Warren Buffett’s Billion Dollar Secrets

Are financial markets efficient?

NO! Citing a well-known quote from Warren Buffett: ” I’d be a bum on the street with a tin cup if the markets were always efficient.” What does Buffett (one of the most successful investors in recent times) mean by this? Obviously, that markets are NOT always efficient.

The Efficient Market Hypothesis(EMH), assumes that share prices reflect all available information and that it is impossible for investors to generate excess returns. Eventually, stocks always trade at their “fair” value, making it impossible for investors to either buy undervalued stocks, and/or sell stocks that are overvalued. If this were the case, why participate in the markets at all? Save for the dividends – if issued.

I am mostly a Value Investor, following an investment strategy that involves buying stocks that appear under-priced by some form of fundamental analysis (e.g. Discounted Free Cash Flow, DFCF). Through DFCF, I can get a rough estimate of a stock’s intrinsic/fair value. If the stock’s intrinsic value is greater than the market value, I would consider buying it, because there is certain “Margin of Safety”. If financial markets were indeed efficient, none of this would make sense. Sometimes, stocks enjoy great popularity (a “Keynesian beauty contest”), often completely separate from their fundamentals, but showing strong upward-trending prices. Example: Tesla (TSLA) today (January 2020).

Do managers care about shareholders?

Do they have to? Having been a shareholder during various times of my life and of a variety of public companies, I am inclined to say NO. Despite their obligation to maximize “shareholder value”, most senior managers are first and foremost concerned about their own remuneration (including bonuses!) and…to survive. It is a common assumption that shareholders are the owners of the company; they are not.

In pure legal terms, shareholders have a claim on earnings. Shareholders do not have a final say over most big company decisions. But, boards of directors do. That is the reason why so-called “activist shareholders” obtain enough shares to demand a seat on the board of directors and are thus able to directly influence corporate strategy. In addition, managers do not have a real incentive to care about shareholders.

Shareholders are often widely dispersed around the country, or the world, and generally do not attend the annual meetings, or bother to fill out a proxy. The shares they own about the company in question are often a small part of a larger diversified portfolio. Finally, most shareholders lack the knowledge and skills to have a well-rounded opinion on management performance. Be aware if one or more members of the board of directors have “friendly relations” with the CEO.

Can one trust public authorities (politicians)?

A leading question. According to sociologist/political economist Max Weber (1864-1920), the true political leader has three qualities: passion (a commitment to the matter at hand, or the passionate dedication to a cause); a feeling of responsibility (owning the results of their actions); and a sense of proportion (an acute awareness of the realities). Weber: “Those destined for political leadership must have strength of character (ethics); and a deep sense of purpose and responsibility.” We all know that today (2020), NO politician in whatever country possesses all those qualities, or adheres to those standards.

The political arena is a very tough and hostile environment, where the weak perish quickly. To survive politicians lie consistently; fake sincerity and amiability, and empty promises for the sole purpose of getting re-elected. A politician’s inaccurate statements are either intentional lies meant to mislead the public, or they confirm that those who are supposed to be in charge of oversight have no idea what they are supposed to oversee – especially in the area of finance! Whether whole governments can be trusted is a matter of geography. Both the Swiss and Canadians have considerable trust in their governments; the Greeks much less so. Whatever your location, be vigilant and sceptical about trusting public authorities.

How to decide when facing irrationality?

Irrationality is all around us, all the time. Economic models still assume, a “homo economicus” always acting perfectly rationally, i.e. in his/her own best interest, making unbiased choices based on all available information. On that subject, I have always liked the quote attributed to John Maynard Keynes: “Markets can stay irrational much longer than you can stay solvent.” Economist Robert Shiller even wrote entire book on the topic entitled Irrational Exuberance.

My main point: People are not rational and most economic models are wrong. Actually, individuals operating in the financial markets are usually quite emotional and irrational. Together, these irrational individuals can create market trends and valuations that are far removed from a company’s fundamentals like earnings and cash flows. The price of the stock becomes a highly-predictable reality, as investors continue to boost the perceived trend. What to do? 1). The trend is your friend, i.e stay with the trend as long as you can. Technical Analysis (MACD, RSI) can give you some indication when the trend may reverse. 2). Fundamental Analysis: Look at some key ratio’s to get an idea about the company’s growth, profitability and overall financial health

Calculate the price
Make an order in advance and get the best price
Pages (550 words)
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Upload your instructions
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with MyStudyWriters
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
See why 20k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
Business Studies
Thank you very much for a good job done and a quick turn around time.
Customer 452615, March 31st, 2021
Business and administrative studies
Thank you for your hard work
Customer 452773, October 19th, 2023
Business and administrative studies
Thank you for your hard work and effort. Made a 96 out of 125 points Lacked information from the rubic
Customer 452773, October 27th, 2023
Business and administrative studies
Thank you
Customer 452773, March 19th, 2023
Customer 452773, March 15th, 2024
Business and administrative studies
excellent work
Customer 452773, March 12th, 2023
Human Resources Management (HRM)
Customer 452773, June 25th, 2023
Thank you!
Customer 452545, February 6th, 2021
ACC/543: Managerial Accounting & Legal Aspects Of Business
Customer 452773, January 10th, 2024
Thank you for your hard work and help.
Customer 452773, February 13th, 2023
excellent work
Customer 452773, March 1st, 2024
Business and administrative studies
always perfect work and always completed early
Customer 452773, February 21st, 2023
Customer reviews in total
Current satisfaction rate
3 pages
Average paper length
Customers referred by a friend
15% OFF your first order
Use a coupon FIRST15 and enjoy expert help with any task at the most affordable price.
Claim my 15% OFF Order in Chat

Sometimes it is hard to do all the work on your own

Let us help you get a good grade on your paper. Get professional help and free up your time for more important courses. Let us handle your;

  • Dissertations and Thesis
  • Essays
  • All Assignments

  • Research papers
  • Terms Papers
  • Online Classes
Live ChatWhatsApp