Is Warren Buffett blind to tail risks/risks of ruin?

Martinghoul said:
Well, I daresay that in a scenario where you have a revolution, you're gonna have to deal with rather more pressing issues than drawdowns.

In fact, this could have been the logic. If you are reasonably certain that the "ruin" scenario is one where there are people with pitchforks and torches burning down your house, you might as well go all in, with a hedge in a form of a nuclear bunker stuffed with supplies. Of course, if you're 80 at the time, you might wanna skip the hedge.
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Or you could just stash $20M in a Luxemburg bank, move to a country that doesn't implode and still live pretty well. The Roman/UK empire blew up and the entire world continued to exist
 
Daal said:
Or you could just stash $20M in a Luxemburg bank, move to a country that doesn't implode and still live pretty well. The Roman/UK empire blew up and the entire world continued to exist
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The UK empire blew up?? That's news to me...

These are existential dilemmas. I suppose it all comes down, as usual, to utility and the subjective value you attach to various aspects of your lifestyle.
 
But even if one goes beyond risk of ruin and consider position sizing only, it's still likely to be an overbet (and thus, detrimental to long-term returns) to put it all in a situation like that. The kelly formula would only let you do that if you are super sure of the future (very high win %s), if you apply a more realistic win percentage (but still certain, like 75%), you still can't go all-in. Adding more and more benefits (returns) still wont help much
 
Daal said:
But even if one goes beyond risk of ruin and consider position sizing only, it's still likely to be an overbet (and thus, detrimental to long-term returns) to put it all in a situation like that. The kelly formula would only let you do that if you are super sure of the future (very high win %s), if you apply a more realistic win percentage (but still certain, like 75%), you still can't go all-in. Adding more and more benefits (returns) still wont help much
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I would probably agree with you, all things considered... Still, one can't get away from the fact that a) he's made lots of money on a whole bunch of trades he did in 2008; and b) he's made lots of money, period.
 
You are all missing the fact that this is a guy who lives in a 70s subdivision house in Omaha, drives an relatively old car with lots of miles on it, and generally lives pretty fugaly. He doesn't need $100M for his day to day, and he's well regarded enough that he could easily land on his feet even if his personal net worth did go negative. The expensive stuff he does, i.e. personal jet to Davos he'd still get to do regardless of his personal wealth.
 
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November 6 2016

Warren Buffett is sitting on more cash than ever, almost $US85 billion of it

Noah Buhayar

http://www.smh.com.au/business/mark...lmost-us85-billion-of-it-20161106-gsj0nr.html

Warren Buffett is sitting on more cash than ever.

His Berkshire Hathaway Inc. had almost $US85 billion ($A110 billion) on its books as of September 30, according to a regulatory filing late on Friday. That's up from the previous record of $US72.7 billion on June 30.

"He's got a lot of ammo" for investments, said Bill Smead, who oversees about US$2.1 billion including Berkshire shares at Smead Capital Management. "Eighty-five billion dollars is a lot of money."
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Sig said:
You are all missing the fact that this is a guy who lives in a 70s subdivision house in Omaha, drives an relatively old car with lots of miles on it, and generally lives pretty fugaly. He doesn't need $100M for his day to day, and he's well regarded enough that he could easily land on his feet even if his personal net worth did go negative. The expensive stuff he does, i.e. personal jet to Davos he'd still get to do regardless of his personal wealth.
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So true. At some level, investing, making money is just a number game, like him playing a game of bridge. Probably none of us is at his level but I am sure for some here trading is like playing bridge too.:sneaky:
 
Daal said:
But even if one goes beyond risk of ruin and consider position sizing only, it's still likely to be an overbet (and thus, detrimental to long-term returns) to put it all in a situation like that. The kelly formula would only let you do that if you are super sure of the future (very high win %s), if you apply a more realistic win percentage (but still certain, like 75%), you still can't go all-in. Adding more and more benefits (returns) still wont help much
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He does not leverage his PA so worst case BRK and his PA values go to zero. In that case since he still owns a farm near his home town, he could just go back to farming. So what risks? :D
 
Daal said:
But even if one goes beyond risk of ruin and consider position sizing only, it's still likely to be an overbet (and thus, detrimental to long-term returns) to put it all in a situation like that. The kelly formula would only let you do that if you are super sure of the future (very high win %s), if you apply a more realistic win percentage (but still certain, like 75%), you still can't go all-in. Adding more and more benefits (returns) still wont help much
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I think you are applying a trader mentality against a long term investor mentality.
 
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