a stock that piece of garbage has no limit to how much it can go up. Just look at CMEDY, I have to say I think that the stock is a $0 but that hasn’t stopped it from bankrupting people for months now who will probably be right in the end,
“Those who can, do, and those who can’t, teach”. I found that this was true through most of my undergrad experience with liberal arts studies. Then I got into the upper level courses in our College of Business and was amazed to see CEOs and executives from serious companies like Taco Bell, Motel 6, Jenny Craig, and even the Peace Corps, laying down truth in the class room. This was the real stuff that made it fun to be in class, cause they had been on the front lines and now retired to kick back and enjoy sharing the wisdom. Proof that you don’t need a BIG NAME ivy leaguer to get a quality education. As Marks said “all these theories should be tools for your thinking, not law” Well put…
Well deserved my friend. That was very interesting about Marks. Howard is a scientist, Corzine is a degenerate gambler.