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July 28, 2006
Following a mortgage guru to the dark side
Warren Buffett says he doesn't make investments if he can't understand the underlying business, but most of the rest of us aren't as smart as the Oracle of Omaha. What to do? Sit on the sidelines and watch the smart guys rake in the dough? That's one strategy. Another idea is to follow those in the know, who often have to reveal what they've bought on a quarterly basis. A study I wrote about back in October found investors could trounce the market by following Buffett's stock moves even after waiting for SEC filing delays. So which smart guys to glom onto now?
First you have Lew Ranieri in the mortgage market, a market he helped invent (as chronicled in Michael Lewis's Liar's Poker). Ranieri's firm just brought to market a real estate investment trust focused on the mortgage-backed securities market, called Crystal River Capital and trading under the symbol CRZ. The prospectus is here. There's also a cast of other managers and analysts who've all worked for years in the dark corners of MBS.
It seems like a terrible time to invest in residential mortgages but that's what makes going with a pioneer so intriguing. Invest when there's blood in the streets and everyone is running for the exits. But you don't just have to rely on Ranieri. Early investors in the trust who remain include hedge fund guru Leon Cooperman and one of value investor Marty Whitman's funds. Sounds like pretty good company.
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first and foremost, this is my very first time blogging and thus, pardon me should i sound silly or offensive against anyone's opinion. i am just writing in to share a piece of my thought.
i agree with warren's statement of "not investing into any business if he could not understand the fundamentals of the business". Yes, we might not be as super smart an investor as warren buffett but still, to understand the fundamentals of an investment and business is not entirely that hard.
my point of view is, sometimes we should not complicate our understanding towards any potential porfolio by those "jargonised" type of analysis. business and financial markets are both controlled by human. Thus, beside understanding the business fundamentals (like the nature of business, product markets, size, historical data, etc), we should also know the controlling players within the industry (from CEOs, retail owners, etc) and sub industry (related industries).
in a nutshell, we just need to understand 3 things. 1st, business fundamentals (not that complicated if we are patience enough to learn over the days), 2nd, basic rules of economy and 3rd, the psychology of human (greeds, etc). with these understanding in place, we can quite comfortably invest in any portfolios of our choice without having to actually follow any of the big timers.
sorry to say, i realise that as we advance in technology or into the future, the more complicated business theories or analysis methods are introduced and applied. isn't it drawing (adding) 2 pairs of legs onto a snake when one thinks he is actually drawing a dragon? let's not decorate (complicate the whole thing) the investment analysis with extra colors to impress or made believed of the outcome that serve no purpose but lead to wrong decision making.
supply and demand, with the medium of exchange (that the liquidity of the medium is exposed to various circumstances and conditions). that's the basic rules or nature of investment we need to understand beside our human psychological behavior towards attaining desired "returns" and none the less, nature of the "subject" (the targeted stock or companies).
well, that's just my personal opinion. i could be wrong and hope i do not offend any of the readers if you find my opinion rediculous. cheers.
Posted by: jason saw at July 31, 2006 04:49 AM