> Accepted securities theory says that random walk best describes the market. <
Yes, this is an outgrowth of the Efficient Market Hypotheses, which postulates that the market only reacts to changes in information, and since those cannot be known until they happen the "next" move is always a random one.
Buffett dismisses the entire premise of the EMH. And I couldn't have said it better myself: "observing that the market was frequently efficient, they went on to conclude incorrectly that it was always efficient. The difference between the two propositions is night and day."
Byproducts of the EMH include the LTCM mess and the massive portfolio insurance failures during the '87 crash. The theories failed when, for a variety of reasons, things weren't as efficient or random as the theorists believed they should be.
But getting back to your point: I don't think CTSL has added any important theory to the investing landscape either. He provides additional reporting about industries and companies I might not know about, which gives me the opportunity to evaluate them more thoroughly and attempt to find some of those great profit-making inefficiencies.
I wouldn't follow him blindly. I wouldn't follow anybody else blindly either.
But for me, given the size of my portfolio and the amount of time I spend on it, I can justify a couple of hundred dollars a year for another source of info. He's not the only one, and even with his mistakes he's definitely not the worst.
mg |
