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It's not impossible. Examples that prove this are outliers like Warren Buffett and Peter Lynch. Just because the information is public doesn't mean people are
by d2viant 16y ago
It's not impossible. Examples that prove this are outliers like Warren Buffett and Peter Lynch.
Just because the information is public doesn't mean people are interpreting or acting on it correctly.
- philwelch 16y agoNo, even with a perfect market there will be, randomly, some people with significantly better luck than others ;) Seriously though, crucial the assumption is a perfectly efficient market, and inefficiencies exist everywhere.
- jaxn 16y agoSure, some people get lucky. Hence the "with much consistency".
- philwelch 16y agoConsistent luck is still luck, and Warren Buffett and Peter Lynch are 2 out of millions. Likewise, 0.47 of people who bet it all on black at the roulette table are lucky, but 0.47^N of people who bet it all on black at the roulette table are consistently lucky. Seriously though, there are real inefficiencies as well, and someone like Warren Buffett is probably exploiting them rather than being really lucky. (Also, I hasten to point out that Berkshire Hathaway currently invests by M&A'ing smaller companies, which is considerably less of an efficient market than the stock market, which is likely more efficient now than it was decades ago--and often, M&A'ing a company can be a value add.)
- d2viant 16y agoConsistent luck? Over decades and decades? At what point does the success become attributable to the person? Investing isn't really a fair comparison to gambling. Gambling is essentially random -- investing you're much more in control of how you do, especially when you make larger and larger investments. Acquiring smaller companies is a relative term, they just bought BNSF for $44 billion. Berkshire rarely purchases smaller companies, they simply don't make a material difference on the balance sheet -- even if they do very well financially.
- philwelch 16y agoDid you read the part of my comment where I said Buffett probably gets better-than-market gains because the market isn't perfectly efficient, or that Berkshire Hathaway acquisition can be a legitimate value-add to the invested-in company qualitatively different from just picking the right stock? I don't think you're arguing in good faith if you ignore everything after the words "seriously though" in all of my comments.