woensdag 22 augustus 2012

everything is a function of opportunity cost

Als ik wat tijd over heb, begin ik wel eens buffettfaq.com te herlezen.

Deze antwoorden verdienen een higlight : 

  • "[CM:  I would argue that one filter that's useful in investing is the idea of opportunity costs. If you have one idea that's available in large quantity that's better that 98% of the other opportunities, then you can just screen out the other 98% ... With this attitude you get a concentrated portfolio, which we don't mind. That practice of ours which is so simple is not widely copied, I don't know why. Even at great universities and intellectual institutions. It's an interesting question: If we're right, why are so many other places so wrong.]"
  • "We don't formally have discount rates. Every time we start talking about this, Charlie reminds me that I've never prepared a spreadsheet, but I do in my mind.
  • We just try to buy things that we'll earn more from than a government bond – the question is, how much higher? If government bonds are at 2%, we're not going to buy a business that will return 4%.I don't call Charlie every day and ask him, "What's our hurdle rate?" We've never used the term.
  • Munger: The concept of a hurdle rate makes nothing but sense, but a lot of people using this make terrible errors. I don't think there's any substitute for thinking about a whole lot of investment options and thinking about the returns from each.
  • The trouble isn't that we don't have one [a hurdle rate] – we sort of do – but it interferes with logical comparison. If I know I have something that yields 8% for sure, and something else came along at 7%, I'd reject it instantly.
  • It's like the mail-order-bride firm offering a bride who has AIDS – I don't need to waste a moment considering it. Everything is a function of opportunity cost."

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